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

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

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

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

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

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

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

The number of shares of Apartment Income REIT Corp. Class A Common Stock outstanding as of ~~April 30, 2021: 156,825,674~~May 2, 2022: 157,097,052

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

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

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

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

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

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

	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 Interests in			Common Noncontrolling Interests in
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 Issued			Amount			Shares Issued		Amount		Additional Paid- in Capital			Other Comprehensive Income (Loss)			Distributions in Excess of Earnings			Total AIR Equity			Consolidated Real Estate Partnerships			AIR Operating Partnership			Total Equity
Balances at December 31, 2020		20	$	2,000		148,861		$	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

	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 Units			General Partner and Special Limited Partner			Limited Partners			Partners’ Capital Attributable to the AIR Operating Partnership			Noncontrolling Interests in Consolidated Real Estate Partnerships			Total Partners’ Capital
Balances at December 31, 2020																		$	2,000		$	1,304,851		$	63,185		$	1,370,036		$	(61,943	)	$	1,308,093
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

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 ~~shareholder~~stockholder 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.

~~Table of Contents~~

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

Table of Contents


	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.

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 with~~As of March 31, 2022, and December 31, 2021, the ~~Separation, Aimco was allocated economic ownership~~investment 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’s~~our 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 income~~NOI reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility ~~reimbursements, for consolidated communities.~~reimbursements. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues in accordance with GAAP.

As of March 31, ~~2021,~~2022, our Same Store segment included 9364 apartment communities with ~~25,485~~22,020 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 related~~basis. 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 ended~~conform with our reportable segment composition of March 31, ~~2021 and 2020~~2022 (in thousands):

Same
Store

Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Three months ended 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 Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			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


	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	$	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

Table of Contents

Same
Store

Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Three months ended 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

(1)

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

(2)

(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.

~~(1)~~

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

~~(2)~~

Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any. Also includes property management revenues, which are not part of our segment performance measure and property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure. The write-off of straight-line rent receivables, recognized due to the impact of COVID-19 and the resulting economic impact on our commercial tenants, are included in consolidated rental and property revenues and are not included in our measurement of segment performance for the three months ended March 31, 2020.

~~(3)~~

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

~~(4)~~

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

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

(1)

Includes the assets not allocated to our segments including: (i) corporate assets; (ii) our note receivable from Aimco; (iii) our mezzanine loan investment; and (iv) assets of leased apartment communities, sold, or classified as held for sale as of March 31, 2022.

~~(1)~~

Includes the assets not allocated to our segments including: (i) corporate assets; (ii) our notes receivable from Aimco; and (iii) assets of apartment communities which were leased to Aimco, sold, or classified as held for sale as of March 31, 2021.

For the three months ended March 31, ~~2021~~2022 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

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):~~

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).

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:

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.

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

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. ~~Certain information included in this~~This Quarterly Report on Form 10-Q contains ~~or may contain~~ information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding: the 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 communities~~and 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 ~~notes~~note receivable due from Aimco.

These forward-looking statements are based on management’s ~~judgment as of this date, which is~~current expectations, estimates and assumptions and subject to risks ~~and uncertainties. Risks~~ and uncertainties, that could cause actual results to differ materially from ~~our expectations include,~~such forward-looking statements, including, but ~~are~~ not limited to: the effects of the ~~coronavirus~~COVID-19 pandemic on AIR’s business and on the global and U.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described ~~herein, 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; the~~AIR; our relationship ~~between the Separate Entities~~with Aimco after the Separation; the ability and willingness of the ~~Separate Entities and their subsidiaries~~parties to the Separation to meet and/or perform their obligations under ~~any~~the related contractual arrangements ~~that are entered into among the parties in connection with the Separation~~ and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve ~~some or all~~ the expected benefits ~~that we expect to achieve~~ from the ~~Separation; and such other~~Separation. Other risks and uncertainties are described ~~from time to time~~ in ~~filings by~~this Quarterly Report on Form 10-Q, as well as “Risk Factors” in Item 1A of AIR’s and AIR Operating Partnership’s combined Annual Report on Form 10-K for the ~~Separate Entities~~year ended December 31, 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.

