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 March 31, 2021 2022
OR
☐ | 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: 1-39686 (Apartment Income REIT Corp.)
Commission File Number: 0-24497 (AIMCO Properties, (Apartment Income REIT, L.P.)
APARTMENT INCOME REIT CORP.
AIMCO PROPERTIES,APARTMENT INCOME REIT, L.P.
(Exact name of registrant as specified in its charter)
Maryland (Apartment Income REIT Corp.) | 84-1299717 | |
Delaware | 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) 757-8101
(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 (Apartment Income REIT Corp.) | AIRC | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Apartment Income REIT Corp.: |
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Apartment Income REIT Corp.: |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Apartment Income REIT Corp.:
Apartment Income REIT 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.:
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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 Income REIT Corp.: | ☐ |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Apartment Income REIT Corp.: Yes ☐ No ☒ |
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The number of shares of Apartment Income REIT Corp. Class A Common Stock outstanding as of April 30, 2021: 156,825,674May 2, 2022: 157,097,052
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.
This filing combines the quarterly reports on Form 10-Q for the quarterly period ended March 31, 2021,2022, of AIR, AIMCO Properties,Apartment Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating Partnership”), and their consolidated subsidiaries. The AIR Operating Partnership’s condensed consolidated financial statements include the accounts of the AIR Operating Partnership and its consolidated subsidiaries. Except as the context otherwise requires, “we,” “us,“our,” or “our”and “us” refer to AIR, the AIR Operating Partnership, and their consolidated subsidiaries, collectively.
AIR, a Maryland corporation, is a self-administered and self-managed real estate investment trust. AIR, through wholly-owned subsidiaries, is the general and special limited partner of the AIR Operating Partnership. As of March 31, 2021,2022, AIR owned approximately 93.6% 92.3%of the legal interest in the common partnership units of the AIR Operating Partnership (“OP Units”) and 94.9%93.9% of the economic interest in the AIR Operating Partnership. The remaining 6.4%7.7% legal interest is owned by third-party limited partners. The legal ownership percentage is based on outstanding common stock and common OP Units, including unvested restricted stock and unvested LTIP units. The economic ownership percentage includes any unvested restricted stock and unvested LTIP units to the extent they are considered participating securities, as defined by accounting principles generally accepted in the United States (“GAAP”). As the sole general partner of the AIR Operating Partnership, AIR has exclusive control of the AIR Operating Partnership’s day-to-day management.
The AIR Operating Partnership holds all of AIR’s assets and manages the daily operations of AIR’s business. Pursuant to the AIR Operating Partnership agreement, AIR is required to contribute to the AIR Operating Partnership all proceeds from the offerings of its securities. In exchange for the contribution of such proceeds, AIR receives additional interests in the AIR Operating Partnership with similar terms (e.g., if AIR contributes proceeds of a stock offering, AIR receives partnership units with terms substantially similar to the stock issued by AIR).
We believe combining the periodic reports of AIR and the AIR Operating Partnership into this single report provides the following benefits:
• We present our business as a whole, in the same manner our management views and operates the business; • We eliminate duplicative disclosure and provide a more streamlined and readable presentation because a substantial portion of the disclosures apply to both AIR and the AIR Operating Partnership; and • We save time and cost through the preparation of a single combined report rather than two separate reports.
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We operate AIR and the AIR Operating Partnership as one enterprise, the management of AIR directs the management and operations of the AIR Operating Partnership, and the members of the Board of Directors of AIR are identical to those of the AIR Operating Partnership’s general partner.
We believe it is important to understand the few differences between AIR and the AIR Operating Partnership in the context of how AIR and the AIR Operating Partnership operate as a consolidated company. AIR has no assets or liabilities other than its investment in the AIR Operating Partnership, which is held directly and indirectly through certain intermediate holding companies (in which all of the common stock is owned by AIR). Also, AIR is a corporation that issues publicly traded equity from time to time, whereas the AIR Operating Partnership is a partnership that has no publicly traded equity. Except for the net proceeds from stock offerings by AIR, which are contributed to the AIR Operating Partnership in exchange for additional limited partnership interests (of a similar type and in an amount equal to the shares of stock sold in the offering), the AIR Operating Partnership generates all remaining capital required by its business. These sources include the AIR Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of debt and equity securities, including additional partnership units, and proceeds received from the sale of apartment communities.
Equity, partners’ capital, and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of AIR and those of the AIR Operating Partnership. Interests in the AIR Operating Partnership held by
1
entities other than AIR, which we refer to as OP Units, are classified within partners’ capital in the AIR Operating Partnership’s financial statements and as noncontrolling interests in AIR’s financial statements.
To help investors understand the differences between AIR and the AIR Operating Partnership, this report provides:provides separate condensed consolidated financial statements for AIR and the AIR Operating Partnership; a single set of condensed consolidated notes to such financial statements that includes separate discussions of each entity’s stockholders’ equity or partners’ capital, and earnings per share or earnings per unit, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity, where appropriate.
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for AIR and the AIR Operating Partnership in order to establish that the requisite certifications have been made and that AIR and the AIR Operating Partnership are both compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.
21
APARTMENT INCOME REIT CORP.
AIMCO PROPERTIES,APARTMENT INCOME REIT, L.P.
TABLE OF CONTENTS
FORM 10-Q
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ITEM 1. | ||
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Condensed Consolidated Statements of Comprehensive Income |
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Condensed Consolidated Statements of Comprehensive Income |
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Condensed Consolidated Statements of Partners’ Capital |
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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ITEM 3. |
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ITEM 4. |
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ITEM 1A. |
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ITEM 2. |
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ITEM 6. |
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32
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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| March 31, |
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| December 31, |
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| March 31, |
| December 31, |
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| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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ASSETS |
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Buildings and improvements |
| $ | 5,712,264 |
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| $ | 6,127,249 |
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| $ | 5,729,946 |
| $ | 5,720,267 |
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Land |
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| 1,299,272 |
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| 1,341,615 |
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| 1,162,311 |
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| 1,164,814 |
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Total real estate |
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| 7,011,536 |
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| 7,468,864 |
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| 6,892,257 |
| 6,885,081 |
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Accumulated depreciation |
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| (2,437,147 | ) |
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| (2,455,505 | ) |
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| (2,341,446 | ) |
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| (2,284,793 | ) |
Net real estate |
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| 4,574,389 |
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| 5,013,359 |
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| 4,550,811 |
| 4,600,288 |
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Cash and cash equivalents |
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| 47,723 |
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| 44,214 |
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| 77,867 |
| 67,320 |
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Restricted cash |
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| 28,023 |
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| 29,266 |
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| 26,044 |
| 25,441 |
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Notes receivable from Aimco |
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| 534,127 |
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| 534,127 |
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Note receivable from Aimco |
| 534,127 |
| 534,127 |
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Leased real estate assets |
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| 467,013 |
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| 466,203 |
| 466,355 |
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Goodwill |
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| 32,286 |
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| 32,286 |
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| 32,286 |
| 32,286 |
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Other assets |
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| 637,943 |
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| 576,026 |
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Other assets, net |
| 601,198 |
| 568,051 |
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Assets held for sale |
| 14,320 |
| 146,492 |
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Total assets |
| $ | 6,321,504 |
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| $ | 6,229,278 |
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| $ | 6,302,856 |
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| $ | 6,440,360 |
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LIABILITIES AND EQUITY |
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Non-recourse property debt, net |
| $ | 3,568,815 |
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| $ | 3,628,236 |
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| $ | 2,033,705 |
| $ | 2,294,739 |
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Term loan, net |
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| 349,827 |
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| 349,164 |
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Term loans, net |
| 1,145,226 |
| 1,144,547 |
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Revolving credit facility borrowings |
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| 394,550 |
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| 265,600 |
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| 177,000 |
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| 304,000 |
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Total indebtedness |
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| 4,313,192 |
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| 4,243,000 |
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| 3,355,931 |
| 3,743,286 |
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Accrued liabilities and other |
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| 606,767 |
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| 598,736 |
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| 603,308 |
| 592,774 |
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Liabilities related to assets held for sale |
| 425 |
| 85,775 |
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Total liabilities |
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| 4,919,959 |
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| 4,841,736 |
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| 3,959,664 |
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| 4,421,835 |
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Commitments and contingencies (Note 5) |
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Preferred noncontrolling interests in AIR Operating Partnership |
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| 79,449 |
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| 79,449 |
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| 79,354 |
| 79,370 |
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Commitments and contingencies (Note 4) |
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Equity: |
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Perpetual preferred stock |
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| 2,000 |
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| 2,000 |
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| 2,000 |
| 2,129 |
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Common Stock, $0.01 par value, 1,021,175,000 shares authorized at March 31, 2021 and December 31, 2020, respectively, and 148,974,839 and 148,861,036 shares issued/outstanding at March 31, 2021 and December 31, 2020, respectively |
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| 1,490 |
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| 1,489 |
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Common Stock, $0.01 par value, 1,021,175,000 shares authorized at March 31, 2022 and December 31, 2021, and 157,082,823 and 156,998,367 shares issued/outstanding at March 31, 2022 and December 31, 2021, respectively |
| 1,571 |
| 1,570 |
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Additional paid-in capital |
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| 3,430,694 |
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| 3,432,121 |
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| 3,762,457 |
| 3,763,105 |
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Accumulated other comprehensive income |
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| 1,100 |
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| 3,039 |
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Accumulated other comprehensive loss |
| (783 | ) |
| — |
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Distributions in excess of earnings |
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| (2,112,381 | ) |
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| (2,131,798 | ) |
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| (1,648,077 | ) |
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| (1,953,779 | ) |
Total AIR equity |
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| 1,322,903 |
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| 1,306,851 |
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| 2,117,168 |
| 1,813,025 |
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Noncontrolling interests in consolidated real estate partnerships |
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| (64,619 | ) |
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| (61,943 | ) |
| (70,157 | ) |
| (70,883 | ) | ||
Common noncontrolling interests in AIR Operating Partnership |
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| 63,812 |
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| 63,185 |
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| 216,827 |
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| 197,013 |
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Total equity |
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| 1,322,096 |
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| 1,308,093 |
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| 2,263,838 |
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| �� | 1,939,155 |
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Total liabilities and equity |
| $ | 6,321,504 |
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| $ | 6,229,278 |
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Total liabilities, preferred noncontrolling interests in AIR Operating Partnership, and equity |
| $ | 6,302,856 |
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| $ | 6,440,360 |
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See notes to condensed consolidated financial statements.
43
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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| Three Months Ended March 31, |
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| Three Months Ended March 31, |
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| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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REVENUES |
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Rental and other property revenues |
| $ | 174,730 |
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| $ | 186,043 |
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| $ | 179,261 |
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| $ | 174,730 |
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Other revenues |
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| 1,683 |
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| 2,217 |
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| 1,683 |
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Total revenues |
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| 176,413 |
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| 186,043 |
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| 181,478 |
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| 176,413 |
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OPERATING EXPENSES |
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EXPENSES |
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Property operating expenses |
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| 64,617 |
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| 65,962 |
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| 63,236 |
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| 64,617 |
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Depreciation and amortization |
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| 75,280 |
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| 81,446 |
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| 84,549 |
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| 75,280 |
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General and administrative expenses |
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| 4,414 |
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| 7,489 |
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| 6,597 |
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| 4,414 |
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Other expenses, net |
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| 2,876 |
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| 1,491 |
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| 4,018 |
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| 2,876 |
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Total operating expenses |
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| 147,187 |
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| 156,388 |
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| 158,400 |
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| 147,187 |
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Interest income |
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| 15,972 |
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| 3,989 |
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| 13,481 |
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| 15,972 |
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Interest expense |
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| (37,035 | ) |
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| (36,806 | ) |
| (22,107 | ) |
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| (36,025 | ) | |
Loss on extinguishment of debt |
| (23,636 | ) |
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| (1,010 | ) | |||||||||
Gain on derecognition of leased properties and dispositions of real estate |
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| 84,032 |
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| 13 |
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| 412,003 |
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| 84,032 |
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Mezzanine investment income, net |
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| 0 |
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| 6,747 |
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Income from continuing operations before income tax (expense) benefit and discontinued operations |
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| 92,195 |
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| 3,598 |
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Income tax (expense) benefit |
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| (3,080 | ) |
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| 1,314 |
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Income from continuing operations |
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| 89,115 |
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| 4,912 |
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Income from discontinued operations, net of tax |
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| — |
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| 4,065 |
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Loss from unconsolidated real estate partnerships |
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| (2,014 | ) |
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| — |
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Income before income tax benefit (expense) |
| 400,805 |
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| 92,195 |
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Income tax benefit (expense) |
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| 579 |
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| (3,080 | ) | ||||||||
Net income |
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| 89,115 |
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| 8,977 |
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| 401,384 |
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| 89,115 |
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Noncontrolling interests: |
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Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships |
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| 235 |
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| (18 | ) | ||||||||
Net loss attributable to noncontrolling interests in consolidated real estate partnerships |
| 564 |
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| 235 |
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Net income attributable to preferred noncontrolling interests in AIR Operating Partnership |
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| (1,604 | ) |
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| (1,869 | ) |
| (1,603 | ) |
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| (1,604 | ) | |
Net income attributable to common noncontrolling interests in AIR Operating Partnership |
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| (4,436 | ) |
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| (368 | ) |
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| (24,167 | ) |
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| (4,436 | ) |
Net income attributable to noncontrolling interests |
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| (5,805 | ) |
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| (2,255 | ) |
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| (25,206 | ) |
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| (5,805 | ) |
Net income attributable to AIR |
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| 83,310 |
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| 6,722 |
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| 376,178 |
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| 83,310 |
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Net income attributable to AIR preferred stockholders |
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| (50 | ) |
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| — |
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| (42 | ) |
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| (50 | ) | |
Net income attributable to participating securities |
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| (64 | ) |
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| (43 | ) |
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| (255 | ) |
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| (64 | ) |
Net income attributable to AIR common stockholders |
| $ | 83,196 |
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| $ | 6,679 |
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| $ | 375,881 |
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| $ | 83,196 |
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Earnings per common share – basic and diluted |
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Income from continuing operations attributable to AIR per common share |
| $ | 0.56 |
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| $ | 0.02 |
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Income from discontinued operations attributable to AIR per common share |
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| — |
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| 0.04 |
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Net income attributable to AIR per common share – basic and diluted |
| $ | 0.56 |
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| $ | 0.06 |
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Net income attributable to AIR common stockholders per share – basic |
| $ | 2.40 |
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| $ | 0.56 |
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Net income attributable to AIR common stockholders per share – diluted |
| $ | 2.39 |
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| $ | 0.56 |
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Weighted-average common shares outstanding – basic |
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| 148,611 |
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| 119,946 |
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| 156,736 |
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| 148,611 |
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Weighted-average common shares outstanding – diluted |
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| 148,830 |
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| 120,162 |
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| 157,088 |
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| 148,830 |
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See notes to condensed consolidated financial statements.
54
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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| Three Months Ended March 31, |
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| Three Months Ended March 31, |
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| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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Net income |
| $ | 89,115 |
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| $ | 8,977 |
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| $ | 401,384 |
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| $ | 89,115 |
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Unrealized losses on available for sale debt securities |
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| (2,071 | ) |
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| (60 | ) | ||||||||
Unrealized loss on derivative instruments |
| (783 | ) |
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| — |
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Reclassification of unrealized losses on available for sale debt securities |
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| — |
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| (2,071 | ) | ||||||||
Comprehensive income |
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| 87,044 |
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| 8,917 |
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| 400,601 |
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| 87,044 |
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Comprehensive income attributable to noncontrolling interests |
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| (5,673 | ) |
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| (2,251 | ) |
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| (25,206 | ) |
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| (5,673 | ) |
Comprehensive income attributable to AIR |
| $ | 81,371 |
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| $ | 6,666 |
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| $ | 375,395 |
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| $ | 81,371 |
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See notes to condensed consolidated financial statements.