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

We own and operate a portfolio of stabilized apartment communities, diversified by ~~the National Association~~both 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.

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.

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%.

•

~~Elevated bad debt expense, resulting in a 170 basis point year-over-year decline to same-store revenues, due primarily to COVID-19 and the governmental lockdowns;~~

•

Recognition of 98.8% of all residential revenue billed during the quarter, with the balance of 1.2% treated as bad debt.

•

~~Transacted renewal rents increased 1.7%, whereas transacted new lease rents decreased 8.1%, for a weighted-average decrease of 4.7%; and~~

•

Controllable operating expenses, which we define as property expenses less real estate taxes, insurance, and utility expenses, increased by 60 basis points compared to the three months ended March 31, 2020.

Same Store Markets

~~Our portfolio is diversified by price point and geography, and with a mix of urban and suburban submarkets. In~~AIR 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 signed~~quarter. Signed new lease ~~rent increases~~rates 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%, and~~14.1%. 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:~~

•

In Philadelphia, The University of Pennsylvania and Drexel University have announced plans to be fully open and hold classes in-person for the fall semester. Businesses are scheduling returns to the office: for example, Comcast anticipates

Table of Contents

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.

~~a late-summer re-opening of its Center City office adjacent to AIR’s Sterling community. Leasing pace in Philadelphia has been strong, 20% ahead of 2019’s pre-COVID levels.~~

•

In Los Angeles, first quarter ADO was 96.7%, a 170 basis point improvement from the fourth quarter of 2020. California has now adopted Senate Bill No. 91 (“SB-91”), a legal framework that provides a path to resolution of long-dated delinquencies that, together with resident payment plans and restored creditor remedies, offers the prospect of pre-COVID levels of bad debt by later this year.

•

In the Bay Area, the San Mateo County submarket on the San Francisco Peninsula suffered as tech workers elected to work remotely, but its fundamental appeal based on proximity to Silicon Valley and Stanford University is unchanged. Google and Facebook have announced that their workforces are expected to return to their offices throughout the Peninsula. AIR’s Bay Area lease pace in the first quarter was up 50% from 2019’s pre-COVID levels, and occupancy in the market grew 200 basis points sequentially from the fourth quarter of 2020, resulting in first quarter 2021 ADO of 92.4%.

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:~~

~~Average revenue per apartment home (1)~~		~~$2,233~~
~~Percentage A (average revenue per apartment home $2,809)~~		~~57%~~
~~Percentage B (average revenue per apartment home $1,979)~~		~~26%~~
~~Percentage C+ (average revenue per apartment home $1,764)~~		~~17%~~

~~(1)~~

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

~~Our average monthly revenue per apartment home was $2,233 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 flow~~FCF internal rates of return higher than expected from the communities being sold. When the cost of capital is favorable, we will look to grow through the acquisition of stabilized apartment communities that we believe we can operate better than their previous owners. Through this disciplined approach to capital allocation, we expect to increase the quality and expected growth rate of our portfolio.

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%.

Table of Contents

~~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 build~~debt. We maintain financial flexibility ~~by maintaining~~through ample unused and available ~~credit;~~credit, holding properties with substantial value unencumbered by property ~~debt;~~debt, maintaining an investment grade ~~rating;~~rating, and using partners’ capital when it enhances financial returns or reduces investment risk.

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:

•

$534 million is expected to be repaid with proceeds from the Aimco note;

•

$159 million is expected to be repaid with proceeds from April property sales;

•

$400 million is expected to be repaid from the proceeds of a second quarter private placement of a ten year debenture. To protect against future increases in interest rates, we entered into a $400 million treasury hedge, locking the interest rate on the ten year treasury at 2.39%. The all-in cost of the private placement is estimated to be approximately 4.10%; and

•

$400 million was hedged in April by the placement of floating to fixed rate swaps at an all-in cost of 3.99% and a weighted-average duration of 4.5 years.

AIR’s leverage, pro forma the above actions is (in thousands):


	March 31, 2022			Pro forma Adjustments				Pro forma March 31, 2022
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	)			—

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	)

Leverage, net of cash and restricted cash	$	2,968,330		$	(716,500	)		$	2,251,830

Floating rate leverage %, net of cash		47	%						—	%
Fixed rate leverage %, net of cash		53	%						100	%
Total		100	%						100	%

Weighted average maturity	6.3 years							8.2 years
Weighted average interest rate		2.7	%						3.5	%
Gross Leverage to Adjusted EBITDAre	6.5x							5.4x
Net Leverage to Adjusted EBITDAre	5.7x							5.4x

(1)

Amount represents the application of the net proceeds from April property sales, Aimco note proceeds and related prepayment penalty in excess of the term loan repayments.

The result is a stronger and more flexible balance sheet with limited repricing risk and a better maturity profile.

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Since AIR's separation from Aimco, ~~with an aggregate principal amount of $534 million. The notes will mature on January 31, 2024~~ and ~~are secured~~pro forma for the above, AIR has:

•

Reduced gross leverage by a$1.5 billion.

•

Brought gross and net leverage to parity and reduced Leverage to EBITDAre to 5.4x.

•

Increased the pool of unencumbered properties ~~owned by Aimco.~~to $7.9 billion, up $5.1 billion, or 180%, from $2.8 billion 15 months ago.

•

Reduced refunding and repricing risk through balanced ladders for debt maturity and repricing. Only $146 million, or 6%, of our pro forma debt reprices through the end of 2024.

•

Limited exposure to floating interest rates. AIR has taken steps to reduce floating rate exposure. Should we incur floating rate debt in the future, we plan to limit it to less than 60% of annual revenues. We ~~consider the notes~~believe increases in interest rates and rental rates are correlated and therefore rents provide a ~~reduction~~natural hedge against rising interest rates. Today, that limit would approximate $380 million; representing 14% of ~~leverage as we expect proceeds to be used to repay current amounts outstanding.~~ total debt and less than 3% of gross asset value.

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 facility~~leverage 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:~~

•

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

•

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

•

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

•

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

~~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.

~~Table of Contents~~

~~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:

		~~Annualized Current Quarter~~
~~Proportionate Debt to Adjusted EBITDAre~~		~~7.6x~~
~~Net Leverage to Adjusted EBITDAre~~		~~7.8x~~
~~Adjusted EBITDAre to Adjusted Interest Expense~~		~~4.6x~~
~~Adjusted EBITDAre to Adjusted Interest Expense and Preferred Dividends~~		~~4.3x~~

~~We expect to achieve our target by year-end 2021 through a:~~

•

~~~0.9x reduction from the equity issuance;~~

•

~~~0.9x reduction from the sale of properties expected to generate $580 million in net proceeds; and~~