65
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 20212022 and 20202021
(In thousands)thousands, except share data)
(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 AIR's Predecessor Equity |
|
| Consolidated Real Estate Partnerships |
|
| AIR Operating Partnership |
|
| Total Equity |
|
| Perpetual Preferred Stock |
|
| Common Stock |
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
| Noncontrolling |
|
| Common |
|
|
|
| ||||||||||||||||||||||||||||
Balances at December 31, 2019 |
|
| — |
|
| $ | — |
|
|
| 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 |
|
| — |
|
|
| — |
|
|
| (189 | ) |
|
| (2 | ) |
|
| (10,002 | ) |
|
| — |
|
|
| — |
|
|
| (10,004 | ) |
|
| — |
|
|
| — |
|
|
| (10,004 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Redemption of AIR Operating Partnership units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (969 | ) |
|
| (969 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Amortization of share-based compensation cost |
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| 1,929 |
|
|
| — |
|
|
| — |
|
|
| 1,929 |
|
|
| — |
|
|
| 1,051 |
|
|
| 2,980 |
| ||||||||||||||||||||||||||||||||||||||||||||
Effect of changes in ownership for consolidated entities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (769 | ) |
|
| — |
|
|
| — |
|
|
| (769 | ) |
|
| — |
|
|
| 769 |
|
|
| 0 |
| ||||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of a change in accounting principle |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (277 | ) |
|
| (277 | ) |
|
| — |
|
|
| — |
|
|
| (277 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Change in accumulated other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (56 | ) |
|
| — |
|
|
| (56 | ) |
|
| — |
|
|
| (4 | ) |
|
| (60 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,722 |
|
|
| 6,722 |
|
|
| 118 |
|
|
| 368 |
|
|
| 7,208 |
| ||||||||||||||||||||||||||||||||||||||||||||
Common Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (60,825 | ) |
|
| (60,825 | ) |
|
| — |
|
|
| — |
|
|
| (60,825 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (73 | ) |
|
| (3,155 | ) |
|
| (3,228 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Other, net |
|
| — |
|
|
| — |
|
|
| 23 |
|
|
| — |
|
|
| 86 |
|
|
| — |
|
|
| 0 |
|
|
| 86 |
|
|
| (158 | ) |
|
| — |
|
|
| (72 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2020 |
|
| 0 |
|
| $ | 0 |
|
|
| 120,092 |
|
| $ | 1,200 |
|
| $ | 3,488,898 |
|
| $ | 4,139 |
|
| $ | (1,776,782 | ) |
| $ | 1,717,455 |
|
| $ | (3,409 | ) |
| $ | 81,502 |
|
| $ | 1,795,548 |
| ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Additional |
|
| Other |
|
| Distributions in Excess |
|
| Total AIR |
|
| Consolidated |
|
| AIR |
|
| Total |
| |||||||||||
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 |
|
|
| 20 |
|
| $ | 2,000 |
|
|
| 148,861,036 |
|
| $ | 1,489 |
|
| $ | 3,432,121 |
|
| $ | 3,039 |
|
| $ | (2,131,798 | ) |
| $ | 1,306,851 |
|
| $ | (61,943 | ) |
| $ | 63,185 |
|
| $ | 1,308,093 |
|
Redemption of AIR Operating Partnership units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,223 | ) |
|
| (3,223 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (3,223 | ) |
| (3,223 | ) | ||||||||||||||||||||
Amortization of share-based compensation cost |
|
| — |
|
|
| — |
|
|
| 33 |
|
|
| — |
|
|
| 1,915 |
|
|
| — |
|
|
| — |
|
|
| 1,915 |
|
|
| — |
|
|
| 723 |
|
|
| 2,638 |
|
| — |
| — |
| 33,000 |
| — |
| 1,915 |
| — |
| — |
| 1,915 |
| — |
| 723 |
| 2,638 |
| |||||||||||||||||||||
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,590 | ) |
|
| — |
|
|
| — |
|
|
| (2,590 | ) |
|
| — |
|
|
| 2,590 |
|
|
| 0 |
|
| — |
| — |
| — |
| — |
| (2,590 | ) |
| — |
| — |
| (2,590 | ) |
| — |
| 2,590 |
| — |
| |||||||||||||||||||
Change in accumulated other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,939 | ) |
|
| — |
|
|
| (1,939 | ) |
|
| — |
|
|
| (132 | ) |
|
| (2,071 | ) |
| — |
| — |
| — |
| — |
| — |
| (1,939 | ) |
| — |
| (1,939 | ) |
| — |
| (132 | ) |
| (2,071 | ) | ||||||||||||||||||
Net income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 83,310 |
|
|
| 83,310 |
|
|
| (235 | ) |
|
| 4,436 |
|
|
| 87,511 |
| ||||||||||||||||||||||||||||||||||||||||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| 83,310 |
| 83,310 |
| (235 | ) |
| 4,436 |
| 87,511 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (63,858 | ) |
|
| (63,858 | ) |
|
| — |
|
|
| — |
|
|
| (63,858 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| (63,858 | ) |
| (63,858 | ) |
| — |
| — |
| (63,858 | ) | |||||||||||||||||||
Preferred Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (50 | ) |
|
| (50 | ) |
|
| — |
|
|
| — |
|
|
| (50 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| (50 | ) |
| (50 | ) |
| — |
| — |
| (50 | ) | |||||||||||||||||||
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
|
| (3,767 | ) |
|
| (5,169 | ) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1,402 | ) |
| (3,767 | ) |
| (5,169 | ) | |||||||||||||||||||
Other, net |
|
| — |
|
|
| — |
|
|
| 81 |
|
|
| 1 |
|
|
| (752 | ) |
|
| — |
|
|
| 15 |
|
|
| (736 | ) |
|
| (1,039 | ) |
|
| — |
|
|
| (1,775 | ) |
|
| — |
|
|
| — |
|
|
| 80,803 |
|
|
| 1 |
|
|
| (752 | ) |
|
| — |
|
|
| 15 |
|
|
| (736 | ) |
|
| (1,039 | ) |
|
| — |
|
|
| (1,775 | ) |
Balances at March 31, 2021 |
|
| 20 |
|
| $ | 2,000 |
|
|
| 148,975 |
|
| $ | 1,490 |
|
| $ | 3,430,694 |
|
| $ | 1,100 |
|
| $ | (2,112,381 | ) |
| $ | 1,322,903 |
|
| $ | (64,619 | ) |
| $ | 63,812 |
|
| $ | 1,322,096 |
|
|
| 20 |
|
| $ | 2,000 |
|
|
| 148,974,839 |
|
| $ | 1,490 |
|
| $ | 3,430,694 |
|
| $ | 1,100 |
|
| $ | (2,112,381 | ) |
| $ | 1,322,903 |
|
| $ | (64,619 | ) |
| $ | 63,812 |
|
| $ | 1,322,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2021 |
|
| 145 |
|
| $ | 2,129 |
|
|
| 156,998,367 |
|
| $ | 1,570 |
|
| $ | 3,763,105 |
|
| $ | — |
|
| $ | (1,953,779 | ) |
| $ | 1,813,025 |
|
| $ | (70,883 | ) |
| $ | 197,013 |
|
| $ | 1,939,155 |
| ||||||||||||||||||||||||||||||||||||||||||||
Redemption of AIR Operating Partnership units |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (3,452 | ) |
| (3,452 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of share-based compensation cost |
| — |
| — |
| — |
| — |
| 1,890 |
| — |
| — |
| 1,890 |
|
|
| — |
| 860 |
| 2,750 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of changes in ownership of consolidated entities |
| — |
| — |
| — |
| — |
| (2,686 | ) |
| — |
| — |
| (2,686 | ) |
| — |
| 2,686 |
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contributions from noncontrolling interests in consolidated real estate partnerships |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 4,325 |
| — |
| 4,325 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in accumulated other comprehensive loss |
| — |
| — |
| — |
| — |
| — |
| (783 | ) |
| — |
| (783 | ) |
| — |
| — |
| (783 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| 376,178 |
| 376,178 |
| (564 | ) |
| 24,167 |
| 399,781 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock dividends |
| — |
| — |
| — |
| — |
| — |
| — |
| (70,428 | ) |
| (70,428 | ) |
| — |
| — |
| (70,428 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (3,147 | ) |
| (4,447 | ) |
| (7,594 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other, net |
|
| (125 | ) |
|
| (129 | ) |
|
| 84,456 |
|
|
| 1 |
|
|
| 148 |
|
|
| — |
|
|
| (48 | ) |
|
| (28 | ) |
|
| 112 |
|
|
| — |
|
|
| 84 |
| ||||||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2022 |
|
| 20 |
|
| $ | 2,000 |
|
|
| 157,082,823 |
|
| $ | 1,571 |
|
| $ | 3,762,457 |
|
| $ | (783 | ) |
| $ | (1,648,077 | ) |
| $ | 2,117,168 |
|
| $ | (70,157 | ) |
| $ | 216,827 |
|
| $ | 2,263,838 |
|
See notes to condensed consolidated financial statements.
76
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Net income | $ | 89,115 |
|
| $ | 8,977 |
|
| $ | 401,384 |
|
| $ | 89,115 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Depreciation and amortization |
| 75,280 |
|
|
| 81,446 |
|
|
| 84,549 |
|
|
| 75,280 |
|
Loss on extinguishment of debt |
|
| 23,636 |
|
|
| 1,010 |
| |||||||
Gain on derecognition of leased properties and dispositions of real estate |
| (84,032 | ) |
|
| (13 | ) |
|
| (412,003 | ) |
|
| (84,032 | ) |
Income tax expense (benefit) |
| 3,080 |
|
|
| (1,314 | ) | ||||||||
Other adjustments |
| 3,194 |
|
|
| 3,022 |
| ||||||||
Discontinued operations: |
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
| 0 |
|
|
| 19,030 |
| ||||||||
Income tax benefit |
| 0 |
|
|
| (1,919 | ) | ||||||||
Other non-cash adjustments, net |
| 0 |
|
|
| 182 |
| ||||||||
Income tax (benefit) expense |
|
| (579 | ) |
|
| 3,080 |
| |||||||
Other, net |
|
| 5,485 |
|
|
| 3,194 |
| |||||||
Net changes in operating assets and operating liabilities |
| (37,467 | ) |
|
| (31,995 | ) |
|
| (29,765 | ) |
|
| (38,477 | ) |
Net cash provided by operating activities |
| 49,170 |
|
|
| 77,416 |
|
|
| 72,707 |
|
|
| 49,170 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Purchases of real estate and deposits related to purchases of real estate |
| 0 |
|
|
| (2,733 | ) | ||||||||
Capital expenditures |
| (39,075 | ) |
|
| (88,189 | ) |
|
| (37,302 | ) |
|
| (39,075 | ) |
Proceeds from dispositions of real estate |
|
| 559,093 |
|
|
| — |
| |||||||
Purchases of corporate assets |
| (784 | ) |
|
| (5,104 | ) |
|
| (2,988 | ) |
|
| (784 | ) |
Other investing activities |
| (483 | ) |
|
| 4,665 |
|
|
| (5,544 | ) |
|
| (483 | ) |
Capital expenditures of discontinued operations |
| 0 |
|
|
| (6,653 | ) | ||||||||
Net cash used in investing activities |
| (40,342 | ) |
|
| (98,014 | ) | ||||||||
Net cash provided by (used in) investing activities |
|
| 513,259 |
|
|
| (40,342 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Principal repayments on non-recourse property debt of continuing operations |
| (60,467 | ) |
|
| (20,173 | ) | ||||||||
Net borrowings on revolving credit facility |
| 128,950 |
|
|
| 318,845 |
| ||||||||
Payment of debt issuance costs |
| (121 | ) |
|
| 0 |
| ||||||||
Principal repayments on non-recourse property debt |
|
| (346,298 | ) |
|
| (60,467 | ) | |||||||
Borrowings on revolving credit facility |
|
| 159,000 |
|
|
| 244,200 |
| |||||||
Repayments of revolving credit facility |
|
| (286,000 | ) |
|
| (115,250 | ) | |||||||
Payment of debt extinguishment costs |
| (519 | ) |
|
| 0 |
|
|
| (22,723 | ) |
|
| (519 | ) |
Repurchases of Common Stock |
| 0 |
|
|
| (10,004 | ) | ||||||||
Payment of dividends to holders of Common Stock |
| (64,314 | ) |
|
| (61,116 | ) |
|
| (70,652 | ) |
|
| (64,314 | ) |
Payment of dividends to holders of Preferred Stock |
| (50 | ) |
|
| 0 |
|
|
| — |
|
|
| (50 | ) |
Payment of distributions to noncontrolling interests |
| (6,835 | ) |
|
| (5,442 | ) | ||||||||
Payment of distributions to preferred noncontrolling interests |
|
| (1,619 | ) |
|
| (1,604 | ) | |||||||
Payment of distributions to common noncontrolling interests |
|
| (7,631 | ) |
|
| (5,231 | ) | |||||||
Redemptions of noncontrolling interests in the AIR Operating Partnership |
| (3,223 | ) |
|
| (1,584 | ) |
|
| (3,452 | ) |
|
| (3,223 | ) |
Principal repayments on non-recourse property debt of discontinued operations |
| 0 |
|
|
| (2,449 | ) | ||||||||
Contribution from noncontrolling interests in consolidated real estate partnerships |
|
| 4,325 |
|
|
| 0 |
| |||||||
Other financing activities |
| 17 |
|
|
| (365 | ) |
|
| 234 |
|
|
| (104 | ) |
Net cash (used in) provided by financing activities |
| (6,562 | ) |
|
| 217,712 |
| ||||||||
Net cash used in financing activities |
|
| (574,816 | ) |
|
| (6,562 | ) | |||||||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
| 2,266 |
|
|
| 197,114 |
|
|
| 11,150 |
|
|
| 2,266 |
|
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF DISCONTINUED OPERATIONS |
| 0 |
|
|
| 1,009 |
| ||||||||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF CONTINUING OPERATIONS |
| 2,266 |
|
|
| 198,123 |
| ||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
| 73,480 |
|
|
| 166,541 |
|
|
| 92,761 |
|
|
| 73,480 |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 75,746 |
|
| $ | 364,664 |
|
| $ | 103,911 |
|
| $ | 75,746 |
|
See notes to condensed consolidated financial statements.
87
APARTMENT INCOME REIT, L.P.
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
| March 31, |
|
| December 31, |
|
| March 31, |
| December 31, |
| |||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Buildings and improvements |
| $ | 5,712,264 |
|
| $ | 6,127,249 |
|
| $ | 5,729,946 |
| $ | 5,720,267 |
| |
Land |
|
| 1,299,272 |
|
|
| 1,341,615 |
|
|
| 1,162,311 |
|
|
| 1,164,814 |
|
Total real estate |
|
| 7,011,536 |
|
|
| 7,468,864 |
|
| 6,892,257 |
| 6,885,081 |
| |||
Accumulated depreciation |
|
| (2,437,147 | ) |
|
| (2,455,505 | ) |
|
| (2,341,446 | ) |
|
| (2,284,793 | ) |
Net real estate |
|
| 4,574,389 |
|
|
| 5,013,359 |
|
| 4,550,811 |
| 4,600,288 |
| |||
Cash and cash equivalents |
|
| 47,723 |
|
|
| 44,214 |
|
| 77,867 |
| 67,320 |
| |||
Restricted cash |
|
| 28,023 |
|
|
| 29,266 |
|
| 26,044 |
| 25,441 |
| |||
Notes receivable from Aimco |
|
| 534,127 |
|
|
| 534,127 |
| ||||||||
Note receivable from Aimco |
| 534,127 |
| 534,127 |
| |||||||||||
Leased real estate assets |
|
| 467,013 |
|
|
| — |
|
| 466,203 |
| 466,355 |
| |||
Goodwill |
|
| 32,286 |
|
|
| 32,286 |
|
| 32,286 |
| 32,286 |
| |||
Other assets |
|
| 637,943 |
|
|
| 576,026 |
| ||||||||
Other assets, net |
| 601,198 |
| 568,051 |
| |||||||||||
Assets held for sale |
|
| 14,320 |
|
|
| 146,492 |
| ||||||||
Total assets |
| $ | 6,321,504 |
|
| $ | 6,229,278 |
|
| $ | 6,302,856 |
|
| $ | 6,440,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
| ||||||||
LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
|
| ||||||||||
Non-recourse property debt, net |
| $ | 3,568,815 |
|
| $ | 3,628,236 |
|
| $ | 2,033,705 |
| $ | 2,294,739 |
| |
Term loan, net |
|
| 349,827 |
|
|
| 349,164 |
| ||||||||
Term loans, net |
| 1,145,226 |
| 1,144,547 |
| |||||||||||
Revolving credit facility borrowings |
|
| 394,550 |
|
|
| 265,600 |
|
|
| 177,000 |
|
|
| 304,000 |
|
Total indebtedness |
|
| 4,313,192 |
|
|
| 4,243,000 |
|
| 3,355,931 |
| 3,743,286 |
| |||
Accrued liabilities and other |
|
| 606,767 |
|
|
| 598,736 |
|
| 603,308 |
| 592,774 |
| |||
Liabilities related to assets held for sale |
|
| 425 |
|
|
| 85,775 |
| ||||||||
Total liabilities |
|
| 4,919,959 |
|
|
| 4,841,736 |
|
| 3,959,664 |
| 4,421,835 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Commitments and contingencies (Note 5) |
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
| ||||||||||
Redeemable preferred units |
|
| 79,449 |
|
|
| 79,449 |
|
| 79,354 |
| 79,370 |
| |||
Commitments and contingencies (Note 4) |
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
| ||||||||||
Partners’ capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Preferred units |
|
| 2,000 |
|
|
| 2,000 |
|
| 2,000 |
| 2,129 |
| |||
General Partner and Special Limited Partner |
|
| 1,320,903 |
|
|
| 1,304,851 |
|
| 2,115,168 |
| 1,810,896 |
| |||
Limited Partners |
|
| 63,812 |
|
|
| 63,185 |
|
|
| 216,827 |
|
|
| 197,013 |
|
Partners’ capital attributable to the AIR Operating Partnership |
|
| 1,386,715 |
|
|
| 1,370,036 |
|
| 2,333,995 |
| 2,010,038 |
| |||
Noncontrolling interests in consolidated real estate partnerships |
|
| (64,619 | ) |
|
| (61,943 | ) |
|
| (70,157 | ) |
|
| (70,883 | ) |
Total partners’ capital |
|
| 1,322,096 |
|
|
| 1,308,093 |
|
|
| 2,263,838 |
|
|
| 1,939,155 |
|
Total liabilities and partners’ capital |
| $ | 6,321,504 |
|
| $ | 6,229,278 |
| ||||||||
Total liabilities, redeemable preferred units, and partners’ capital |
| $ | 6,302,856 |
|
| $ | 6,440,360 |
|
See notes to condensed consolidated financial statements.
98
APARTMENT INCOME REIT, L.P.
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Rental and other property revenues |
| $ | 174,730 |
|
| $ | 186,043 |
|
| $ | 179,261 |
|
| $ | 174,730 |
|
Other revenues |
|
| 1,683 |
|
|
| — |
|
|
| 2,217 |
|
|
| 1,683 |
|
Total revenues |
|
| 176,413 |
|
|
| 186,043 |
|
| 181,478 |
|
|
| 176,413 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
OPERATING EXPENSES |
|
|
|
|
|
|
|
| ||||||||
EXPENSES |
|
|
|
|
|
| ||||||||||
Property operating expenses |
|
| 64,617 |
|
|
| 65,962 |
|
| 63,236 |
|
|
| 64,617 |
| |
Depreciation and amortization |
|
| 75,280 |
|
|
| 81,446 |
|
| 84,549 |
|
|
| 75,280 |
| |
General and administrative expenses |
|
| 4,414 |
|
|
| 7,489 |
|
| 6,597 |
|
|
| 4,414 |
| |
Other expenses, net |
|
| 2,876 |
|
|
| 1,491 |
|
|
| 4,018 |
|
|
| 2,876 |
|
Total operating expenses |
|
| 147,187 |
|
|
| 156,388 |
| ||||||||
|
| 158,400 |
|
|
| 147,187 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest income |
|
| 15,972 |
|
|
| 3,989 |
|
| 13,481 |
|
|
| 15,972 |
| |
Interest expense |
|
| (37,035 | ) |
|
| (36,806 | ) |
| (22,107 | ) |
|
| (36,025 | ) | |
Loss on extinguishment of debt |
| (23,636 | ) |
|
| (1,010 | ) | |||||||||
Gain on derecognition of leased properties and dispositions of real estate |
|
| 84,032 |
|
|
| 13 |
|
| 412,003 |
|
|
| 84,032 |
| |
Mezzanine investment income, net |
|
| 0 |
|
|
| 6,747 |
| ||||||||
Income from continuing operations before income tax (expense) benefit and discontinued operations |
|
| 92,195 |
|
|
| 3,598 |
| ||||||||
Income tax (expense) benefit |
|
| (3,080 | ) |
|
| 1,314 |
| ||||||||
Income from continuing operations |
|
| 89,115 |
|
|
| 4,912 |
| ||||||||
Income from discontinued operations, net of tax |
|
| — |
|
|
| 4,065 |
| ||||||||
Loss from unconsolidated real estate partnerships |
|
| (2,014 | ) |
|
| 0 |
| ||||||||
Income before income tax benefit (expense) |
| 400,805 |
|
|
| 92,195 |
| |||||||||
Income tax benefit (expense) |
|
| 579 |
|
|
| (3,080 | ) | ||||||||
Net income |
|
| 89,115 |
|
|
| 8,977 |
|
| 401,384 |
|
|
| 89,115 |
| |
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 235 |
|
|
| (18 | ) | ||||||||
Net loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 564 |
|
|
| 235 |
| ||||||||
Net income attributable to the AIR Operating Partnership |
|
| 89,350 |
|
|
| 8,959 |
|
| 401,948 |
|
|
| 89,350 |
| |
Net income attributable to the AIR Operating Partnership’s preferred unitholders |
|
| (1,654 | ) |
|
| (1,869 | ) |
| (1,645 | ) |
|
| (1,654 | ) | |
Net income attributable to participating securities |
|
| (64 | ) |
|
| (43 | ) |
|
| (255 | ) |
|
| (64 | ) |
Net income attributable to the AIR Operating Partnership’s common unitholders |
| $ | 87,632 |
|
| $ | 7,047 |
|
| $ | 400,048 |
|
| $ | 87,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Earnings per common unit – basic and diluted: |
|
|
|
|
|
|
|
| ||||||||
Income from continuing operations attributable to the AIR Operating Partnership per common unit |
| $ | 0.56 |
|
| $ | 0.03 |
| ||||||||
Income from discontinued operations attributable to the AIR Operating Partnership per common unit |
|
| — |
|
|
| 0.03 |
| ||||||||
Net income attributable to the AIR Operating Partnership per common unit – basic and diluted |
| $ | 0.56 |
|
| $ | 0.06 |
| ||||||||
Net income attributable to the AIR Operating Partnership common unitholders per unit – basic |
| $ | 2.40 |
|
| $ | 0.56 |
| ||||||||
|
|
|
|
|
| |||||||||||
Net income attributable to the AIR Operating Partnership common unitholders per unit – diluted |
| $ | 2.39 |
|
| $ | 0.56 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Weighted-average common units outstanding – basic |
|
| 156,527 |
|
|
| 126,521 |
|
|
| 166,853 |
|
|
| 156,527 |
|
Weighted-average common units outstanding – diluted |
|
| 156,746 |
|
|
| 126,798 |
|
|
| 167,205 |
|
|
| 156,746 |
|
See notes to condensed consolidated financial statements.