•

~~~0.5x reduction resulting from growth in property NOI;~~

•

~~Resulting in a ratio of 5.5x.~~

~~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 ~~closing~~amount of non-recourse property debt as percentage of the ~~new credit facility and~~undepreciated book value of a company’s assets. We have lowered the ~~expected use~~amount of ~~proceeds from the equity issuance, we expect to hold communities unencumbered by~~non-recourse property debt ~~with an estimated fair market value~~by $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 ~~dividends~~dividend 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, 2021~~20, 2022.

~~. The safety and simplicity~~In setting AIR's 2022 dividend, our Board of ~~our business model, combined with~~Directors 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 improved~~after-tax dividend ~~payout ratio after the Separation. Our~~will benefit from AIR's refreshed tax ~~basis allows our dividend to also be tax efficient. Before~~basis. 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-free~~was 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.

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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. ~~Out~~AIR 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 Predecessor~~AIR 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, and~~nine years. Also in 2021, AIR was recognized by the Washington Post as a "Top Workplace" in the Washington, D.C. area. AIR was recognized by the Denver Business Journal as one of ~~only two real estate companies to receive a BEST award from~~ the ~~Association~~Denver Area's Healthiest Employers in 2022 for ~~Talent Development in~~

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~~recognition of our company-wide success in talent development, marking its~~the 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 $0.56~~increased $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 ~~25,485~~22,020 apartment homes and our Other Real Estate segment included ~~two~~nine apartment communities with ~~237~~2,499 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 income~~NOI 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 income~~NOI reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility ~~reimbursements, for~~reimbursements. In our condensed consolidated ~~communities. Accordingly, the results~~statements of operations, ~~of our segments discussed below~~utility reimbursements are ~~presented on a proportionate basis. In September 2020, we formed a joint venture~~included 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.

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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

Ownership-Effected
Change (1)

(in thousands)
2021

2020

$

%

$

%

Rental and other property revenues, before utility reimbursements:

   Same Store
$
153,652

$
176,757

$
(23,105
)

(13.1
%)

$
(9,238
)

(5.7
%)
   Other Real Estate

1,056

1,715

(659
)

(38.4
%)

(659
)

(38.4
%)
      Total

154,708

178,472

(23,764
)

(13.3
%)

(9,897
)

(6.0
%)
Property operating expenses, net of utility reimbursements:

   Same Store

44,097

46,049

(1,952
)

(4.2
%)

1,351

3.2
%
   Other Real Estate

1,067

1,093

(26
)

(2.4
%)

(26
)

(2.4
%)
      Total

45,164

47,142

(1,978
)

(4.2
%)

1,325

3.0
%
Proportionate property net operating income:

   Same Store

109,555

130,708

(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
%)


	Three Months Ended March 31,				Historical Change						Change Attributable to Changes in Ownership						Change Excluding Changes in Ownership
(in thousands)	2022		2021		$			%			$			%			$		%
Rental and other property revenues, before utility reimbursements:
Same Store	$	138,108	$	133,558	$	4,550			3.4	%	$	(7,119	)		(5.8	%)	$	11,669		9.2	%
Other Real Estate		15,644		1,914		13,730		nm				—			—	%		13,730	nm
Total		153,752		135,472		18,280			13.5	%		(7,119	)		(5.8	%)		25,399		19.3	%
Property operating expenses, net of utility reimbursements:
Same Store		37,234		37,901		(667	)		(1.8	%)		(1,783	)		(4.9	%)		1,116		3.1	%
Other Real Estate		6,334		1,364		4,970		nm				—			—	%		4,970	nm
Total		43,568		39,265		4,303			11.0	%		(1,783	)		(4.9	%)		6,086		15.9	%
Proportionate property net operating income:
Same Store		100,874		95,657		5,217			5.5	%		(5,336	)		(6.2	%)		10,553		11.7	%
Other Real Estate		9,310		550		8,760		nm				—			—	%		8,760	nm
Total	$	110,184	$	96,207	$	13,977			14.5	%	$	(5,336	)		(6.2	%)	$	19,313		20.7	%

~~(1)~~

~~Reflects the change for the three months ended March 31, 2021 and 2020, as if the California joint venture had closed on January 1, 2020.~~

For the three months ended March 31, ~~2021,~~2022, compared to ~~2020, after giving effect~~2021, excluding changes attributable to ~~the sale of partial interest~~changes in ~~certain Same Store communities in the California joint venture,~~ownership, our Same Store proportionate property ~~net operating income decreased~~NOI increased by $10.6 million, or ~~8.8%~~11.7%. This ~~decrease~~increase was attributable primarily to a ~~$9.2~~$11.7 million, or ~~5.7%~~9.2%, ~~decrease~~increase in rental and other property revenues due ~~primarily~~ to ~~160~~a 500 basis point ~~decreases in average daily occupancy and also~~increase in residential rental ~~rates. Rental~~rates, a 270 basis point increase in ADO to 98.1%, and ~~other property revenues declined an additional~~a 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 ~~decrease~~increase in proportionate property ~~net operating income~~NOI was ~~also attributable to higher~~partially offset by an increase of $1.1 million, or 3.1%, in Same Store property operating expenses, ~~of $1.4 million. Controllable~~due primarily to increases in controllable operating expenses ~~were up $0.1~~of $0.5 million, ~~compared to the three months ended March 31, 2020, while~~or 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 income~~NOI 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 ~~increased~~decreased 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.

•

~~a $2.9 million write-off of straight-line rent receivables during the three months ended March 31, 2020, due to the impact of COVID-19;~~

•

~~a $1.7 million increase in property management revenues related to property management fees earned from the management of Aimco owned communities; and~~

•

~~a $1.1 million decrease in casualty losses; offset partially by~~

•

~~a $2.4 million decrease in net operating income attributable to sold properties.~~

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.

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General and Administrative Expenses

For the three months ended March 31, ~~2021,~~2022, compared to ~~2020,~~2021, general and administrative (“G&A”) expenses ~~decreased~~increased by ~~$3.1~~$2.2 million, or ~~41.1%~~49.5%, due primarily to ~~lower incentive compensation~~the 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, net~~Expenses, 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 ~~Expense~~Income

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

(1)

Net proceeds are after repayment of $99.4 million of property debt, net working capital settlements, payment of transaction costs, and debt prepayment penalties, if applicable.

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.

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For the three months ended March 31, 2022, compared to 2021, we recognized income tax ~~expense~~benefit of ~~$3.1~~$0.6 million, compared to ~~Aimco’s~~an income tax ~~benefit~~provision 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.~~

~~Table of Contents~~assets.

Our critical accounting policies are described in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of 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:~~

•

Separation costs: during 2021, we incurred tax, legal and other costs in connection with the Separation. We excluded these costs from Pro forma FFO because we believe they are not representative of ongoing operating performance.

•

Prepayment penalties: as a result of refinancing activity in 2021, we incurred debt extinguishment costs. We excluded such costs from Pro forma FFO because we believe these costs are not representative of ongoing operating performance.

•

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

•

Incremental cash received from leased properties: commencing on January 1, 2021, we leased four properties to Aimco for redevelopment and development, which resulted in derecognizing the net book value of these properties and lease asset on the lease commencement date. During the first quarter, we recognized $83.7 million of gain associated with this transaction. Due to the terms of these leases, during 2021 cash received exceeded GAAP income. We include the cash lease income in Pro forma FFO.

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

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~~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

(1)

We incurred $24 million and $1 million of debt extinguishment costs from the prepayment of debt in 2022 and 2021, respectively. In 2022, approximately 50% of the prepayment penalty reflects the mark-to-market on the debt and accelerates future interest expense. The remaining 50% is an investment in increased financial flexibility. We excluded these costs from Pro forma FFO because we believe they are not representative of future cash flows.

(2)

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

(3)

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

(4)

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

(5)

In the third quarter of 2021, we incurred casualty losses due to Hurricane Ida-induced flooding in downtown Philadelphia causing damage to our Park Towne Place apartment community, and continued to incur incremental costs related to its cleanup in 2022. We excluded these costs from Pro forma FFO because of the unusual nature of the weather event.

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.

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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.

~~Table of Contents~~

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.

•

~~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 exclude~~for the effect of the following ~~items for~~items:

•

net income attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests are excluded to allow investors to compare a measure of our earnings before the ~~reasons set forth below:~~

•

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

effects of our capital structure and indebtedness with that of other companies in the real estate industry;

•

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

•

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

•

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

•

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

•

~~the amount by which cash exceeds GAAP lease income for the four properties leased to Aimco for redevelopment and development.~~

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•

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

•

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

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

~~(1)~~

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:

•

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

•

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

•

~~the income recognized related to our notes receivable from Aimco, as their proceeds are expected to be used to repay current amounts outstanding.~~

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.

~~Table of Contents~~

~~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

(1)

Adjusted EBITDAre would be approximately $114 million on a gross basis including the interest income on the note receivable from Aimco. Our calculation of Net Leverage to EBITDAre, including the related interest income, was 6.5x as of March 31, 2022.

(2)

Pro forma adjustments, net, includes pro forma adjustments to NAREIT FFO under the heading NAREIT Funds From Operations and Pro forma Funds From Operations, excluding items that are not included in EBITDAre such as prepayment penalties, net, and amounts attributable to noncontrolling interest share, and a $1.8 million adjustment to reflect the disposition of eight apartment communities during the period as if the transactions closed on January 1, 2022.