109
APARTMENT INCOME REIT, L.P.
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTSSTATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Net income |
| $ | 89,115 |
|
| $ | 8,977 |
|
| $ | 401,384 |
|
| $ | 89,115 |
|
Unrealized losses on available for sale debt securities |
|
| (2,071 | ) |
|
| (60 | ) | ||||||||
Unrealized loss on derivative instruments |
| (783 | ) |
|
| — |
| |||||||||
Reclassification of unrealized losses on available for sale debt securities |
|
| — |
|
|
| (2,071 | ) | ||||||||
Comprehensive income |
|
| 87,044 |
|
|
| 8,917 |
|
| 400,601 |
|
|
| 87,044 |
| |
Comprehensive loss (income) attributable to noncontrolling interests |
|
| 235 |
|
|
| (18 | ) | ||||||||
Comprehensive loss attributable to noncontrolling interests |
|
| 564 |
|
|
| 235 |
| ||||||||
Comprehensive income attributable to the AIR Operating Partnership |
| $ | 87,279 |
|
| $ | 8,899 |
|
| $ | 401,165 |
|
| $ | 87,279 |
|
See notes to condensed consolidated financial statements.
1110
APARTMENT INCOME REIT, L.P.
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Three Months Ended March 31, 20212022 and 20202021
(In thousands)
(Unaudited)
|
| Preferred Units |
|
| General Partner and Special Limited Partner |
|
| Limited Partners |
|
| Partners’ Capital Attributable to the AIR Operating Partnership |
|
| Noncontrolling Interests in Consolidated Real Estate Partnerships |
|
| Total Partners’ Capital |
| ||||||||||||||||||||||||||||||
Balances at 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 | ) | ||||||||||||||||||||||||
|
| Preferred |
|
| General Partner |
|
| Limited |
|
| Partners’ Capital |
|
| Noncontrolling |
|
| Total |
| ||||||||||||||||||||||||||||||
Balances at December 31, 2020 |
| $ | 2,000 |
|
| $ | 1,304,851 |
|
| $ | 63,185 |
|
| $ | 1,370,036 |
|
| $ | (61,943 | ) |
| $ | 1,308,093 |
| ||||||||||||||||||||||||
Redemption of common partnership units |
|
| — |
|
|
| — |
|
|
| (969 | ) |
|
| (969 | ) |
|
| — |
|
|
| (969 | ) |
|
| — |
|
|
| — |
|
|
| (3,223 | ) |
|
| (3,223 | ) |
|
| — |
|
|
| (3,223 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| 1,929 |
|
|
| 1,051 |
|
|
| 2,980 |
|
|
| — |
|
|
| 2,980 |
|
|
| — |
|
|
| 1,915 |
|
|
| 723 |
|
|
| 2,638 |
|
|
| — |
|
|
| 2,638 |
|
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| (769 | ) |
|
| 769 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,590 | ) |
|
| 2,590 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cumulative effect of a change in accounting principle |
|
| — |
|
|
| (277 | ) |
|
| — |
|
|
| (277 | ) |
|
| — |
|
|
| (277 | ) | ||||||||||||||||||||||||
Change in accumulated other comprehensive income |
|
| — |
|
|
| (56 | ) |
|
| (4 | ) |
|
| (60 | ) |
|
| — |
|
|
| (60 | ) |
|
| — |
|
|
| (1,939 | ) |
|
| (132 | ) |
|
| (2,071 | ) |
|
| — |
|
|
| (2,071 | ) |
Net income |
|
| — |
|
|
| 6,722 |
|
|
| 368 |
|
|
| 7,090 |
|
|
| 118 |
|
|
| 7,208 |
|
|
| — |
|
|
| 83,310 |
|
|
| 4,436 |
|
|
| 87,746 |
|
|
| (235 | ) |
|
| 87,511 |
|
Distributions to common unitholders |
|
| — |
|
|
| (60,825 | ) |
|
| (3,155 | ) |
|
| (63,980 | ) |
|
| — |
|
|
| (63,980 | ) | ||||||||||||||||||||||||
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (73 | ) |
|
| (73 | ) | ||||||||||||||||||||||||
Other, net |
|
| — |
|
|
| 86 |
|
|
| — |
|
|
| 86 |
|
|
| (158 | ) |
|
| (72 | ) | ||||||||||||||||||||||||
Balances at March 31, 2020 |
| $ | — |
|
| $ | 1,717,455 |
|
| $ | 81,502 |
|
| $ | 1,798,957 |
|
| $ | (3,409 | ) |
| $ | 1,795,548 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Balances at December 31, 2020 |
| $ | 2,000 |
|
| $ | 1,304,851 |
|
| $ | 63,185 |
|
| $ | 1,370,036 |
|
| $ | (61,943 | ) |
| $ | 1,308,093 |
| ||||||||||||||||||||||||
Redemption of AIR Operating Partnership units |
|
| — |
|
|
| — |
|
|
| (3,223 | ) |
|
| (3,223 | ) |
|
| — |
|
|
| (3,223 | ) | ||||||||||||||||||||||||
Amortization of share-based compensation cost |
|
| — |
|
|
| 1,915 |
|
|
| 723 |
|
|
| 2,638 |
|
|
| — |
|
|
| 2,638 |
| ||||||||||||||||||||||||
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| (2,590 | ) |
|
| 2,590 |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Change in accumulated other comprehensive income |
|
| — |
|
|
| (1,939 | ) |
|
| (132 | ) |
|
| (2,071 | ) |
|
| — |
|
|
| (2,071 | ) | ||||||||||||||||||||||||
Net income (loss) |
|
| — |
|
|
| 83,310 |
|
|
| 4,436 |
|
|
| 87,746 |
|
|
| (235 | ) |
|
| 87,511 |
| ||||||||||||||||||||||||
Distributions to common unitholders |
|
| — |
|
|
| (63,858 | ) |
|
| (3,767 | ) |
|
| (67,625 | ) |
|
| — |
|
|
| (67,625 | ) |
|
| — |
|
|
| (63,858 | ) |
|
| (3,767 | ) |
|
| (67,625 | ) |
|
| — |
|
|
| (67,625 | ) |
Distributions to preferred unitholders |
|
| — |
|
|
| (50 | ) |
|
| — |
|
|
| (50 | ) |
|
| — |
|
|
| (50 | ) |
|
| — |
|
|
| (50 | ) |
|
| — |
|
|
| (50 | ) |
|
| — |
|
|
| (50 | ) |
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
|
| (1,402 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,402 | ) |
|
| (1,402 | ) |
Other, net |
|
| — |
|
|
| (736 | ) |
|
| — |
|
|
| (736 | ) |
|
| (1,039 | ) |
|
| (1,775 | ) |
|
| — |
|
|
| (736 | ) |
|
| — |
|
|
| (736 | ) |
|
| (1,039 | ) |
|
| (1,775 | ) |
Balances at March 31, 2021 |
| $ | 2,000 |
|
| $ | 1,320,903 |
|
| $ | 63,812 |
|
| $ | 1,386,715 |
|
| $ | (64,619 | ) |
| $ | 1,322,096 |
|
| $ | 2,000 |
|
| $ | 1,320,903 |
|
| $ | 63,812 |
|
| $ | 1,386,715 |
|
| $ | (64,619 | ) |
| $ | 1,322,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Balances at December 31, 2021 |
| $ | 2,129 |
|
| $ | 1,810,896 |
|
| $ | 197,013 |
|
| $ | 2,010,038 |
|
| $ | (70,883 | ) |
| $ | 1,939,155 |
| ||||||||||||||||||||||||
Redemption of common partnership units |
|
| — |
|
|
| — |
|
|
| (3,452 | ) |
|
| (3,452 | ) |
|
| — |
|
|
| (3,452 | ) | ||||||||||||||||||||||||
Amortization of share-based compensation cost |
|
| — |
|
|
| 1,890 |
|
|
| 860 |
|
|
| 2,750 |
|
|
| — |
|
|
| 2,750 |
| ||||||||||||||||||||||||
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| (2,686 | ) |
|
| 2,686 |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Contributions from noncontrolling interests in consolidated real estate partnerships |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,325 |
|
|
| 4,325 |
| ||||||||||||||||||||||||
Change in accumulated other comprehensive loss |
|
| — |
|
|
| (783 | ) |
|
| — |
|
|
| (783 | ) |
|
| — |
|
|
| (783 | ) | ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 376,178 |
|
|
| 24,167 |
|
|
| 400,345 |
|
|
| (564 | ) |
|
| 399,781 |
| ||||||||||||||||||||||||
Distributions to common unitholders |
|
| — |
|
|
| (70,428 | ) |
|
| — |
|
|
| (70,428 | ) |
|
| — |
|
|
| (70,428 | ) | ||||||||||||||||||||||||
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| (4,447 | ) |
|
| (4,447 | ) |
|
| (3,147 | ) |
|
| (7,594 | ) | ||||||||||||||||||||||||
Other, net |
|
| (129 | ) |
|
| 101 |
|
|
| — |
|
|
| (28 | ) |
|
| 112 |
|
|
| 84 |
| ||||||||||||||||||||||||
Balances at March 31, 2022 |
| $ | 2,000 |
|
| $ | 2,115,168 |
|
| $ | 216,827 |
|
| $ | 2,333,995 |
|
| $ | (70,157 | ) |
| $ | 2,263,838 |
|
See notes to condensed consolidated financial statements.
1211
APARTMENT INCOME REIT, L.P.
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Net income | $ | 89,115 |
|
| $ | 8,977 |
|
| $ | 401,384 |
|
| $ | 89,115 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Depreciation and amortization |
| 75,280 |
|
|
| 81,446 |
|
|
| 84,549 |
|
|
| 75,280 |
|
Loss on extinguishment of debt |
|
| 23,636 |
|
|
| 1,010 |
| |||||||
Gain on derecognition of leased properties and dispositions of real estate |
| (84,032 | ) |
|
| (13 | ) |
|
| (412,003 | ) |
|
| (84,032 | ) |
Income tax expense (benefit) |
| 3,080 |
|
|
| (1,314 | ) | ||||||||
Other adjustments |
| 3,194 |
|
|
| 3,022 |
| ||||||||
Discontinued operations: |
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
| 0 |
|
|
| 19,030 |
| ||||||||
Income tax benefit |
| 0 |
|
|
| (1,919 | ) | ||||||||
Other non-cash adjustments, net |
| 0 |
|
|
| 182 |
| ||||||||
Income tax (benefit) expense |
|
| (579 | ) |
|
| 3,080 |
| |||||||
Other, net |
|
| 5,485 |
|
|
| 3,194 |
| |||||||
Net changes in operating assets and operating liabilities |
| (37,467 | ) |
|
| (31,995 | ) |
|
| (29,765 | ) |
|
| (38,477 | ) |
Net cash provided by operating activities |
| 49,170 |
|
|
| 77,416 |
|
|
| 72,707 |
|
|
| 49,170 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Purchases of real estate and deposits related to purchases of real estate |
| 0 |
|
|
| (2,733 | ) | ||||||||
Capital expenditures |
| (39,075 | ) |
|
| (88,189 | ) |
|
| (37,302 | ) |
|
| (39,075 | ) |
Proceeds from dispositions of real estate |
|
| 559,093 |
|
|
| — |
| |||||||
Purchases of corporate assets |
| (784 | ) |
|
| (5,104 | ) |
|
| (2,988 | ) |
|
| (784 | ) |
Other investing activities |
| (483 | ) |
|
| 4,665 |
|
|
| (5,544 | ) |
|
| (483 | ) |
Capital expenditures of discontinued operations |
| 0 |
|
|
| (6,653 | ) | ||||||||
Net cash used in investing activities |
| (40,342 | ) |
|
| (98,014 | ) | ||||||||
Net cash provided by (used in) investing activities |
|
| 513,259 |
|
|
| (40,342 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |||
Principal repayments on non-recourse property debt of continuing operations |
| (60,467 | ) |
|
| (20,173 | ) | ||||||||
Net borrowings on revolving credit facility |
| 128,950 |
|
|
| 318,845 |
| ||||||||
Payment of debt issuance costs |
| (121 | ) |
|
| 0 |
| ||||||||
Principal repayments on non-recourse property debt |
|
| (346,298 | ) |
|
| (60,467 | ) | |||||||
Borrowings on revolving credit facility |
|
| 159,000 |
|
|
| 244,200 |
| |||||||
Repayments of revolving credit facility |
|
| (286,000 | ) |
|
| (115,250 | ) | |||||||
Payment of debt extinguishment costs |
| (519 | ) |
|
| 0 |
|
|
| (22,723 | ) |
|
| (519 | ) |
Repurchases of common partnership units held by General Partner and Special Limited Partner |
| 0 |
|
|
| (10,004 | ) | ||||||||
Payment of distributions to General Partner and Special Limited Partner |
| (64,314 | ) |
|
| (61,116 | ) | ||||||||
Payment of distributions to preferred units |
|
| (1,619 | ) |
|
| (1,654 | ) | |||||||
Payment of distributions General Partner and Special Limited Partner |
|
| (70,652 | ) |
|
| (64,314 | ) | |||||||
Payment of distributions to Limited Partners |
| (3,830 | ) |
|
| (3,492 | ) |
|
| (4,484 | ) |
|
| (3,830 | ) |
Payment of distributions to preferred units |
| (1,654 | ) |
|
| (1,869 | ) | ||||||||
Payment of distributions to noncontrolling interests |
| (1,401 | ) |
|
| (81 | ) |
|
| (3,147 | ) |
|
| (1,401 | ) |
Redemption of common and preferred units |
| (3,223 | ) |
|
| (1,584 | ) |
|
| (3,452 | ) |
|
| (3,223 | ) |
Principal repayments on non-recourse property debt of discontinued operations |
| 0 |
|
|
| (2,449 | ) | ||||||||
Contribution from noncontrolling interests in consolidated real estate partnerships |
|
| 4,325 |
|
|
| 0 |
| |||||||
Other financing activities |
| 17 |
|
|
| (365 | ) |
|
| 234 |
|
|
| (104 | ) |
Net cash (used in) provided by financing activities |
| (6,562 | ) |
|
| 217,712 |
| ||||||||
Net cash used in financing activities |
|
| (574,816 | ) |
|
| (6,562 | ) | |||||||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
| 2,266 |
|
|
| 197,114 |
|
|
| 11,150 |
|
|
| 2,266 |
|
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF DISCONTINUED OPERATIONS |
| 0 |
|
|
| 1,009 |
| ||||||||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF CONTINUING OPERATIONS |
| 2,266 |
|
|
| 198,123 |
| ||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
| 73,480 |
|
|
| 166,541 |
|
|
| 92,761 |
|
|
| 73,480 |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 75,746 |
|
| $ | 364,664 |
|
| $ | 103,911 |
|
| $ | 75,746 |
|
See notes to condensed consolidated financial statements.
1312
APARTMENT INCOME REIT CORP.
AIMCO PROPERTIES,APARTMENT INCOME REIT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 20212022
(Unaudited)
Note 1 — Basis of Presentation and Organization
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of Apartment Income REIT Corp. (“AIR”), AIMCO Properties,Apartment Income REIT, L.P. (“AIR Operating Partnership”), and their consolidated subsidiaries. The AIR Operating Partnership’s condensed consolidated financial statements include the accounts of the AIR Operating Partnership and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Except as the context otherwise requires, “we,” “our,” and “us” refer to AIR, the AIR Operating Partnership, and their consolidated subsidiaries, collectively.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with 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 months ended March 31, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
The condensed consolidated balance sheets of AIR, the AIR Operating Partnership, and their consolidated subsidiaries as of December 31, 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 AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020. Except where indicated, the footnotes refer to AIR, the AIR Operating Partnership and their consolidated 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 (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 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 reflect only continuing operations. Please see Note 9 for further details regarding our discontinued operations.
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
14
including eight important geographic concentrations: Boston; Philadelphia; Greater Washington D.C.; Miami; Denver; the San Francisco Bay Area; Los Angeles; and San Diego.
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 March 31, 2021, after elimination of units held by consolidated subsidiaries, the AIR Operating Partnership had 159,101,296 common OP Units outstanding. As of March 31, 2021, AIR owned 148,974,839 of the common OP Units of the AIR Operating Partnership and AIR had an equal number of shares of its Class A Common Stock outstanding, which we refer to as Common Stock. AIR’s ownership of the total common OP Units outstanding represents a 93.6% legal interest in the AIR Operating Partnership and a 94.9% economic interest.
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 March 31, 2021, our portfolio included 95 apartment communities with 25,722 apartment homes in which we held an average ownership of approximately 93%. We also have 4 properties that we leased to Aimco for redevelopment and development.
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation
We consolidate a variable interest entity (“VIE”), in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.
As used herein, and except where the context otherwise requires, “partnership” refers to a limited partnership or a limited liability company and “partner” refers to a partner in a limited partnership or a member of a limited liability company. Interests in the AIR Operating Partnership that are held by limited partners other than AIR are reflected in AIR’s accompanying condensed consolidated balance sheets as noncontrolling interests in the AIR Operating Partnership. Interests in partnerships consolidated by the AIR Operating Partnership that are held by third parties are reflected in AIR’s and AIR Operating Partnership’s accompanying condensed consolidated balance sheets as noncontrolling interests in consolidated real estate partnerships.
Except as the context otherwise requires, “we,” “our,” and “us” refer to AIR, the AIR Operating Partnership, and their consolidated subsidiaries, collectively.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
The condensed consolidated balance sheets of AIR, the AIR Operating Partnership, and their consolidated subsidiaries as of December 31, 2021, have been derived from their respective audited financial statements at that date, but do not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2021. Except where indicated, the footnotes refer to AIR, the AIR Operating Partnership and their consolidated subsidiaries, collectively.
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 formed 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; 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 11 states and the District of Columbia. As of March 31, 2022, our portfolio included 76 apartment communities with 25,078 apartment homes, in which we held an average ownership of approximately 88%. We also have 4 properties that we lease to third parties.
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 March 31, 2022, after elimination of units held by consolidated subsidiaries, the AIR Operating Partnership had 170,224,531 common OP Units outstanding. As of March 31, 2022, AIR owned 157,082,823 of the common OP Units of the AIR Operating Partnership and AIR had an equal number of shares of its Class A Common Stock outstanding, which we refer to as Common
13
Stock. AIR’s ownership of the total common OP Units outstanding represents a 92.3% legal interest in the AIR Operating Partnership and a 93.9% economic interest.
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation
We consolidate a variable interest entity (“VIE”), in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.
Redeemable Preferred OP Units
As described in Note 5, the6, our preferred OP Units may be redeemed at the holder’s option and are therefore presented within temporary equity in AIR’s condensed consolidated balance sheets and within temporary capital in the AIR Operating Partnership’s condensed consolidated balance sheets.
The following table presents a rollforward of the AIR Operating Partnership’s preferred OP Units from December 31, 2020, to March 31, 2021 (in thousands):
Balance at December 31, 2020 |
| $ | 79,449 |
|
Preferred distributions |
|
| (1,604 | ) |
Net income |
|
| 1,604 |
|
Balance at March 31, 2021 |
| $ | 79,449 |
|
Balance at January 1, 2022 |
| $ | 79,370 |
|
Preferred distributions |
|
| (1,619 | ) |
Redemption of preferred units and other |
|
| 0 |
|
Net income allocated to preferred units |
|
| 1,603 |
|
Balance at March 31, 2022 |
| $ | 79,354 |
|
The AIR Operating Partnership has outstanding various classes of redeemable preferred OP Units. As of March 31, 20212022 and December 31, 2020,2021, the AIR Operating Partnership had 2,938,8022,935,035 and 2,935,662 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 tenants primarily for utility reimbursements. For the three months ended March 31, 2021 and 2020, our total lease income, included in continuing operations, was comprised of the following amounts for all operating leases (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Fixed lease income |
| $ | 163,968 |
|
| $ | 178,027 |
|
Variable lease income |
|
| 10,459 |
|
|
| 10,554 |
|
Straight-line rent write-off (1) |
|
| — |
|
|
| (2,850 | ) |
Total lease income |
| $ | 174,427 |
|
| $ | 185,731 |
|
15
|
|
On January 1, 2021, we leased 4 redevelopment and development properties to the Spinnee. The leases are being accounted for as sales-type leases. Please see Note 9 for further discussion.
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.
Note 3 — Significant Transactions
Reclassifications and RevisionsApartment Community Dispositions
On November 30, 2020, AIR’s Predecessor and the Aimco Operating Partnership effected a reverse split of Common Stock and common partnership units, respectively, at a ratio of one share or unit for every 1.23821 shares or units outstanding on the date of effectiveness. The accounting guidance for recapitalization events requires that we revise AIR’s equity and the AIR Operating Partnership’s partners’ capital as if the reverse split had occurred at the beginning of the earliest period presented. As such, we have revised the outstanding share and unit counts, presentation of share and unit activity, and earnings per share and unit, as if the reverse split had occurred on January 1, 2020.
As previously stated in Note 1, the financial results forDuring the three months ended March 31, 2020, include the financial results of AIR’s Predecessor, and the financial results attributable to the2022, we sold 8 apartment communities retained by Aimco inwith 1,332 homes for a gain on disposition of $413.1 million.
During the Separation are presented as discontinued operations.
Note 3 — Significant Transactions
New Credit Facility
On April 14,three months ended March 31, 2021, we closed a new $1.4 billion credit facility, providing four-to-five-year money at a current all-in costsold 0 apartment communities.
From time to time we may be marketing for sale certain communities that are inconsistent with our long-term investment strategy. At the end of 1.6%. each reporting period, we evaluate whether such communities meet the criteria to be classified as held for sale. As of March 31, 2022, we had 3 apartment communities with 559 apartment homes that were classified as held for sale. Subsequent to March 31, 2022, we completed the sale of these apartment communities for gross proceeds of $161 million.
14
Note 4 — Leases
Tenant Lessor Arrangements
The facility ismajority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents primarily for utility reimbursements. Our total lease income was comprised of the following amounts for all operating leases (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Fixed lease income |
| $ | 168,230 |
|
| $ | 163,968 |
|
Variable lease income |
|
| 10,805 |
|
|
| 10,459 |
|
Total lease income |
| $ | 179,035 |
|
| $ | 174,427 |
|
In general, our commercial leases have options to extend for a $600 million revolving credit facilitycertain period of time at the tenant’s option. Future minimum annual rental payments we are contractually obligated to receive under commercial leases, excluding such extension options, are as follows as of March 31, 2022 (in thousands):
2022 (remaining) |
| $ | 8,116 |
|
2023 |
|
| 10,499 |
|
2024 |
|
| 10,011 |
|
2025 |
|
| 9,456 |
|
2026 |
|
| 8,379 |
|
Thereafter |
|
| 39,255 |
|
Total |
| $ | 85,716 |
|
Generally, our residential leases do not provide extension options and, $800as of March 31, 2022, have an average remaining term of 6.7 months.
Lessor Arrangements
As of March 31, 2022, the aggregate minimum lease payments owed to us under the sales-type leases is as follows:
2022 (remaining) |
| $ | 18,955 |
|
2023 |
|
| 25,262 |
|
2024 |
|
| 25,262 |
|
2025 |
|
| 25,373 |
|
2026 |
|
| 25,966 |
|
Thereafter |
|
| 704,287 |
|
Total lease receivable (1) |
| $ | 825,105 |
|
Add: Unguaranteed residual value |
|
| 131,580 |
|
Less: Discount |
|
| 490,482 |
|
Total leased real estate assets |
| $ | 466,203 |
|
The $800$
The term loans mature onDuring 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;three months ended March 31, 2022 and
• $200 million maturing on April 14, 2026.
Equity Issuance
On April 23, 2021, we issuedrecognized income of $6.5 million and sold 7.825$6.4 million, sharesrespectively, 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 Class A Common Stock for $43.766 per share in a private placement to a large global real estate-focused investment firm for a cash purchase pricecondensed consolidated statement of $342 million.operations.
Note 45 — Commitments and Contingencies
Legal Matters
In addition to the matters described below, we are a party to various legal actions and administrative proceedings arising in the ordinary course of business, some of which are covered by our general liability insurance program, and none of which we expect to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.
The Spinnee is responsible for the first $17.5 million of legal and environmental liabilities related to occurrences prior to the Separation. The AIR Operating Partnership is responsible for any such liabilities in excess of $17.5 million.15
16
Environmental
Various federal, state, and local laws subject apartment community owners or operators to liability for management and the costs of removal or remediation of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Such laws often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with investigation and remediation actions. Moreover, private plaintiffs may potentially make claims for investigation and remediation costs they incur or for personal injury, disease, disability, or other infirmities related to the alleged presence of hazardous materials. In addition to potential environmental liabilities or costs associated with our current apartment communities, we may also be responsible for such liabilities or costs associated with communities we acquire or manage in the future or apartment communities we no longer own or operate.
We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations (“AROs”), as defined by GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or apartment community casualty, we believe that the fair value of our asset retirement obligationsAROs cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. Asset retirement obligationsAROs that are reasonably estimable as of March 31, 2021,2022, are immaterial to our condensed consolidated financial statements.
Note 56 — Earnings and Dividends per Share and per Unit
AIR and the AIR Operating Partnership calculate basic earnings per common share and basic earnings per common unit, respectively, based on the weighted-average number of shares of Common Stock and common partnership units outstanding.outstanding, respectively. We calculate diluted earnings per share and diluted earnings per unit taking into consideration dilutive common stock and common partnership unit equivalents and dilutive convertible securities outstanding during the period.
Our common stock and common partnership unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in AIR’s issuance of additional shares and the AIR Operating Partnership’s issuance to AIR of additional common partnership units equal to the number of shares purchased under the options. These equivalents also include unvested total shareholderstockholder return (“TSR”) restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of Common Stock and common partnership units outstanding equal to the number of the shares that vest. Common partnership unit equivalents also include unvested long-term incentive partnership units. We include in the denominator securities with dilutive effect in calculating diluted earnings per share and per unit during these periods.
Our restricted stock awards that are subject to time-based vesting receive non-forfeitable dividends similar to shares of Common Stock and common partnership units prior to vesting, and our TSR long-term incentive partnership units receive non-forfeitable distributions based on specified percentages of the distributions paid to common partnership units prior to vesting and conversion. The unvested restricted shares and units related to these awards are participating securities. We include the effect of participating securities in basic and diluted earnings (loss) per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method.
In our condensed consolidated statement of operations, noncontrolling interest in consolidated real estate partnerships is related to both continuing and discontinued operations. For purposes of our earnings per share calculation, we have appropriately allocated the noncontrolling interest in consolidated real estate partnerships for the three months ended March 31, 2020. Please see Note 9 for detail of noncontrolling interest in consolidated real estate partnerships associated with discontinued operations.
17
Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings per share and per unit for the three months ended March 31, 2021 and 2020, are as follows (in thousands, except per share and per unit data):
| Three Months Ended March 31, 2021 |
| |||||||||
| Income (Numerator) |
|
| Shares (Denominator) |
|
| Per Share Amount |
| |||
Basic Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AIR common stockholders | $ | 83,196 |
|
|
| 148,611 |
|
| $ | 0.56 |
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
| — |
|
|
| 219 |
|
|
| — |
|
Net income attributable to AIR common stockholders | $ | 83,196 |
|
|
| 148,830 |
|
| $ | 0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-dilutive share equivalents outstanding |
|
|
|
|
| 7,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, 2020 |
| |||||||||
| Income (Numerator) |
|
| Shares (Denominator) |
|
| Per Share Amount |
| |||
Basic Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to AIR | $ | 2,511 |
|
|
| 119,946 |
|
| $ | 0.02 |
|
Income from discontinued operations attributable to AIR |
| 4,168 |
|
|
| 119,946 |
|
|
| 0.04 |
|
Net income attributable to AIR common stockholders | $ | 6,679 |
|
|
| 119,946 |
|
| $ | 0.06 |
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
| — |
|
|
| 216 |
|
|
| — |
|
Net income attributable to AIR common stockholders | $ | 6,679 |
|
|
| 120,162 |
|
| $ | 0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-dilutive share equivalents outstanding |
|
|
|
|
| 97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, 2021 |
| |||||||||
| Income (Numerator) |
|
| Shares (Denominator) |
|
| Per Unit Amount |
| |||
Basic Earnings per unit: |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the AIR Operating Partnership's common unitholders | $ | 87,632 |
|
|
| 156,527 |
|
| $ | 0.56 |
|
Diluted Earnings per unit: |
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
| — |
|
|
| 219 |
|
|
| — |
|
Net income attributable to the AIR Operating Partnership's common unitholders | $ | 87,632 |
|
|
| 156,746 |
|
| $ | 0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-dilutive partnership unit equivalents outstanding |
|
|
|
|
| 1,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, 2020 |
| |||||||||
| Income (Numerator) |
|
| Shares (Denominator) |
|
| Per Unit Amount |
| |||
Basic Earnings per unit: |
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to the AIR Operating Partnership | $ | 2,879 |
|
|
| 126,521 |
|
| $ | 0.03 |
|
Income from discontinued operations attributable to the AIR Operating Partnership |
| 4,168 |
|
|
| 126,521 |
|
|
| 0.03 |
|
Net income attributable to the AIR Operating Partnership's common unitholders | $ | 7,047 |
|
|
| 126,521 |
|
| $ | 0.06 |
|
Diluted Earnings per unit: |
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
| — |
|
|
| 277 |
|
|
| — |
|
Net income attributable to the AIR Operating Partnership's common unitholders | $ | 7,047 |
|
|
| 126,798 |
|
| $ | 0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-dilutive partnership unit equivalents outstanding |
|
|
|
|
| 1,847 |
|
|
|
|
|
|
| Three Months Ended March 31, 2022 |
| |||||||||
|
| Net Income (Numerator) |
|
| Shares (Denominator) |
|
| Per Share Amount |
| |||
Basic earnings per share: |
|
|
|
|
|
|
|
|
| |||
Net income attributable to AIR common stockholders |
| $ | 375,881 |
|
|
| 156,736 |
|
| $ | 2.40 |
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
| |||
Effect of dilutive securities |
|
| 0 |
|
|
| 352 |
|
|
| (0.01 | ) |
Net income attributable to AIR common stockholders |
| $ | 375,881 |
|
|
| 157,088 |
|
| $ | 2.39 |
|
18
16
|
| Three Months Ended March 31, 2021 |
| |||||||||
|
| Net Income (Numerator) |
|
| Shares (Denominator) |
|
| Per Share Amount |
| |||
Basic earnings per share: |
|
|
|
|
|
|
|
|
| |||
Net income attributable to AIR common stockholders |
| $ | 83,196 |
|
|
| 148,611 |
|
| $ | 0.56 |
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
| |||
Effect of dilutive securities |
|
| 0 |
|
|
| 219 |
|
|
| 0 |
|
Net income attributable to AIR common stockholders |
| $ | 83,196 |
|
|
| 148,830 |
|
| $ | 0.56 |
|
|
| Three Months Ended March 31, 2022 |
| |||||||||
|
| Net Income (Numerator) |
|
| Shares (Denominator) |
|
| Per Unit Amount |
| |||
Basic earnings per unit: |
|
|
|
|
|
|
|
|
| |||
Net income attributable to the AIR Operating Partnership's common unitholders |
| $ | 400,048 |
|
|
| 166,853 |
|
| $ | 2.40 |
|
Diluted earnings per unit: |
|
|
|
|
|
|
|
|
| |||
Effect of dilutive securities |
|
| 0 |
|
|
| 352 |
|
|
| (0.01 | ) |
Net income attributable to the AIR Operating Partnership's common unitholders |
| $ | 400,048 |
|
|
| 167,205 |
|
| $ | 2.39 |
|
|
| Three Months Ended March 31, 2021 |
| |||||||||
|
| Net Income (Numerator) |
|
| Shares (Denominator) |
|
| Per Unit Amount |
| |||
Basic earnings per unit: |
|
|
|
|
|
|
|
|
| |||
Net income attributable to the AIR Operating Partnership's common unitholders |
| $ | 87,632 |
|
|
| 156,527 |
|
| $ | 0.56 |
|
Diluted earnings per unit: |
|
|
|
|
|
|
|
|
| |||
Effect of dilutive securities |
|
| 0 |
|
|
| 219 |
|
|
| 0 |
|
Net income attributable to the AIR Operating Partnership's common unitholders |
| $ | 87,632 |
|
|
| 156,746 |
|
| $ | 0.56 |
|
The AIR Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holders’ option. The AIR Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of March 31, 2021,2022, these preferred OP Units were potentially redeemable for approximately 1.9 1.5million shares of Common Stock (based on the period end market price) or cash. The AIR Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. Accordingly, we have excluded these securities from earnings per share and unit computations for the periods presented above.
Dividends and distributions paid per share of Common Stock during the three months ended March 31, 2021 and 2020,per common unit were as follows:
| Three Months Ended March 31, |
| |||||
| 2021 |
|
| 2020 |
| ||
Dividends and distributions paid | $ | 0.43 |
|
| $ | 0.41 |
|
Note 6 — Fair Value Measurements
Recurring Fair Value Measurements
We measure at fair value on a recurring basis our investments in the securitization trust that holds certain of our property debt, which we classify as available for sale (“AFS”) debt securities. These investments are presented within other assets in the condensed consolidated balance sheets. We hold several positions in the securitization trust that pay interest currently$0.45 and we also hold the first loss position in the securitization trust, which accrues interest over the term of the investment. These investments were acquired at a discount to face value and we are accreting the discount to the $100.9 million face value of the investments through interest income using the effective interest method over the remaining expected term of the investments, which$0.43 as of March 31, 2021, was approximately 0.25 years. Our amortized cost basis for these investments, which represents the original cost adjusted for interest accretion less interest payments received, was $99.0 million2022 and $97.1 million as of March 31, 2021, and December 31, 2020, respectively.
Note 7 — Fair Value Measurements
Our investments in AFS debt securities are classified within Level 2 of the GAAP fair value hierarchy. We estimate 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 interest currently typically moves in an inverse relationship with movements in interest rates. The fair value of the first loss position is primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.Recurring Fair Value Measurements
During the year ended December 31, 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% strike price. The amount of future cash settlement is limited if the prevailing interest rate exceeds 2.78%. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement. In connection with the Separation,separation on December 15, 2020 (“Separation”), AIR assigned all of the risks and rewards of ownership related to this swap to Aimco, with an offsetting and equal asset or liability recognized for the amount of gain or loss recognized.loss.
We measureOur interest rate option is measured at fair value on a recurring basis, our interest rate option, which is presented in other assets, net, 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 adjustmentsadjustment to arrive at cash flows from operations, and the upfront premium is reflected in other financing in our condensed consolidated statements of cash flows.
17
The following table summarizes fair value for our AFS debt securities and our interest rate option (in thousands):
| As of March 31, 2021 |
|
| As of December 31, 2020 |
| ||||||||||||||||||||||||||
| Total Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
AFS debt securities | $ | 99,983 |
|
| $ | 0 |
|
| $ | 99,983 |
|
| $ | 0 |
|
| $ | 100,151 |
|
| $ | 0 |
|
| $ | 100,151 |
|
| $ | 0 |
|
Interest rate option | $ | 37,368 |
|
| $ | 0 |
|
| $ | 37,368 |
|
| $ | 0 |
|
| $ | 13,177 |
|
| $ | 0 |
|
| $ | 13,177 |
|
| $ | 0 |
|
|
| As of March 31, 2022 |
|
| As of December 31, 2021 |
| ||||||||||||||||||||||||||
|
| Total Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
Interest rate option |
| $ | 35,474 |
|
| $ | 0 |
|
| $ | 35,474 |
|
| $ | 0 |
|
| $ | 21,699 |
|
| $ | 0 |
|
| $ | 21,699 |
|
| $ | 0 |
|
19
Nonrecurring Fair Value Measurements
There were 0 assets measured at fair value on a nonrecurring basis as of March 31, 2021. As of December 31, 2020, assets measured at fair value on a nonrecurring basis in our condensed consolidated balance sheets consist of a real estate asset that was written down to its estimated fair value for impairment purposes during the year ended December 31, 2020. Our estimate of fair value was determined using valuations performed by third-party specialists, as well as various estimates and assumptions, the most significant being market rental rates, operating expense assumptions, and capitalization rate. These unobservable inputs are classified as Level 3 within the GAAP fair value hierarchy. As of December 31, 2020, the fair value of the real estate asset measured on a nonrecurring basis was $34.4 million.
Financial Assets and Liabilities Not Measured at Fair Value
We believe that the carrying value of the consolidated amounts of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximated their estimated fair value as of March 31, 2021,2022, and December 31, 2020,2021, due to their relatively short-term nature and high probability of realization. The carrying amounts of notesthe note receivable from Aimco, the term loan,loans, and the revolving credit facility borrowings also approximated their estimated fair value as of March 31, 2021,2022 and December 31, 2020.2021. 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 forof our non-recourse property debt, excluding debt issuance costs (in thousands):
|
| As of March 31, 2022 |
|
| As of December 31, 2021 |
| ||||||||||
|
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
| ||||
Non-recourse property debt |
| $ | 2,043,649 |
|
| $ | 1,953,994 |
|
| $ | 2,305,756 |
|
| $ | 2,367,713 |
|
| As of March 31, 2021 |
|
| As of December 31, 2020 |
| ||||||||||
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
| ||||
Non-recourse property debt | $ | 3,585,629 |
|
| $ | 3,666,592 |
|
| $ | 3,646,093 |
|
| $ | 3,730,621 |
|
Note 78 — Variable Interest Entities
Consolidated Entities
AIR consolidates the AIR Operating Partnership, a variable interest entity (“VIE”) of which AIR is the primary beneficiary. AIR, through the AIR Operating Partnership, consolidates all VIEs for which it is the primary beneficiary.Substantially all of the assets and liabilities of AIR are that of the AIR Operating Partnership.