Liquidity and Capital Resources

Liquidity

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

•

~~$47.7 million in cash and cash equivalents;~~

•

$74.0 million in cash and cash equivalents;

•

~~$18.5 million of restricted cash, excluding amounts related to tenant security deposits, which consists primarily of escrows held by lenders for capital additions, property taxes, and insurance; and~~

•

$14.9 million of restricted cash, excluding amounts related to tenant security deposits, which consists primarily of escrows held by lenders for capital additions, property taxes, and insurance; and

•

~~$181.9~~•

$411.6 million of available ~~capacity to borrow under our revolving credit facility after consideration of $23.6 million of letters of credit backed by the facility.~~

~~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.~~

revolving credit facility after consideration of letters of credit.

Additional liquidity may also be provided through property debt financing at properties unencumbered by debt and proceeds from our ~~notes~~note receivable from ~~Aimco~~Aimco.. 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

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through ~~primarily non-recourse, long-term~~secured and unsecured borrowings, the issuance of equity securities (including OP Units), the sale of apartment communities, and cash generated from operations. Additionally, we expect to meet our liquidity requirements associated with our debt maturities.

~~Table of Contents~~

~~The following table summarizes~~There 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, as~~ordinary course of ~~March~~business from those disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2021 (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 term~~intermediate-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 ~~8.1~~6.3 years as of March 31, ~~2021.~~2022 with a weighted-average interest rate of 2.7%.

Under our ~~new~~revolving 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.

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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, decreased~~2022, increased by ~~$28.2~~$23.5 million compared to the same period in ~~2020.~~2021. The ~~decrease~~increase was due primarily to ~~lower~~higher 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 in~~provided 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, ~~2021~~2022 and ~~2020,~~2021, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.

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

•

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

•

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

•

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

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•

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

•

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.

•

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

•

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

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

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For the three months ended March 31, ~~2021~~2022 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 ~~decreased~~increased 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 2020~~amounts capitalized related to the ~~redevelopment and development of~~ ~~properties that have subsequently been leased~~casualty event at our Park Towne Place apartment community related to ~~Aimco effective~~Hurricane Ida. ~~January 1, 2021.~~

Financing Activities

Net cash used in financing activities for the three months ended March 31, ~~2021~~2022 increased by ~~$224.3~~$568.3 million compared to the ~~three months ended March 31, 2020.~~same period in 2021. The ~~change~~increase 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

~~(1)~~

~~$64.3~~ ~~million represented distributions to AIR, and $3.8 million represented distributions paid to holders of common OP Units.~~

~~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 and~~the 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 ~~2021~~2022 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 ~~change~~decrease in 30-day LIBOR of 100 basis points with constant credit risk spreads would reduce ~~or increase~~ interest expense by, ~~approximately $4.1~~a 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 change~~partially 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.

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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 ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, AIR’s internal control over financial reporting.

The AIR Operating Partnership

Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There has been no change in the AIR Operating Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, the AIR Operating Partnership’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

As of the date of this report, there have been no material changes from the risk factors in AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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

AIR

Unregistered Sales of Equity Securities

From time to time, we may issue shares of Common Stock in exchange for OP Units, defined under The AIR Operating Partnership heading below. Such shares are issued based on an exchange ratio of one share for each common OP Unit. We may also issue shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended 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, ~~2021~~2022..

Repurchases of Equity Securities

The AIR Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one year, limited partners other than AIR have the right to redeem their common OP Units for cash or, at our election, shares of AIR Common Stock on a one-for-one basis (subject to customary antidilution adjustments). 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 ~~Units~~Units.


Fiscal period	Total Number of Units Purchased		Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Units that May Yet Be Purchased Under Plans or Programs (1)
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

(1)