The AIR Operating Partnership consolidates (i) five VIEs that own interestinterests in one or more apartment communities and are typically structured to generate a return for their partners through the operation and ultimate sale of the communities and (ii) fourfive VIEs related to lessor entities that own interestinterests in the properties leased to Aimco.third parties. The assets and liabilities of the VIEs associated with the leased properties consistsconsist 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 AIR Operating Partnership:
|
| March 31, 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 |
|
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
VIEs with interests in apartment communities |
|
| 5 |
|
|
| 5 |
|
Apartment communities owned by VIEs |
|
| 16 |
|
|
| 16 |
|
Apartment homes in communities owned by VIEs |
|
| 5,369 |
|
|
| 5,369 |
|
Assets of the AIR Operating Partnership’s consolidated VIEs must first be used to settle the liabilities of such consolidated VIEs. These consolidated VIEs’ creditors do not have recourse to the general credit of the AIR Operating Partnership. Assets and liabilities of VIEs, excluding those of the AIR Operating Partnership, are summarized in the table below (in thousands):
|
| March 31, 2021 |
|
| December 31, 2020 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net real estate |
| $ | 1,114,993 |
|
| $ | 1,125,315 |
|
| $ | 1,086,541 |
| $ | 1,096,039 |
| |
Cash and cash equivalents |
|
| 16,345 |
|
|
| 10,548 |
|
| 38,750 |
| 29,863 |
| |||
Restricted cash |
|
| 8,450 |
|
|
| 8,818 |
|
| 1,977 |
| 2,380 |
| |||
Other assets |
|
| 28,456 |
|
|
| 23,870 |
| ||||||||
Other assets, net |
| 26,692 |
| 21,745 |
| |||||||||||
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Non-recourse property debt secured by AIR communities, net |
| $ | 1,274,457 |
|
| $ | 1,278,318 |
|
| $ | 1,223,574 |
| $ | 1,227,345 |
| |
Accrued liabilities and other |
|
| 35,206 |
|
|
| 34,038 |
|
| 35,765 |
| 34,659 |
|
20
18
Unconsolidated Entities
During 2021, we formed a joint venture with an affiliate of Blackstone by selling an 80% interest in three multi-family properties with 1,748 units located in Virginia. Our 20% interest in the venture meets the definition of a VIE, however, we are not the primary beneficiary and do not consolidate these communities. As of March 31, 2022 and December 31, 2021, the carrying value of the investment of $24.0 million and $26.0 million, respectively, is included in other assets, net, in our condensed consolidated balance sheets. AIR's exposure to the obligations of the VIE is limited to the carrying value of the limited partnership interests and 20% of Blackstone's guarantor liabilities, which were $79 million as of March 31, 2022.
We have an interest in a partnership that owns Parkmerced Apartments, which meets the definition of a VIE. However, we are not the primary beneficiary and do not consolidate this partnership. In connection withAs of March 31, 2022, and December 31, 2021, the Separation, Aimco was allocated economic ownershipinvestment balance of the $275.0$346.0 million mezzanine loan investment and option to acquire a 30% equity interest$337.8 million, respectively, is included in the partnership. The investment accrues interest at 10% per annum with a five-year term and the right to extend for a second five-year term.other assets, net, in our condensed consolidated balance sheets. Subsequent to the Separation, all risks and rewards of ownership are Aimco’s. As of March 31, 2021, and December 31, 2020, the investment balance of $315.1 million and $307.4 million, respectively, primarily consisting of notes receivable, is included in other assets in AIR’s condensed consolidated balance sheets,Aimco’s, however, as legal transfer ishas not complete. Since AIR has legally assigned all risks and rewards of ownership to Aimco,occurred, there is an equal and offsetting liability included in accrued liabilities and other in AIR’sour condensed consolidated balance sheets. Accordingly, there is no net effect on AIR’s shareholders’stockholders’ equity. During the three months ended March 31, 2020, we recognized $6.7 million of income in connection with the mezzanine loan. The mezzanine investment income was offset by an expense to recognize the requirement that this income be contributed to Aimco.
Note 89 — Business Segments
We have 2 segments: Same Store and Other Real Estate. Our Same Store segment includes communities that: (i) are owned and managed by AIR, and (ii) had reached a stabilized level of operations. Our Other Real Estate segment includes the 5 properties that were acquired in 2021 and 4communities that we expect to sell or lease to a third party, but do not yet meet the criteria to be classified as Same Store. Communities included in discontinued operations are excluded from our evaluation of segment performance, as they are no longer included in information used by our held for sale.
Our chief operating decision maker (“CODM”).
Our CODM uses proportionate property net operating income (“NOI”) to assess the operating performance of our communities. Proportionate property net operating incomeNOI reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities.reimbursements. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues in accordance with GAAP.
As of March 31, 2021,2022, our Same Store segment included 9364 apartment communities with 25,48522,020 apartment homes, and our Other Real Estate segment included 29 apartment communities with 237 homes.2,499 apartment homes, and 3 apartment communities with 559 apartment homes were classified as held for sale.
The following tables present the total revenues, property operating expenses, proportionate property net operating income, (loss), and income (loss) from continuing operations before income tax benefit (expense) of our segments on a proportionate basis, excluding amounts relatedbasis. To reflect how the CODM evaluates the business, prior period segment information has been recast to communities sold or communities included in discontinued operations, for the three months endedconform with our reportable segment composition of March 31, 2021 and 20202022 (in thousands):
| Same Store |
|
| Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| |||||
Three months ended March 31, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues | $ | 153,652 |
|
| $ | 1,056 |
|
| $ | 20,018 |
|
| $ | 1,687 |
|
| $ | 176,413 |
|
Property operating expenses |
| 44,097 |
|
|
| 1,067 |
|
|
| 10,559 |
|
|
| 8,894 |
|
|
| 64,617 |
|
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| 82,570 |
|
|
| 82,570 |
|
Total operating expenses |
| 44,097 |
|
|
| 1,067 |
|
|
| 10,559 |
|
|
| 91,464 |
|
|
| 147,187 |
|
Proportionate property net operating income (loss) |
| 109,555 |
|
|
| (11 | ) |
|
| 9,459 |
|
|
| (89,777 | ) |
|
| 29,226 |
|
Other items included in income before income tax expense (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| 62,969 |
|
|
| 62,969 |
|
Income (loss) from continuing operations before income tax expense | $ | 109,555 |
|
| $ | (11 | ) |
| $ | 9,459 |
|
| $ | (26,808 | ) |
| $ | 92,195 |
|
| Same |
|
| Other |
|
| Proportionate |
|
| Corporate and |
|
| Consolidated |
| |||||
Three months ended March 31, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total revenues | $ | 138,108 |
|
| $ | 15,644 |
|
| $ | 19,781 |
|
| $ | 7,945 |
|
| $ | 181,478 |
|
Property operating expenses |
| 37,234 |
|
|
| 6,334 |
|
|
| 10,381 |
|
|
| 9,287 |
|
|
| 63,236 |
|
Other operating expenses not allocated to segments (3) |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 95,164 |
|
|
| 95,164 |
|
Total operating expenses |
| 37,234 |
|
|
| 6,334 |
|
|
| 10,381 |
|
|
| 104,451 |
|
|
| 158,400 |
|
Proportionate property net operating income |
| 100,874 |
|
|
| 9,310 |
|
|
| 9,400 |
|
|
| (96,506 | ) |
|
| 23,078 |
|
Other items included in income before income tax benefit (4) |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 377,727 |
|
|
| 377,727 |
|
Income before income tax benefit | $ | 100,874 |
|
| $ | 9,310 |
|
| $ | 9,400 |
|
| $ | 281,221 |
|
| $ | 400,805 |
|
21
| Same |
|
| Other |
|
| Proportionate |
|
| Corporate and |
|
| Consolidated |
| |||||
Three months ended March 31, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total revenues | $ | 133,558 |
|
| $ | 1,914 |
|
| $ | 19,308 |
|
| $ | 21,633 |
|
| $ | 176,413 |
|
Property operating expenses |
| 37,901 |
|
|
| 1,364 |
|
|
| 9,849 |
|
|
| 15,503 |
|
|
| 64,617 |
|
Other operating expenses not allocated to segments (3) |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 82,570 |
|
|
| 82,570 |
|
Total operating expenses |
| 37,901 |
|
|
| 1,364 |
|
|
| 9,849 |
|
|
| 98,073 |
|
|
| 147,187 |
|
Proportionate property net operating income |
| 95,657 |
|
|
| 550 |
|
|
| 9,459 |
|
|
| (76,440 | ) |
|
| 29,226 |
|
Other items included in income before income tax expense (4) |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 62,969 |
|
|
| 62,969 |
|
Income before income tax expense | $ | 95,657 |
|
| $ | 550 |
|
| $ | 9,459 |
|
| $ | (13,471 | ) |
| $ | 92,195 |
|
19
| Same Store |
|
| Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| |||||
Three months ended March 31, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues | $ | 176,757 |
|
| $ | 1,715 |
|
| $ | 6,973 |
|
| $ | 598 |
|
| $ | 186,043 |
|
Property operating expenses |
| 46,049 |
|
|
| 1,093 |
|
|
| 6,474 |
|
|
| 12,346 |
|
|
| 65,962 |
|
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| 90,426 |
|
|
| 90,426 |
|
Total operating expenses |
| 46,049 |
|
|
| 1,093 |
|
|
| 6,474 |
|
|
| 102,772 |
|
|
| 156,388 |
|
Proportionate property net operating income (loss) |
| 130,708 |
|
|
| 622 |
|
|
| 499 |
|
|
| (102,174 | ) |
|
| 29,655 |
|
Other items included in income before income tax benefit (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| (26,057 | ) |
|
| (26,057 | ) |
Income (loss) from continuing operations before income tax benefit | $ | 130,708 |
|
| $ | 622 |
|
| $ | 499 |
|
| $ | (128,231 | ) |
| $ | 3,598 |
|
(2) Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any. Also includes property management revenues, which are not part of our segment performance measure and property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure. (3) Includes depreciation and amortization, general and administrative expenses, and other expenses, net, and may also include provision for real estate impairment loss and write-offs of deferred leasing commissions, which are not included in our measure of segment performance. (4) Includes gain on derecognition of leased properties and dispositions of real estate, interest income, including interest income related to the leased properties, interest expense, and loss on extinguishment of debt.
|
|
|
|
|
|
|
|
The assets of our segments and the consolidated assets not allocated to our segments were as follows (in thousands):
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
Same Store |
| $ | 3,974,518 |
|
| $ | 3,962,175 |
|
Other Real Estate |
|
| 753,452 |
|
|
| 799,012 |
|
Corporate and other assets (1) |
|
| 1,574,886 |
|
|
| 1,679,173 |
|
Total consolidated assets |
| $ | 6,302,856 |
|
| $ | 6,440,360 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||
Same Store | $ | 4,666,856 |
|
| $ | 4,697,969 |
|
Other Real Estate |
| 89,325 |
|
|
| 97,248 |
|
Corporate and other assets (1) |
| 1,565,323 |
|
|
| 1,434,061 |
|
Total consolidated assets | $ | 6,321,504 |
|
| $ | 6,229,278 |
|
|
|
For the three months ended March 31, 20212022 and 2020,2021, capital additions related to our segments were as follows (in thousands):
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Same Store | $ | 22,354 |
|
| $ | 43,351 |
|
| $ | 29,817 |
| $ | 19,417 |
| |
Other Real Estate |
| 818 |
|
|
| 44,689 |
|
|
| 7,286 |
| 251 |
| ||
Total capital additions | $ | 23,172 |
|
| $ | 88,040 |
|
| $ | 37,103 |
|
| $ | 19,668 |
|
2220
Note 9 – Discontinued Operations
The financial results attributable to apartment communities retained by the Spinnee for the prior year comparative period have been classified as discontinued operations within the condensed consolidated financial statements.
Summarized results of discontinued operations are shown below (in thousands):
|
| Three Months Ended |
| |
|
| March 31, 2020 |
| |
REVENUES: |
|
|
|
|
Rental and other property revenues |
| $ | 38,509 |
|
OPERATING EXPENSES: |
|
|
|
|
Property operating expenses |
|
| 13,321 |
|
Depreciation and amortization |
|
| 19,030 |
|
Other expenses, net |
|
| 198 |
|
Total operating expenses |
|
| 32,549 |
|
|
|
|
|
|
Interest income |
|
| 534 |
|
Interest expense |
|
| (4,530 | ) |
Income from unconsolidated real estate partnerships |
|
| 182 |
|
Income before income tax benefit |
|
| 2,146 |
|
Income tax benefit |
|
| 1,919 |
|
Income from discontinued operations, net of tax |
|
| 4,065 |
|
Net loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 103 |
|
Net income from discontinued operations attributable to Spinnee |
| $ | 4,168 |
|
During the three months ended March 31, 2021, we recognized $3.9 million of additional costs related to Separation, consisting of $1.8 million of incremental tax expense and $2.1 million of costs incurred as a direct result of the Separation.
We entered into various separation and transition services agreements with the Spinnee that provide for a framework of our relationship with the Spinnee after the Separation, including: (i) a separation agreement setting forth the mechanics of the Separation, the key provisions relating to the Separation of our assets and liabilities from those of the Spinnee, and certain organizational matters and conditions; (ii) an employee matters agreement to allocate liabilities and responsibilities relating to employment matters, teammate compensation, and benefits plans and programs, and other related matters; (iii) Property Management Agreements pursuant to which we provide property management and related services at a majority of the properties owned or leased by the Spinnee in exchange for a fee based on an agreed percentage of revenue collected; (iv) Master Services Agreement pursuant to which we provide the Spinnee with customary administrative and support services on an ongoing basis in exchange for payment for the fully-burdened costs (including internal allocated costs); and (v) a Master Leasing Agreement pursuant to which the Spinnee may enter into leases with us pursuant to which the Spinnee, at its option, may redevelop, develop, or lease-up apartment communities. The Property Management Agreement, the Master Services Agreement, and the Master Leasing Agreement may be terminated in accordance with the respective agreements.
During the three months ended March 31, 2021, we recognized revenue of $1.7 million from the Property Management Agreements and Master Services Agreement, all of which is reflected in other revenue in our condensed consolidated statement of operations.
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).
23
On January 1, 2021, we leased 4 redevelopment and development properties to the Spinnee. In accordance with ASC 842, 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. Commensurate with the commencement of each of the leases on January 1, 2021, we also recognized a net gain of $83.7 million, which is equal to the difference in the net investment values and their carrying values immediately prior to the commencement of the leases. During the three months ended March 31, 2021, we recognized income of $6.4 million 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 $6.6 million during the three months ended March 31, 2021.
The initial term of each of the leases range from 10 to 25 years. All of the leases 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 March 31, 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) |
| $ | 18,947 |
|
2022 |
|
| 25,262 |
|
2023 |
|
| 25,262 |
|
2024 |
|
| 25,262 |
|
2025 |
|
| 25,373 |
|
Thereafter |
|
| 730,446 |
|
Lease payments plus guaranteed residual value (1) (2) |
| $ | 850,552 |
|
Add: Unguaranteed residual value |
|
| 131,580 |
|
Less: Discount |
|
| (515,119 | ) |
Total leased real estate assets |
| $ | 467,013 |
|
|
|
|
|
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 the existing debt of $215.4 million as of December 31, 2020, 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 months ended March 31, 2021, we recognized interest income of $6.9 million associated with the notes receivable, which is reflected in interest income in our condensed consolidated statement of operations.
As of March 31, 2021, we have a receivable from Aimco in the amount of approximately $14 million, which is recognized in other assets, and a payable to Aimco in the amount of approximately $23 million, which is recognized in accrued liabilities and other in our condensed consolidated balance sheets. The amount payable to Aimco is due primarily to treasury management services and is in a payable position because cash receipts exceeded cash paid. We expect the amounts due to and from Aimco to be settled in the second quarter of 2021.
24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward LookingForward-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 thisThis 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 ongoing relationship between AIR and Aimco (the “Separate Entities”) following the Separation; the payment of dividends and distributions in the future; the impact of the COVID-19 pandemic, including our ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding consumer demand, growth in revenue and strength of other performance metrics and models; the effect of acquisitions and dispositions; expectations regarding acquisitions as well as sales of our apartment communitiesand joint ventures and the use of proceeds thereof; the availability and cost of corporate debt; 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 notesnote receivable due from Aimco.
These forward-looking statements are based on management’s judgment as of this date, which iscurrent 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: the effects of the coronavirusCOVID-19 pandemic on AIR’s business and on the global and U.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described herein, and the impact on entities in which AIR holds a partial interest, and the impact of governmental lockdowns on AIR’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 inflation, the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply;supply, which may be impacted by global supply chain disruptions; the timing and effects of acquisitions and dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIR’s ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including interest rate changes and the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; 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; theAIR; our relationship between the Separate Entitieswith Aimco after the Separation; the ability and willingness of the Separate Entities and their subsidiariesparties to the Separation to meet and/or perform their obligations under anythe 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 Separation; and such otherSeparation. Other risks and uncertainties are described from time to time in filings bythis 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 Entitiesyear ended December 31, 2021, and subsequent filings with the Securities and Exchange Commission (“SEC”).SEC.
In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”) and depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership.
Readers should carefully review AIR’s financial statements and the notes thereto, as well as the section entitled “Risk Factors” described in Item 1A of AIR’s and AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020, and subsequent documents we file from time to time with the SEC. 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 update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
As used herein and except as the context otherwise requires, “we,” “our,” and “us” refer to Apartment Income REIT Corp. (“AIR”), AIMCO Properties, L.P. (“AIR Operating Partnership”) and their consolidated subsidiaries, collectively.
Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States (“GAAP”).GAAP. These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading and include: NAREIT Funds from Operations, Pro forma Funds from Operations, and the measures used to compute our leverage ratios.
21
25
Executive Overview
We created AIR provides investors with a simple and transparent way to invest in the multi-family sector with public market liquidity, the safety of a diversified portfolio of apartment communities with low financial leverage, best-in-class operations, and sector low general and administrative costs.
Our principal financial objective is to be a low-costthe most efficient and efficienteffective way to invest in U.S. multi-family real estate. Manyestate, due to our simplified business model, diversified portfolio of stabilized apartment communities, and low leverage. The Board of Directors has set the following strategic objectives:
We own and operate a portfolio of stabilized apartment communities, diversified by the National Associationboth geography and price point. As of Real Estate Investment Trusts (“NAREIT”), referred to herein as “NAREIT FFO.” These investors also focus on NAREIT FFO, as adjusted for non-cash, unusual or non-recurring items. We refer to this metric as Pro forma Funds From Operations (“Pro forma FFO”) and use it as a secondary measureMarch 31, 2022, our portfolio included 76 apartment communities with 25,078 apartment homes in which we held an average ownership of operational performance.approximately 88%.
Our business is organized around four areas of strategic focus: operational excellence; portfolio management; balance sheet; and team and culture. The results from the execution of our business plan are further described in the sections that follow.
The Separation
For financial reporting purposes, GAAP requires that Aimco is presented as the predecessor (“AIR’s Predecessor”) for AIR’s financial statements. As a result, unless otherwise stated, financial results prior to the Separation on December 15, 2020 include the financial results of AIR’s Predecessor. The financial results prior to the Separation attributable to the apartment communities retained by Aimco are presented as discontinued operations and are excluded from our property net operating income.
Operational Excellence
We own and operate a portfolio of stabilized apartment communities, diversified by both geography and price point. As of March 31, 2021, our portfolio included 95 apartment communities with 25,722 apartment homes in which we held an average ownership of approximately 93%.
Same Store highlights for the first quarter include:
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Markets
Our portfolio is diversified by price point and geography, and with a mix of urban and suburban submarkets. InAIR enjoyed stronger than typical consumer demand across all markets in the first quarter of 2021, our five healthiest markets were San Diego, Denver, Miami, Boston and Washington, DC. These markets, which represent half of our total portfolio, together posted signedquarter. Signed new lease rent increasesrates were up 17.8% from the prior lease, with renewals up 11.3%, resulting in a weighted-average increase of 1.8%, signed renewal rent increases of 3.9%, signed blended lease rent increases of 2.9%, and14.1%. Occupancy was high throughout the quarter, averaging 98.1%. With limited availability, demand remained strong with volume above 2020's pre-COVID levels.
Consistent with our expectations, average daily occupancy declined sequentially in March and April as we began to experience higher frictional vacancy associated with the increased turnover of 96.9%peak leasing season.
2021 Acquisition Performance
In sourcing acquisitions, AIR seeks to identify properties that will benefit from AIR’s operating acumen, or the “AIR Edge.” These acquisitions are typically expected to deliver unlevered internal rates of return ("IRR") of 200 basis points or more than AIR’s stabilized Same Store portfolio. In today’s market, we target IRRs greater than 8%. In these markets our asking effective rents are above their pre-COVID peak.a typical acquisition, the acquired property will experience NOI growth at market rates for 6 to 12 months, as the property is integrated onto AIR’s platform with AIR customer selection, satisfaction, and retention, cost control, capital enhancements, and good neighbor policies. During the following two to four years, NOI growth is expected to exceed the market growth rate by two or three times.
The positive momentum for the first quarter has carried over to April 2021, with leasing pace and rates continuing to trend higher. Although occupancy growth will begin to moderate as we experience greater frictional vacancy during peak leasing season, the fundamentals point towards a continued recovery in average daily occupancy through the balance of the year.22
AIR’s more challenged markets also showed signs of continuing improvement:
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26
AIR acquired five properties in 2021, at a cost of approximately $730 million, with an expected first year yield of 4.3% and a long-term unlevered IRR of approximately 9%. During the quarter, ADO increased by 40 basis points related to these properties, and we signed 275 new and renewal leases at rates 23% above expiring leases. Based on performance to date, we now expect the first year yield to be 4.5%, 20 basis points above underwriting. |
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Portfolio Management
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. During the first quarter of 2022, we exited the Chicago market and reduced our exposure to California.
We measure the quality of apartment communities in our portfolio based on average rents of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance data and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of local market average; and as “B” quality apartment communities those earning rents between 90% and 125% of local market average; 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 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 multi-family real estate industry.
The following table summarizes information about our portfolio relative to the market for the three months ended March 31, 2021:
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Our average monthly revenue per apartment home was $2,233 for the three months ended March 31, 2021, representing a decrease of approximately 5% compared to the same period in 2020.
Commencing on January 1, 2021, we leased four properties to Aimco for redevelopment and development with an initial value of $467.0 million and quarterly cash lease income of $6.6 million. Aimco 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, AIR has the option to purchase the improved assets at a discount to their fair value, when property operations are stabilized, currently expected between January 1, 2024 and January 1, 2025.
We also expect to improve the quality of our portfolio by allocating investment capital to enhance rent growth and increase long-term capital values through routine investments in property upgrades (such as upgrading kitchens, bathrooms, and other interior design aspects) and through portfolio design, emphasizing land value as well as location and submarket. We plan to maintain a dynamic capital allocation and market selection process, expecting over time to reallocate our investment to locations with lower public tax burdens, including the southeastern United States and the Mountain West. We target geographic diversification in our portfolio to reduce the volatility of our rental revenue by avoiding undue concentration in any particular market.
As part of our portfolio strategy, we seek to sell communities with lower expected free cash flow ("FCF") internal rates of return and reinvest the proceeds from such sales in accretive uses such as capital enhancements, share repurchases, and selective acquisitions of stabilized communities with projected free cash flowFCF internal rates of return higher than expected from the communities being sold. When the cost of capital is favorable, we will look to grow through the acquisition of stabilized apartment communities that we believe we can operate better than their previous owners. Through this disciplined approach to capital allocation, we expect to increase the quality and expected growth rate of our portfolio.
27Transactions
Acquisitions
We did not acquire any apartment communities in the first quarter. During the balance of the year we anticipate acquiring approximately $500 million of properties, where the "AIR Edge" is expected to provide IRRs above 8%, and 200 basis points above our cost of capital.
Dispositions
During the three months ended March 31, 2022, we sold eight apartment communities located in Chicago and various cities in California, with 1,332 apartment homes, for gross proceeds of $578 million at a NOI cap rate of 4.5%. Net sales proceeds, after transaction costs and repayment of debt at the sold properties, from these transactions were $460 million. The NOI cap rate reflects AIR’s low property tax basis in the seven California properties sold. Adjusting for market rate real estate taxes, the NOI cap rate is 3.7%.
Subsequent to quarter end, we sold an additional three apartment communities located in California for gross proceeds of $161 million. Net proceeds, after transaction costs, were $159 million. Our NOI cap rate of 4.8% reflects AIR’s low property tax basis in these properties. Adjusting for market rate real estate taxes, the NOI cap rate is 3.9%.
23
Acquisitions and Dispositions
We did not acquire or dispose of any apartment communities during the three months ended March 31, 2021.
Balance Sheet
Components of Leverage
We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage and primarily long-dated debt; and we builddebt. We maintain financial flexibility by maintainingthrough ample unused and available credit;credit, holding properties with substantial value unencumbered by property debt;debt, maintaining an investment grade rating;rating, and using partners’ capital when it enhances financial returns or reduces investment risk.
Our leverage includes our share of long-term, non-recourse property debt encumbering our apartment communities, together with outstanding borrowings under our revolving credit facility, our term loans, and our preferred equity.We have notes receivable
As of March 31, 2022, AIR had $1.5 billion of floating rate debt. Of this amount:
AIR’s leverage, pro forma the above actions is (in thousands):
|
| March 31, 2022 |
|
| Pro forma Adjustments |
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| Pro forma |
| |||
Fixed rate loans payable |
| $ | 1,481,336 |
|
| $ | — |
|
| $ | 1,481,336 |
|
Floating rate loans payable, to be hedged |
|
| 167,500 |
|
|
| (167,500 | ) |
|
| — |
|
Floating rate loans payable, hedged |
|
| — |
|
|
| 167,500 |
|
|
| 167,500 |
|
Non-recourse property debt |
|
| 1,648,836 |
|
|
| — |
|
|
| 1,648,836 |
|
|
|
|
|
|
|
|
|
|
| |||
Term loan to be repaid with proceeds from Aimco note |
|
| 350,000 |
|
|
| (350,000 | ) |
|
| — |
|
Term loan to be repaid with proceeds from new fixed rate bond offering |
|
| 400,000 |
|
|
| (400,000 | ) |
|
| — |
|
Term loan to be hedged/repaid |
|
| 400,000 |
|
|
| (400,000 | ) |
|
| — |
|
Floating rate term loans |
|
| 1,150,000 |
|
|
| (1,150,000 | ) |
|
| — |
|
|
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|
|
|
|
|
|
| |||
Floating revolving credit facility borrowings |
|
| 177,000 |
|
|
| (177,000 | ) | (1) |
| — |
|
Term loans now hedged |
|
| — |
|
|
| 232,500 |
|
|
| 232,500 |
|
New fixed rate bond offering |
|
| — |
|
|
| 400,000 |
|
|
| 400,000 |
|
Preferred equity |
|
| 81,354 |
|
|
| — |
|
|
| 81,354 |
|
Total Leverage |
|
| 3,057,190 |
|
|
| (694,500 | ) |
|
| 2,362,690 |
|
|
|
|
|
|
|
|
|
|
| |||
Cash and restricted cash |
|
| (88,860 | ) |
|
| (22,000 | ) | (1) |
| (110,860 | ) |
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|
|
|
|
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| |||
Leverage, net of cash and restricted cash |
| $ | 2,968,330 |
|
| $ | (716,500 | ) |
| $ | 2,251,830 |
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| |||
Floating rate leverage %, net of cash |
|
| 47 | % |
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|
|
|
| — | % | |
Fixed rate leverage %, net of cash |
|
| 53 | % |
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|
|
|
| 100 | % | |
Total |
|
| 100 | % |
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|
|
|
| 100 | % | |
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|
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|
|
|
|
|
|
| |||
Weighted average maturity |
| 6.3 years |
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|
|
|
| 8.2 years |
| |||
Weighted average interest rate |
|
| 2.7 | % |
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|
|
|
| 3.5 | % | |
Gross Leverage to Adjusted EBITDAre |
| 6.5x |
|
|
|
|
| 5.4x |
| |||
Net Leverage to Adjusted EBITDAre |
| 5.7x |
|
|
|
|
| 5.4x |
|
The result is a stronger and more flexible balance sheet with limited repricing risk and a better maturity profile.
24
Since AIR's separation from Aimco, with an aggregate principal amount of $534 million. The notes will mature on January 31, 2024 and are securedpro forma for the above, AIR has:
Please see the Liquidity and Capital Resources section for additional information regarding our leverage.
New Credit Facility
On April 14, we closed a new $1.4 billion credit facility, providing four-to-five-year money at a current all-in cost of 1.6%. The facility is comprised of a $600 million revolving credit facilityleverage and $800 million of variable rate term loans. Term loan proceeds are being used to extend the maturity of our current $350 million term loan; to repay $213 million of property debt; and to reduce borrowings on our revolving credit facility. The $213 million property debt repayment increases by over $530 million our pool of properties unencumbered by debt. The reduction of property level debt and the increase in unencumbered properties strengthen our investment grade balance sheet and enhances our ability to access the public bond market.
The $800 million of term loans are priced at a LIBOR spread of 100 basis points, with a LIBOR floor of 0.00%, 98 basis points lower than our previous term loan. Borrowing costs under the new revolving credit facility are 10 basis points lower than under our previous facility. To further our environmental, social, and governance (“ESG”) initiatives, the facility allows for an additional one basis point margin reduction if certain ESG targets are achieved. The term of the revolver ends April 14, 2025, with two six-month extension options.
The term loans mature on the following schedule:
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The term loans were structured to maintain our balanced maturity ladder, and to also maximize flexibility through the ability to prepay freely and extend the maturity date of shorter duration loans.
Equity Issuance
On April 23, 2021, we issued and sold 7.825 million shares of our Class A Common Stock in a private placement to a large global real estate-focused investment firm for a cash purchase price of $342 million. We expect to use the proceeds to repay property debt with a weighted-average interest rate of 4.6%.
As a “new issuer”, we are not yet eligible to file a “shelf” registration statement. Until we have 12 months of post-Separation filings, the registration process will result in a longer SEC clearance process and a longer marketing period, which could introduce greater volatility and uncertainty in pricing and execution.
28
On Track Leverage Reduction
We target Net Leverage to Adjusted EBITDAre below 6.0x and Adjusted EBITDAre to Adjusted Interest Expense and Preferred Dividends above 2.5x. Our leverage ratios for the three months ended March 31, 2021 are presented below:
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We expect to achieve our target by year-end 2021 through a:
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Please see the Leverage Ratios subsection of the Non-GAAP Measures section for further information about the calculation of our leverage ratios.
Liquidity
We use our revolving credit facility primarily for working capital, and other short-term purposes, and to secure letters of credit. As of March 31, 2021, pro forma the closing of the new credit facility, but excluding proceeds received from the equity issuance,2022, our share of cash and restricted cash, excluding amounts related to tenant security deposits, was $59.1 $88.9 million and we had the capacity to borrow up to $459.7$411.6 million under our new revolving credit facility, bringing total pro forma liquidity to $518.8$500.5 million. We increased liquidity by $400 million through the exercise of the accordion feature on our revolving credit facility. After consideration of April property sales and the exercise of the accordion, our liquidity is more than $1.0 billion.
We also manage our financial flexibility by maintaining an investment grade rating and holding apartment communities that are unencumbered by property debt. AIR credit has been rated BBB by Standard & Poor’s.Pro forma
We anticipate seeking an investment grade credit rating from Moody’s. In assigning ratings, Moody’s places significant emphasis on the closingamount of non-recourse property debt as percentage of the new credit facility andundepreciated book value of a company’s assets. We have lowered the expected useamount of proceeds from the equity issuance, we expect to hold communities unencumbered bynon-recourse property debt with an estimated fair market valueby $1.5 billion since December 31, 2020. At March 31, 2022 AIR share of approximately $4.0 billion.non-recourse property debt represented 19% of undepreciated book value.
Dividend
On April 26, 2021,2022, our Board of Directors declared a quarterly cash dividendsdividend of $0.43$0.45 per share of AIR Common Stock. This amount is payable on May 28, 2021,31, 2022, to stockholders of record on May 14, 202120, 2022.
. The safety and simplicityIn setting AIR's 2022 dividend, our Board of our business model, combined withDirectors targets a dividend level of approximately 75% of full year FFO per share.
We expect that the predictability of our cash flows, allows us to distribute a greater percentage of income, leading to an improvedafter-tax dividend payout ratio after the Separation. Ourwill benefit from AIR's refreshed tax basis allows our dividend to also be tax efficient. Beforebasis. Two-thirds of the consideration of any property sales, approximately 60% of AIR’s 2021 dividend is expected to be taxable, with approximately 40% of AIR’s dividend expected to be a tax-freewas considered return of capital. Actual results could differ materially.capital while the remaining one-third was treated as capital gains.
The Board of Directors recently authorized both a common stock repurchase program of up to $500 million and an at-the-market offering program of up to $500 million. To date, neither has been used.
Team and Culture
Our team and culture are keys to our success. Our intentional focus on a collaborative and productive culture based on respect for others and personal responsibility is reinforced by a preference for promotion from within. We focus on succession planning and talent development to produce a strong, stable team that is the enduring foundation of our success. We offer benefits reinforcing our value of caring for each other, including an opportunity to manage one’s life through flexible work schedules and “dress for your day,” paid time for parental leave, profit sharing, retirement plans for all, financial support for our teammates who are becoming United States citizens, and a bonus structure at all levels of the organization. Consistent with the duration of our other leave policies, we also pay full compensation and benefits for teammates who are actively deployed by the United States military.
A critical element of our culture is a relentless focus on efficiency. We continuously seek to reduce costs through the use of additional automation and continued technological investment. We expect this focus will enable our general and administrative expenses to be lower, as a percentage of gross asset value, than our peers.
25
Corporate responsibility is a longstanding priority and a key part of our culture. We strive for transparency, and continuous improvement, as measured by GRESB. We are aligned with the UN Sustainable Development Goals. We have established targets for energy, water, and greenhouse gas reductions, embarked on environmental certifications for our properties, and are implementing resilience strategies including physical and climate risk assessments of the portfolio.
Our focus on our team and our culture is recognized externally, as well. OutAIR was recognized for our gender-balanced board by the Women’s Leadership Foundation in Colorado and is in the top 15% of public companies in Colorado to achieve this milestone.
We are continuing our longstanding commitment to offer the AIR Gives Opportunity Scholarship to students living in affordable housing across the country in partnership with the National Leased Housing Association.
AIR has been recognized nationally as a “National Top Workplace Winner.” In addition to that national recognition, AIR has previously been recognized as a top workplace in Colorado, the Washington, D.C. area, and the San Francisco Bay area. Specifically in 2021, out of hundreds of participating companies, in 2020, AIR’s PredecessorAIR was one of only six recognized by the Denver Post as a “Top Workplace”"Top Workplace" in Colorado for each of the past eight years, andnine years. Also in 2021, AIR was recognized by the Washington Post as a "Top Workplace" in the Washington, D.C. area. AIR was recognized by the Denver Business Journal as one of only two real estate companies to receive a BEST award from the AssociationDenver Area's Healthiest Employers in 2022 for Talent Development in
29
recognition of our company-wide success in talent development, marking itsthe third consecutive year receiving this award.year.
Results of Operations
Because our operating results depend primarily on income from our apartment communities, the supply of and demand for apartments influences our operating results. Additionally, the level of expenses required to operate and maintain our apartment communities and the pace and price at which we acquire and dispose of our apartment communities affects our operating results.
The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements included in Item 1.
Financial Highlights
Net income from continuing operations attributable to common stockholders per common share, on a dilutive basis, was $0.56increased $1.83 for the three months ended March 31, 2021.2022 compared to 2021, due primarily to an increase in gain on dispositions of real estate.
Pro forma FFO per share was $0.57 for the three months ended March 31, 2022 compared to $0.50 for the three months ended March 31, 2021.2021, due primarily to an outperformance in Same Store operations, the contribution from properties acquired in 2021, and lower interest expense.
Residential Rent Collection Update
We measure residential rent collection as the amount of payments received as a percentage of all residential amounts owed on a proportionate basis. In the first quarter, we recognized 98.0% of all residential revenue billed during the quarter, treating the balance of 2.0% as bad debt. Of the 98.0% of residential revenue recognized, as of quarter-end, we collected in cash all but 90 basis points, with 97.1% of the residential rents collected.
As of March 31, 2021, our proportionate share of the amount of uncollected and unreserved residential accounts receivable, not offset by tenant security deposits totaled $1.2 million. Most of this balance is expected to be collected during the second quarter of 2021.
77% of our uncollected accounts receivable relate to California residents. The state of California has recently implemented the SB-91 rent relief program, where the state has agreed to pay 80% of a resident’s past due rent in exchange for the landlord forgiving the remaining 20%. We are cautiously optimistic that this program will be helpful to restoration of access to collection remedies; however, it is premature to estimate the amount of potential recovery.
Looking forward, we expect bad debt expense to decline, but the timing and pace will depend on unwinding the emergency ordinances that currently allow residents to live rent free, so that we are again able to collect rent or to re-rent these apartments to new residents who pay the rent that is owed.
Detailed Results of Operations for the Three Months Ended March 31, 2021,2022, Compared to 2020
Net income from continuing operations increased by $84.2 million during the three months ended March 31, 2021 compared to 2020, due primarily to an $83.7 million gain on derecognition of leased properties.
Property Operations
We have two segments: Same Store and Other Real Estate. Our Same Store segment includes communities that: (i) are owned and managed by AIR and (ii) had reached a stabilized level of operations. Our Other Real Estate segment includes the five properties that were acquired in 2021 and four communities that we expect to sell or lease to a third party, but do not yet meet the criteria to be classified as Same Store.held for sale.
As of March 31, 2021,2022, our Same Store segment included 9364 apartment communities with 25,48522,020 apartment homes and our Other Real Estate segment included twonine apartment communities with 2372,499 apartment homes.
Proportionate Property Net Operating Income
Our proportionate share of financial information includes our share of unconsolidated real estate partnerships and excludes the noncontrolling interest partners’ share of consolidated real estate partnerships. We believe proportionate information benefits the users of our financial information by providing the amount of revenues, expenses, assets, liabilities, and other items attributable to our stockholders.
We use proportionate property net operating incomeNOI to assess the operating performance of our communities, which excludes the results of properties retained by the Spinnee in connection with the Separation, which are included in discontinued operations.communities. Proportionate property net operating incomeNOI reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, forreimbursements. In our condensed consolidated communities. Accordingly, the resultsstatements of operations, of our segments discussed belowutility reimbursements are presented on a proportionate basis. In September 2020, we formed a joint ventureincluded in rental and other property revenues in accordance with a passive institutional investor to own a portfolio of 12 multi-family communities in California. In order for both periods to be comparable, we have presented, in addition to the actual historical changes in results of operations of our segments, the property operating results as if the California joint venture had closed on January 1, 2020.GAAP.
3026
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 the Spinnee in the Separation, which are included in discontinued operations, reported in consolidated amounts, in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below.
Please see Note 89 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 March 31, |
|
| Historical Change |
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| Ownership-Effected Change (1) |
| |||||||||||||||
(in thousands) | 2021 |
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| 2020 |
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| $ |
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| % |
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| $ |
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| % |
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Rental and other property revenues, before utility reimbursements: |
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Same Store | $ | 153,652 |
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| $ | 176,757 |
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| $ | (23,105 | ) |
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| (13.1 | %) |
| $ | (9,238 | ) |
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| (5.7 | %) |
Other Real Estate |
| 1,056 |
|
|
| 1,715 |
|
|
| (659 | ) |
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| (38.4 | %) |
|
| (659 | ) |
|
| (38.4 | %) |
Total |
| 154,708 |
|
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| 178,472 |
|
|
| (23,764 | ) |
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| (13.3 | %) |
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| (9,897 | ) |
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| (6.0 | %) |
Property operating expenses, net of utility reimbursements: |
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Same Store |
| 44,097 |
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| 46,049 |
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| (1,952 | ) |
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| (4.2 | %) |
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| 1,351 |
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| 3.2 | % |
Other Real Estate |
| 1,067 |
|
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| 1,093 |
|
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| (26 | ) |
|
| (2.4 | %) |
|
| (26 | ) |
|
| (2.4 | %) |
Total |
| 45,164 |
|
|
| 47,142 |
|
|
| (1,978 | ) |
|
| (4.2 | %) |
|
| 1,325 |
|
|
| 3.0 | % |
Proportionate property net operating income: |
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Same Store |
| 109,555 |
|
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| 130,708 |
|
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| (21,153 | ) |
|
| (16.2 | %) |
|
| (10,589 | ) |
|
| (8.8 | %) |
Other Real Estate |
| (11 | ) |
|
| 622 |
|
|
| (633 | ) |
|
| (101.8 | %) |
|
| (633 | ) |
|
| (101.8 | %) |
Total | $ | 109,544 |
|
| $ | 131,330 |
|
| $ | (21,786 | ) |
|
| (16.6 | %) |
| $ | (11,222 | ) |
|
| (9.3 | %) |
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For the three months ended March 31, 2021,2022, compared to 2020, after giving effect2021, excluding changes attributable to the sale of partial interestchanges in certain Same Store communities in the California joint venture,ownership, our Same Store proportionate property net operating income decreasedNOI increased by $10.6 million, or 8.8%11.7%. This decreaseincrease was attributable primarily to a $9.2$11.7 million, or 5.7%9.2%, decreaseincrease in rental and other property revenues due primarily to 160a 500 basis point decreases in average daily occupancy and alsoincrease in residential rental rates. Rentalrates, a 270 basis point increase in ADO to 98.1%, and other property revenues declined an additionala 60 basis points due to lower rents from commercial tenants due primarily to the economic impacts of COVID-19.point decrease in bad debt.
The decreaseincrease in proportionate property net operating incomeNOI was also attributable to higherpartially offset by an increase of $1.1 million, or 3.1%, in Same Store property operating expenses, of $1.4 million. Controllabledue primarily to increases in controllable operating expenses were up $0.1of $0.5 million, compared to the three months ended March 31, 2020, whileor 2.8%, and an increase of $0.6 million in net utilities expense, real estate taxes, and insurance costs increased by $0.9 million and $0.3 million, respectively.insurance.
Other Real Estate proportionate property net operating incomeNOI for the three months ended March 31, 2021,2022, compared to 2020, was relatively flat.2021, increased by $8.8 million, due primarily to the June acquisition of City Center on 7th and October 2021 acquisition of four properties located in the Washington, D.C. area.
Non-Segment Real Estate Operations
Operating income amounts not attributed to our segments include revenues and offsite costs associated with property management, casualty losses, write-off of straight-line rent receivables, and the results of apartment communities sold or held for sale, reported in consolidated amounts, which we do not allocate to our segments for purposes of evaluating segment performance.
For the three months ended March 31, 2021,2022, compared to 2020,2021, non-segment real estate operations increaseddecreased by $4.1$7.5 million, or 36.0%, due primarily to:
• $9.9 million of lower NOI attributable to sold properties; offset by • $1.6 million of lower property management expenses, net; and • $0.8 million of lower casualty losses.
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Depreciation and Amortization
For the three months ended March 31, 2021,2022, compared to 2020,2021, depreciation and amortization expense was relatively flat.increased $9.3 million, or 12.3%, due primarily to apartment homes acquired in the second and fourth quarters of 2021, partially offset by decreases associated with apartment communities sold.
3127
General and Administrative Expenses
For the three months ended March 31, 2021,2022, compared to 2020,2021, general and administrative (“G&A”) expenses decreasedincreased by $3.1$2.2 million, or 41.1%49.5%, due primarily to lower incentive compensationthe allocation of property management costs greater than 3% of revenues, a policy adopted in 2022 and structural changes made to reflect AIR’s more focused business model.higher insurance expenses.
Other expenses, netExpenses, Net
Other expenses, net, includes costs associated with our risk management activities, partnership administration expenses, and certain non-recurring items.
For the three months ended March 31, 2021,2022, compared to 2020,2021, other expenses, net, was relatively flat.
Interest Income
Interest income for three months ended March 31, 2021, compared to 2020, increased $12.0$1.1 million, or 39.7%, due primarily to $6.9 million of income associated from our notes receivable from Aimco and $6.4 million of interest income associated with the four properties leased to Aimco recognized during the first quarter of 2021.higher legal expenses.
Interest ExpenseIncome
For the three months ended March 31, 2021,2022, compared to 2020,2021, interest income decreased by $2.5 million, or 15.6%, due primarily to interest income included in 2021 associated with our previous investment in a securitization trust. Interest income for each of the three months ended March 31, 2022 and 2021 includes $6.9 million of income associated with our note receivable from Aimco, and $6.5 million and $6.4 million, respectively, of rental payments, which GAAP characterizes as interest income associated with properties leased.
Interest Expense
For the three months ended March 31, 2022, compared to 2021, interest expense was relatively flat.decreased by $13.9 million, or 38.6%, primarily due to debt payoff activity and lower interest expense on debt following refinancing activity.
Through March 31, 2022, we repaid $339.0 million of property debt and reduced borrowings on our revolving credit facility by $127 million.
Loss on Extinguishment of Debt
For the three months ended March 31, 2022, compared to 2021, loss on extinguishment of debt increased by $22.6 million, primarily due to $23.6 million of prepayment penalties from the early payment of property debt in the first quarter to achieve our deleveraging targets, compared to $1.0 million in the first quarter of 2021.
Gain on Derecognition of Leased Properties and Dispositions of Real Estate
During the three months ended March 31, 2022, we recognized $412.0 million of gain on dispositions of real estate.
Apartment communities sold during the three months ended March 31, 2022 are summarized below (dollars in millions):
| 2022 |
| |
Number of apartment communities sold |
| 8 |
|
Gross proceeds | $ | 578.0 |
|
Net proceeds (1) | $ | 460.2 |
|
During the three months ended March 31, 2021, we recognized an $83.7 million gain associated with the derecognition of the net book value of the four properties leased to Aimco for redevelopment and development commencing on January 1, 2021.
Mezzanine Investment Income, Net
In connection with the Separation, Aimco was allocated economic ownership of the mezzanine loan investment and option to acquire a 30% equity interest in the partnership. Subsequent to the Separation, all risks and rewards of ownership are Aimco’s, but legal transfer is not complete. Duringassets leased. There were no apartment communities sold during the three months ended March 31, 2020, we recognized $6.7 million of income in connection with the mezzanine loan. The mezzanine investment income was offset by an expense to recognize the requirement that this income be contributed to Aimco.2021.
Income Tax Benefit (Expense) Benefit
Certain of our operations, including property management, are conducted through taxable REIT subsidiaries (“TRS entities”).
Our income tax benefit (expense) benefit calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities for which the tax consequences have been realized or will be realized in future periods. Income taxes related to these items, as well as changes in valuation allowance, are included in income tax benefit (expense) benefit in our condensed consolidated statements of operations.
28
For the three months ended March 31, 2022, compared to 2021, we recognized income tax expensebenefit of $3.1$0.6 million, compared to Aimco’san income tax benefitprovision of $1.3$3.1 million during the same period in 2020.2021.
Income from Discontinued Operations, net
On December 15, 2020, we completed the Separation, which resulted in Aimco being presented as the predecessor for AIR’s financial statements due to the relative significance of AIR’s business as compared to Aimco before the Separation. The results of operations for consolidated apartment communities that were retained by Aimco are classified as discontinued operations for all periods presented.
For the three months ended March 31, 2020, apartment communities that were included in discontinued operations generated net income of $4.1 million.
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.
32
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 AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020.2021. 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.
NAREIT Funds From Operations and Pro forma Funds From Operations
Many of our investors focus on multiples of Funds From Operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), referred to herein as “NAREIT FFO.” These investors also focus on NAREIT FFO, as adjusted for non-cash, unusual or non-recurring items. We refer to this metric as Pro forma Funds From Operations (“Pro forma FFO”) and use it as a secondary measure of operational performance.
NAREIT FFO is a non-GAAP measure that we believe, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate assets generally appreciate over time or maintain residual value to a much greater extent than do other depreciable assets such as machinery, computers, or other personal property. NAREIT defines FFO as net income computed in accordance with GAAP, excluding: (i) depreciation and amortization related to real estate; (ii) gains and losses from sales and impairment of depreciable assets and land used in our primary business; and (iii) income taxes directly associated with a gain or loss on the sale of real estate, and including (iv) our share of the FFO of unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine NAREIT FFO. We calculate NAREIT FFO attributable to AIR common stockholders (diluted) by subtracting dividends on preferred stock and preferred units and amounts allocated from NAREIT FFO to participating securities.
In addition to NAREIT FFO, we use Pro forma FFO to measure short-term performance. Pro forma FFO represents NAREIT FFO as defined above, excluding the results of operations of properties retained by Aimco in the Separation and certain amounts that are unique or occur infrequently.
In computing Pro forma FFO, we made the following adjustments to NAREIT FFO:
|
|
|
|
|
|
|
|
NAREIT FFO and Pro forma FFO should not be considered alternatives to net income determined in accordance with GAAP, as indications of our performance. Although we use these non-GAAP measures for comparability in assessing our performance compared to other REITs, not all REITs compute these same measures and those who do may not compute them in the same manner. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other REITs.
3329
For the three months ended March 31, 2021 NAREIT FFO and Pro forma FFO are calculated as follows (in thousands, except per share data):
|
| Three Months Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net income attributable to AIR common stockholders |
| $ | 375,881 |
|
| $ | 83,196 |
|
Adjustments: |
|
|
|
|
|
| ||
Real estate depreciation and amortization, net of noncontrolling partners’ interest |
|
| 81,457 |
|
|
| 69,495 |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
| (412,003 | ) |
|
| (84,032 | ) |
Income tax adjustments related to gain on dispositions and other tax-related items |
|
| — |
|
|
| 1,800 |
|
Common noncontrolling interests in AIR OP’s share of above adjustments |
|
| 20,041 |
|
|
| 644 |
|
Amounts allocable to participating securities |
|
| 208 |
|
|
| 7 |
|
NAREIT FFO attributable to AIR common stockholders |
| $ | 65,584 |
|
| $ | 71,110 |
|
Adjustments: |
|
|
|
|
|
| ||
Loss on extinguishment of debt (1) |
|
| 23,636 |
|
|
| 1,010 |
|
Separation and transition related costs (2) |
|
| 869 |
|
|
| 2,165 |
|
Non-cash straight-line rent (3) |
|
| 642 |
|
|
| 669 |
|
Incremental cash received from leased properties (4) |
|
| 153 |
|
|
| 162 |
|
Casualty losses and other (5) |
|
| 203 |
|
|
| — |
|
Common noncontrolling interests in AIR OP’s share of above adjustments |
|
| (1,565 | ) |
|
| (215 | ) |
Amounts allocable to participating securities |
|
| (13 | ) |
|
| (2 | ) |
Pro forma FFO |
| $ | 89,509 |
|
| $ | 74,899 |
|
|
|
|
|
|
|
| ||
Weighted-average common shares outstanding – basic |
|
| 156,736 |
|
|
| 148,611 |
|
Dilutive common share equivalents |
|
| 352 |
|
|
| 219 |
|
Pro forma shares and dilutive share equivalents used to calculate Pro forma FFO per share |
|
| 157,088 |
|
|
| 148,830 |
|
|
|
|
|
|
|
| ||
Net income attributable to AIR per common share – diluted |
| $ | 2.39 |
|
| $ | 0.56 |
|
NAREIT FFO per share – diluted |
| $ | 0.42 |
|
| $ | 0.48 |
|
Pro forma FFO per share – diluted |
| $ | 0.57 |
|
| $ | 0.50 |
|
|
| Three Months Ended March 31, |
| |
|
| 2021 |
| |
Net income attributable to AIR common stockholders |
| $ | 83,196 |
|
Adjustments: |
|
|
|
|
Real estate depreciation and amortization, net of noncontrolling partners’ interest |
|
| 69,495 |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
| (84,032 | ) |
Income tax adjustments related to gain on dispositions and other tax-related items |
|
| 1,800 |
|
Common noncontrolling interests in AIR OP’s share of above Adjustments |
|
| 644 |
|
Amounts allocable to participating securities |
|
| 7 |
|
NAREIT FFO attributable to AIR common stockholders |
| $ | 71,110 |
|
Adjustments, all net of common noncontrolling interests in AIR Operating Partnership and participating securities: |
|
|
|
|
Separation costs |
|
| 2,057 |
|
Prepayment penalties |
|
| 943 |
|
Non-cash straight line rent |
|
| 635 |
|
Incremental cash received from leased properties |
|
| 154 |
|
Pro forma FFO |
| $ | 74,899 |
|
|
|
|
|
|
Pro forma shares and dilutive share equivalents used to calculate Pro forma FFO per share |
|
| 148,830 |
|
|
|
|
|
|
Net income attributable to AIR per common share – diluted |
| $ | 0.56 |
|
NAREIT FFO per share – diluted |
| $ | 0.48 |
|
Pro forma FFO per share – diluted |
| $ | 0.50 |
|
Please see the Results of Operations section for discussion of the factors affecting our Pro forma FFO for 2021.2022.
The AIR Operating Partnership does not separately compute or report NAREIT FFO or Pro forma FFO. However, based on AIR’s method for allocation of such amounts to noncontrolling interests in the AIR Operating Partnership, as well as limited differences between the amounts of net income attributable to AIR’s common stockholders and the AIR Operating Partnership’s unitholders during the periods presented, NAREIT FFO and Pro forma FFO amounts on a per unit basis for the AIR Operating Partnership would be expected to be substantially the same as the corresponding per share amounts for AIR.
Leverage Ratios
As discussed under the Balance Sheet heading, we target Net Leverage to Adjusted EBITDAre below 6.0x and Adjusted EBITDAre to Interest Expense and Preferred Dividends above 2.5x.6.0x. We also focus on the ratios of Proportionate Debt to Adjusted EBITDAre and Adjusted EBITDAre Coverage of Adjusted Interest.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.
30
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 the value of our investment in a securitization trust that holds certain of our property debt, as our payments of principal and interest associated with such property debt will ultimately repay our investments in the trust, and our notesnote receivable from Aimco, the proceeds from which we expect will be used to pay down property debt.
We believe Proportionate Debt is useful to investors as it is a measure of our net exposure to debt obligations. Proportionate Debt, as used in our leverage ratios, is calculated as set forth in the table below.
Preferred equity represents the redemption amounts for AIR’s Preferred Stock and the AIR Operating Partnership’s Preferred Partnership Units and, although perpetual in nature, are another component of our overall leverage.
34
The reconciliation of total indebtedness to Proportionate Debt and Preferred Equity, as used in our leverage ratios, as of March 31, 2021, is as follows (in thousands):
|
| March 31, 2021 |
| |
Total indebtedness |
| $ | 4,313,192 |
|
Adjustments: |
|
|
|
|
Debt issuance costs related to non-recourse property debt and term loan |
|
| 16,987 |
|
Proportionate share adjustments related to debt obligations |
|
| (484,290 | ) |
Cash and restricted cash |
|
| (75,746 | ) |
Tenant security deposits included in restricted cash |
|
| 9,514 |
|
Proportionate share adjustments related to cash and restricted cash |
|
| 7,167 |
|
Notes receivable from Aimco |
|
| (534,127 | ) |
Securitization trust investment |
|
| (99,983 | ) |
Proportionate Debt |
| $ | 3,152,714 |
|
Perpetual preferred stock |
|
| 2,000 |
|
Preferred OP Units |
|
| 79,449 |
|
Net Leverage |
| $ | 3,234,163 |
|
March 31, 2022 | ||||
Total indebtedness | $ | 3,355,931 | ||
Adjustments: | ||||
Debt issuance costs related to non-recourse property debt and term loans | 14,718 | |||
Proportionate share adjustments related to debt obligations | (394,818 | ) | ||
Cash and restricted cash | (103,911 | ) | ||
Tenant security deposits included in restricted cash | 11,008 | |||
Proportionate share adjustments related to cash and restricted cash | 4,048 | |||
Note receivable from Aimco | (534,127 | ) | ||
Proportionate Debt | $ | 2,352,849 | ||
Perpetual preferred stock | 2,000 | |||
Preferred noncontrolling interests in AIR Operating Partnership | 79,354 | |||
Net Leverage | $ | 2,434,203 | ||
Leverage reduction funded by April 2022 property sales | (158,585 | ) | ||
Net Leverage, Pro forma for April 2022 sales | $ | 2,275,618 |
We calculated Adjusted EBITDAre used in our leverage ratios based on annualized current quarter amounts. EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are useful to investors, creditors, and rating agencies as a supplemental measure of our ability to incur and service debt because they are recognized measures of performance by the real estate industry and facilitate comparison of credit strength between AIR and other companies. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income as determined in accordance with GAAP as indicators of liquidity. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts. NAREIT defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, which we have further adjusted for:
• gains and losses on the derecognition of leased properties and dispositions of depreciated property; • impairment write-downs of depreciated property; and • adjustments to reflect our share of EBITDAre of investments in unconsolidated entities.
|
|
|
|
|
|
EBITDAre is defined by NAREIT and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted to excludefor the effect of the following items foritems:
|
|
|
|
|
|
|
|
|
|
3531
The reconciliation of net income to EBITDAre and Adjusted EBITDAre, for the three months ended March 31, 2021, as used in our leverage ratios, is as follows (in thousands):
|
| Three Months Ended |
| |
|
| March 31, 2021 |
| |
Net income |
| $ | 89,115 |
|
Adjustments: |
|
|
|
|
Interest expense |
|
| 37,035 |
|
Income tax expense |
|
| 3,080 |
|
Depreciation and amortization |
|
| 75,280 |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
| (84,032 | ) |
EBITDAre |
| $ | 120,478 |
|
Net loss from continuing operations attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 235 |
|
EBITDAre adjustments attributable to noncontrolling interests |
|
| (9,197 | ) |
Interest income on securitization investment and notes receivable from Aimco |
|
| (9,300 | ) |
Non-cash straight-line rent |
|
| 669 |
|
Incremental cash received from leased properties |
|
| 162 |
|
Pro forma FFO adjustments, net (1) |
|
| 1,165 |
|
Adjusted EBITDAre |
| $ | 104,212 |
|
Annualized Adjusted EBITDAre |
| $ | 416,848 |
|
|
|
We calculated Adjusted Interest Expense, as used in our leverage ratios, based on the most recent three-month amounts annualized. 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:
|
|
|
|
|
|
Preferred Dividends include dividends paid with respect to AIR’s Preferred Stock and the AIR Operating Partnership’s Preferred Partnership Units, exclusive of preferred equity redemption related amounts. We add Preferred Dividends to Adjusted Interest Expense for a more complete picture of the interest and dividend requirements of our leverage.
36
The reconciliation of interest expense to Adjusted Interest Expense and Preferred Dividends for the three months ended March 31, 2021, as used in our leverage ratios, is as follows (in thousands):
|
| Three Months Ended |
| |
|
| March 31, 2022 |
| |
Net income |
| $ | 401,384 |
|
Adjustments: |
|
|
| |
Interest expense |
|
| 22,107 |
|
Loss on extinguishment of debt |
|
| 23,636 |
|
Income tax benefit |
|
| (579 | ) |
Depreciation and amortization |
|
| 84,549 |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
| (412,003 | ) |
EBITDAre |
| $ | 119,094 |
|
Net loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 564 |
|
EBITDAre adjustments attributable to noncontrolling interests and unconsolidated real estate partnerships |
|
| (5,926 | ) |
Interest income on note receivable from Aimco (1) |
|
| (6,944 | ) |
Pro forma FFO adjustments, net (2) |
|
| 342 |
|
Adjusted EBITDAre |
| $ | 107,130 |
|
Annualized Adjusted EBITDAre |
| $ | 428,520 |
|
April 2022 property sales, annualized |
|
| (7,955 | ) |
Pro forma Adjusted Annualized EBITDAre |
| $ | 420,565 |
|
|
| Three Months Ended |
| |
|
| March 31, 2021 |
| |
Interest expense |
| $ | 37,035 |
|
Adjustments: |
|
|
|
|
Adjustments related to interest of consolidated partnerships |
|
| (3,914 | ) |
Debt prepayment penalties |
|
| (1,016 | ) |
Interest income on securitization investment and notes receivable from Aimco |
|
| (9,300 | ) |
Adjusted Interest Expense |
| $ | 22,805 |
|
Preferred Dividends |
|
| 1,654 |
|
Adjusted Interest Expense and Preferred Dividends |
| $ | 24,459 |
|
Annualized Adjusted Interest Expense |
| $ | 91,220 |
|
Annualized Adjusted Interest Expense and Preferred Dividends |
| $ | 97,836 |
|
Liquidity and Capital Resources
Liquidity
Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flows from operations. Additional sources are proceeds from dispositions of apartment communities, proceeds from refinancing existing property debt, borrowings under new property debt, borrowings under our new $1.4 billion credit facility,facilities, proceeds from our notesnote receivable from Aimco, and proceeds from equity offerings.
As of March 31, 2021,2022, our available liquidity was $248.1$500.5 million, which consisted of:
|
|
|
|
|
|
Pro forma the closing of our new credit facility, as of March 31, 2021, we had the capacity to borrow up to $459.7 million, bringing total pro forma liquidity to $525.9 million. In addition,under our previously announced private placement generated approximately $342.5 million in proceeds.
Additional liquidity may also be provided through property debt financing at properties unencumbered by debt and proceeds from our notesnote receivable from AimcoAimco.. As of March 31, 2021, we held unencumbered communities with an estimated fair market value of approximately $2.5 billion. Pro forma the closing of the new credit facility and the expected use of proceeds from the equity issuance, we expect to hold communities unencumbered by property debt with an estimated fair market value of approximately $4.0 billion.
Uses for liquidity include normal operating activities, payments of principal and interest on outstanding property debt, capital expenditures, dividends paid to stockholders, distributions paid to noncontrolling interest partners, and acquisitions of apartment communities. We use our cash and cash equivalents and our cash provided by operating activities to meet short-term liquidity needs. In the event that our cash and cash equivalents and cash provided by operating activities are not sufficient to meet our short-term liquidity needs, we have additional means, such as short-term borrowing availability and proceeds from apartment community sales and refinancings. We may use our revolving credit facility for working capital and other short-term purposes, such as funding investments on an interim basis. We expect to meet our long-term liquidity requirements, including apartment community acquisitions, primarily
32
through primarily non-recourse, long-termsecured and unsecured borrowings, the issuance of equity securities (including OP Units), the sale of apartment communities, and cash generated from operations. Additionally, we expect to meet our liquidity requirements associated with our debt maturities.
37
The following table summarizesThere have been no material changes to our contractual obligations and commitments outside the payments due under our non-recourse property debt commitments, excluding debt issuance costs, asordinary course of Marchbusiness from those disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2021 (in thousands):2021.
| Total |
|
| Remaining 2021 |
|
| 1-3 Years (2022-2023) |
|
| 3-5 Years (2024-2025) |
|
| More than Five Years (2026 and Thereafter) |
| |||||
Non-recourse property debt | $ | 3,585,629 |
|
| $ | 85,985 |
|
| $ | 482,646 |
|
| $ | 600,083 |
|
| $ | 2,416,915 |
|
Leverage and Capital Resources
The availability of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through changes in interest rates and access to financing. Currently, interest rates are low compared to historical levels and financing is readily available. However, in recent months, we have seen interest rates begin to increase. 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 termintermediate-term maturity risk through refinancing such loans with long-dated debt. However, if financing options become unavailable for our future debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending, or proceeds from apartment community dispositions.
Historically, our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt. As of March 31, 2021, approximately 79.0% of our total leverage consisted of property-level, non-recourse, long-dated, amortizing debt. As of March 31, 2021, approximately 99.5% 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 years. On average, 3.6% of our unpaid principal balances will mature each year from 2021 through 2023.
As of March 31, 2021, we had $394.6 million outstanding borrowings under our revolving credit facility and $350.0 million borrowed under our term loan agreement.
As of March 31, 2021, our preferred equity, which includes outstanding preferred OP Units and outstanding perpetual preferred stock, represented approximately 2.1% of our total leverage. Preferred OP Units are redeemable at the holder’s option and our preferred stock is redeemable by AIR on or after December 15, 2025. For illustrative purposes, we compute the weighted-average maturity of our preferred OP Units assuming a 10-year maturity and our preferred stock assuming it is called at the expiration of the no-call period.
The combination of non-recourse property-level 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.
On April 14, 2021, we closed a new credit facility. The term loan proceeds from the new facility are being used to extend the maturity of our current $350 million term loan; to repay $213 million of property debt; and to reduce borrowings on our revolving credit facility. Pro forma for the new revolving credit facility and term loans, the weighted-average remaining term to maturity for our total leverage described above was 8.16.3 years as of March 31, 2021.2022 with a weighted-average interest rate of 2.7%.
Under our newrevolving credit facility, agreement entered into on April 14, 2021, we have agreed to maintain certain financial covenants, as well as other covenants customary for similar credit arrangements. The financial covenants we are required to maintain include a Maximum Leverage ratio of no greater than 0.60 to 1.00; a Fixed Charge Coverage Ratio of greater than 1.5x, a Maximum Secured Indebtedness to Total Assets ratio of no greater than 0.45 to 1.00 through March 31, 2023, and 0.40 to 1.00 thereafter, and a Maximum Unsecured Leverage ratio no greater than 0.60 to 1.00. We were in compliance with these covenants as of March 31, 2022 and expect to remain in compliance with these covenants during the next 12 months.
We like the discipline of financing a portion of our real estate investments through the use of fixed-rate, amortizing, non-recourse property debt, as the amortization gradually reduces our leverage and reduces our refunding risk, and the fixed-rate provides a hedge against increases in interest rates, and the non-recourse feature avoids entity risk.
Changes in Cash, Cash Equivalents, and Restricted Cash
The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash due to operating, investing and financing activities, which are presented in our condensed consolidated statements of cash flows in Item 1 of this report.
38
Operating Activities
For the three months ended March 31, 2021,2022, net cash provided by operating activities was $49.2$72.7 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 three months ended March 31, 2021, decreased2022, increased by $28.2$23.5 million compared to the same period in 2020.2021. The decreaseincrease was due primarily to lowerhigher contribution from our apartment communities, which were negatively impacted by lower residential rental rates, lower average daily occupancy, increased bad debt expense, and waived late fees.communities.
Investing Activities
For the three months ended March 31, 2021,2022, our net cash used inprovided by investing activities of $40.3$513.3 million consisted primarily of proceeds from dispositions of real estate, offset partially by capital expenditures.
Capital additions totaled $23.2$37.1 million and $88.0$19.7 million during the three months ended March 31, 20212022 and 2020,2021, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.
We categorize capital spending for communities in our portfolio broadly into fourfive 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; 33 • initial capital expenditures, which represent capital additions contemplated in the underwriting at our recently acquired communities. These amounts are considered in the underwriting of the acquisition and are therefore included with the purchase price when determining expected returns; and • other additions, which may include capital expenditures incurred in connection with the restoration of an apartment community after a casualty event and other capitalizable costs. During the first quarter, we incurred $7.5 million of costs associated with restoring our Park Towne Place property after a 2021 casualty event.
|
|
|
|
|
|
|
|
We exclude the amounts of capital spending related to apartment communities sold or classified as held for sale at the end of the period from the foregoing measures. We have also excluded from these measures indirect capitalized costs, which are not yet allocated to communities with capital additions, and their related capital spending categories.
A summary of the capital spending for these categories, along with a reconciliation of the total for these categories to the capital expenditures reported in the accompanying condensed consolidated statements of cash flows, for the three months ended March 31, 2021 and 2020, are presented below (in thousands):
|
| Three Months Ended March 31, |
|
| Three Months Ended March 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Capital replacements |
| $ | 8,221 |
|
| $ | 6,857 |
|
| $ | 5,552 |
| $ | 7,449 |
| |
Capital improvements |
|
| 1,568 |
|
|
| 1,529 |
|
| 1,817 |
| 1,393 |
| |||
Capital enhancements |
|
| 9,934 |
|
|
| 8,429 |
|
| 14,102 |
| 9,097 |
| |||
Initial capital expenditures |
| 5,660 |
| 1,121 |
| |||||||||||
Other capital expenditures |
|
| 3,449 |
|
|
| 71,225 |
|
|
| 9,972 |
|
|
| 608 |
|
Total capital additions |
| $ | 23,172 |
|
| $ | 88,040 |
|
| $ | 37,103 |
| $ | 19,668 |
| |
Plus: additions related to apartment communities sold |
|
| — |
|
|
| 121 |
| ||||||||
Plus: additions related to apartment communities sold and held for sale |
|
| 58 |
|
|
| 3,504 |
| ||||||||
Consolidated capital additions |
| $ | 23,172 |
|
| $ | 88,161 |
|
| $ | 37,161 |
| $ | 23,172 |
| |
Plus: net change in accrued capital spending from continuing operations |
|
| 15,903 |
|
|
| 28 |
| ||||||||
Total capital expenditures from continuing operations per condensed consolidated statement of cash flows |
| $ | 39,075 |
|
| $ | 88,189 |
| ||||||||
Plus: net change in accrued capital spending |
|
| 141 |
|
|
| 15,903 |
| ||||||||
Total capital expenditures per condensed consolidated statements of cash flows |
| $ | 37,302 |
|
| $ | 39,075 |
|
39
For the three months ended March 31, 20212022 and 2020,2021, we capitalized $0.7$0.3 million and $3.4$0.7 million of interest costs, respectively, and $4.1$3.7 million and $9.9$4.1 million of other direct and indirect costs, respectively.
Other capital expenditures decreasedincreased by $67.8$9.4 million for the three months ended March 31, 2021,2022, compared to 2020,2021, due primarily to increased spend incurred in 2020amounts capitalized related to the redevelopment and development of properties that have subsequently been leasedcasualty event at our Park Towne Place apartment community related to Aimco effectiveHurricane Ida. January 1, 2021.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 20212022 increased by $224.3$568.3 million compared to the three months ended March 31, 2020.same period in 2021. The changeincrease was due primarily to lower net borrowings on our revolving credit facility and higher principal repayments on non-recourse debt offset partially by no repurchases of common stock in the period compared to repurchases of $10.0 million in the prior year period.and net repayments on our credit facility.
Equity and Partners’ Capital Transactions
The following table presents the AIR Operating Partnership’s distribution activity (including distributions paid to AIR) during the three months ended March 31, 2021 (in thousands):
Cash distributions paid by the AIR Operating Partnership to preferred unitholders |
| $ | 1,654 |
|
Cash distributions paid by the AIR Operating Partnership to common unitholders (1) |
|
| 68,144 |
|
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships |
|
| 1,401 |
|
Total cash distributions paid by the AIR Operating Partnership |
| $ | 71,199 |
|
|
|
The following table presents AIR’s dividend and distribution activity during the three months ended March 31, 2021 (in thousands):
Cash distributions paid to holders of OP Units |
| $ | 5,434 |
|
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships |
|
| 1,401 |
|
Cash dividends paid by AIR to preferred stockholders |
|
| 50 |
|
Cash dividends paid by AIR to common stockholders |
|
| 64,314 |
|
Total cash dividends and distributions paid by AIR |
| $ | 71,199 |
|
Future Capital Needs
We expect to fund any future acquisitions, debt maturities, and other capital spending principally with proceeds from apartment community sales short-term(including the formation of joint ventures), secured and unsecured borrowings, debt andthe issuance of equity financing,securities (including OP Units), and operating cash flows. We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for 20212022 and beyond.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2021,2022, on a consolidated basis, we had approximately $14.5$1.2 billion of outstanding borrowings on our term loans, $88.5 million of variable-rate property-level debt outstanding, in addition to our $350.0 million term loan and $394.6$177.0 million of variable-rate borrowings under our revolving credit facility. We estimate that an increase in 30-day LIBOR of 100 basis points with constant credit risk spreads would increase interest expense by $14.2 million on an annual basis. We estimate that a changedecrease in 30-day LIBOR of 100 basis points with constant credit risk spreads would reduce or increase interest expense by, approximately $4.1a lesser amount, $6.3 million and $6.2 million, respectively, on an annual basis.basis, due to the existence of LIBOR floors in certain of our floating rate debt agreements.
As of March 31, 2021,2022, we had approximately $75.7$103.9 million of cash and cash equivalents and restricted cash, a portion of which bears interest at variable rates, which may offset somewhat a changepartially mitigate the effect of an increase in variable rates on our variable-rate debt discussed above.
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ITEM 4. CONTROLS AND PROCEDURES
AIR
Disclosure Controls and Procedures
AIR’s management, with the participation of AIR’s chief executive officer and chief financial officer, has evaluated the effectiveness of AIR’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, AIR’s chief executive officer and chief financial officer have concluded that, as of the end of such period, AIR’s disclosure controls and procedures are effective.
40
Changes in Internal Control Over Financial Reporting
There has been no change in AIR’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of 20212022 that has materially affected, or is reasonably likely to materially affect, AIR’s internal control over financial reporting.
The AIR Operating Partnership
Disclosure Controls and Procedures
The AIR Operating Partnership’s management, with the participation of the chief executive officer and chief financial officer of AIR, who are the equivalent of the AIR Operating Partnership’s chief executive officer and chief financial officer, respectively, has evaluated the effectiveness of the AIR Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange) as of the end of the period covered by this report. Based on such evaluation, the chief executive officer and chief financial officer of AIR have concluded that, as of the end of such period, the AIR Operating Partnership’s disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There has been no change in the AIR Operating Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of 20212022 that has materially affected, or is reasonably likely to materially affect, the AIR Operating Partnership’s internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
As of the date of this report, there have been no material changes from the risk factors in AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020.2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
AIR
Unregistered Sales of Equity Securities
From time to time, we may issue shares of Common Stock in exchange for OP Units, defined under The AIR Operating Partnership heading below. Such shares are issued based on an exchange ratio of one share for each common OP Unit. We may also issue shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended March 31, 2021, 2022, we did not issue any shares of Common Stock in exchange for OP Units or limited partnership interests in consolidated real estate partnerships.
The AIR Operating Partnership
Unregistered Sales of Equity Securities
The AIR Operating Partnership did not issue any unregistered OP Units during the three months ended March 31, 20212022..
Repurchases of Equity Securities
The AIR Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one year, limited partners other than AIR have the right to redeem their common OP Units for cash or, at our election, shares of AIR Common Stock on a one-for-one basis (subject to customary antidilution adjustments). NoDuring the three months ended March 31, 2022, no common OP Units were redeemed in exchange for shares of Common Stock during the three months ended March 31, 2021.Stock.
The following table summarizes the AIR Operating Partnership’s repurchases, or redemptions in exchange for cash, of common OP UnitsUnits.
Fiscal period |
| Total |
|
| Average |
|
| Total Number of |
| Maximum Number | ||
January 1 - January 31, 2022 |
|
| 13,846 |
|
| $ | 53.62 |
|
| N/A |
| N/A |
February 1 - February 28, 2022 |
|
| 43,351 |
|
|
| 53.13 |
|
| N/A |
| N/A |
March 1 - March 31, 2022 |
|
| 7,770 |
|
|
| 52.17 |
|
| N/A |
| N/A |
Total |
|
| 64,967 |
|
| $ | 53.12 |
|
|
|
|
|
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) | ||
January 1, 2021 ‒ January 31, 2021 |
|
| — |
|
| $ | — |
|
| N/A |
| N/A |
February 1, 2021 ‒ February 28, 2021 |
|
| 8,012 |
|
|
| 38.57 |
|
| N/A |
| N/A |
March 1, 2021 ‒ March 31, 2021 |
|
| 70,121 |
|
|
| 42.11 |
|
| N/A |
| N/A |
Total |
|
| 78,133 |
|
| $ | 41.75 |
|
|
|
|
|
|
|
Dividend and Distribution Payments
As a REIT, AIR is required to distribute annually to holders of its Common Stock at least 90% of its “real estate investment trust taxable income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income. Our credit agreement includes customary covenants, including a restriction on dividends and distributions and other restricted payments, but permits dividends and distributions during any four consecutive fiscal quarters in an aggregate amount of up to 95% of AIR’s FFO for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain AIR’s REIT status.
42ITEM 5. OTHER INFORMATION
On May 2, 2022, AIR Operating Partnership, as borrower, AIR, and certain subsidiaries of AIR Operating Partnership, as guarantors, the lenders party thereto and PNC Bank, National Association, as administrative agent, entered into a First Amendment to Credit Agreement in order to amend AIR OP’s existing credit agreement, dated as of April 14, 2021 (the “Credit Agreement”), to provide for,
36
among other things, (i) an increase in the commitments under the revolving credit facility from $600,000,000 to $1,000,000,000 (thereby increasing the aggregate principal amount of term loans and revolving credit commitments under the Credit Agreement to $1,800,000,000), and (ii) a change in the interest rate benchmark from LIBOR to the secured overnight funding rate.
37
ITEM 6. EXHIBITS
The following exhibits are filed with this report:
EXHIBIT NO. | DESCRIPTION | |
101 | The following materials from AIR’s and the AIR Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
APARTMENT INCOME REIT CORP. | ||
By: | /s/ Paul Beldin | |
Paul Beldin | ||
Executive Vice President and Chief Financial Officer | ||
( | ||
| ||
By: |
| |
By: | /s/ Paul Beldin | |
Paul Beldin | ||
Executive Vice President and Chief Financial Officer | ||
( | ||
Date: May 6, 20214, 2022
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