The terms of the AIR Operating Partnership’s Partnership Agreement do not provide for a maximum number of units that may be repurchased, and other than the ~~three months ended March 31, 2021.~~

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

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

~~(1)~~

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

Dividend and Distribution Payments

As a REIT, AIR is required to distribute annually to holders of its Common Stock at least 90% of its “real estate investment trust taxable income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income. Our credit agreement includes customary covenants, including a restriction on dividends and distributions and other restricted payments, but permits dividends and distributions during any 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,

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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.

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ITEM 6. EXHIBITS

The following exhibits are filed with this report:


EXHIBIT NO.		DESCRIPTION

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

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

~~4.1~~		Description of AIR’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (Exhibit 4.1 to AIR’s Annual Report on Form 10-K dated March 12, 2021, is incorporated herein by this reference)

10.1		~~Sixth~~Seventh Amended and Restated Partnership Agreement of ~~Limited Partnership of AIMCO Properties,~~Apartment Income REIT, L.P.~~, effective as of December 14, 2020~~ (Exhibit 10.1 to AIR’s Current Report on Form 8-K dated ~~December 15, 2020,~~July 7, 2021, is incorporated herein by this reference)

10.2		First Amendment to Credit Agreement, dated as of ~~April 14, 2021,~~May 2, 2022, by and among Apartment Income REIT, L.P., Apartment Income REIT Corp., AIR REIT Sub 1, LLC, AIR REIT Sub 2, LLC, ~~AIMCO~~AIR SUBSIDIARY REIT I, LLC, ~~AIMCO Properties, L.P., AIMCO/~~AIR/Bethesda Holdings, Inc., the lenders party thereto and PNC Bank, National Association, as administrative ~~agent (Exhibit 10.1 to AIR’s Current Report on Form 8-K dated April 14, 2021, is incorporated herein by this reference)~~agent.

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

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

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

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

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

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

101		The following materials from AIR’s and the AIR Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, ~~2021,~~2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of comprehensive income; (iv) condensed consolidated statements of equity and partners’ capital; (v) condensed consolidated statements of cash flows; and (vi) notes to condensed consolidated financial statements.

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

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SIGNATURES

~~SIGNATURES~~

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


	APARTMENT INCOME REIT CORP.

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


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

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

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

Date: May ~~6, 2021~~4, 2022

4439


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

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


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

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


Apartment Income REIT Corp.:	☐		~~AIMCO Properties,~~Apartment Income REIT, L.P.:	☐


		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)
	Apartment Income REIT Corp.:
	Condensed Consolidated Balance Sheets ~~(Unaudited)~~	43
	Condensed Consolidated Statements of Operations ~~(Unaudited)~~	54
	Condensed Consolidated Statements of Comprehensive Income ~~(Unaudited)~~	65
	Condensed Consolidated Statements of Equity ~~(Unaudited)~~	76
	Condensed Consolidated Statements of Cash Flows ~~(Unaudited)~~	87
	~~AIMCO Properties,~~Apartment Income REIT, L.P.:
	Condensed Consolidated Balance Sheets ~~(Unaudited)~~	98
	Condensed Consolidated Statements of Operations ~~(Unaudited)~~	109
	Condensed Consolidated Statements of Comprehensive Income ~~(Unaudited)~~	1110
	Condensed Consolidated Statements of Partners’ Capital ~~(Unaudited)~~	1211
	Condensed Consolidated Statements of Cash Flows ~~(Unaudited)~~	1312
	Notes to the Condensed Consolidated Financial Statements of Apartment Income REIT Corp. and ~~AIMCO Properties,~~Apartment Income REIT, L.P. ~~(Unaudited)~~	1413
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2521
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4034
ITEM 4.	CONTROLS AND PROCEDURES	4035
	PART II. OTHER INFORMATION
ITEM 1A.	RISK FACTORS	4236
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4236
ITEM 6.	EXHIBITS	4338
Signatures		4439


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


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


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


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


	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
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)

Preferred noncontrolling interests in AIR Operating Partnership		79,449			79,449			79,354			79,370
Commitments and contingencies (Note 4)

Equity:
Perpetual preferred stock		2,000			2,000			2,000			2,129
Common Stock, $0.01 par value, 1,021,175,000 shares authorized at 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		1,490			1,489
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
Additional paid-in capital		3,430,694			3,432,121			3,762,457			3,763,105
Accumulated other comprehensive income		1,100			3,039
Accumulated other comprehensive loss								(783	)		—
Distributions in excess of earnings		(2,112,381	)		(2,131,798	)		(1,648,077	)		(1,953,779	)
Total AIR equity		1,322,903			1,306,851			2,117,168			1,813,025
Noncontrolling interests in consolidated real estate partnerships		(64,619	)		(61,943	)		(70,157	)		(70,883	)
Common noncontrolling interests in AIR Operating Partnership		63,812			63,185			216,827			197,013
Total equity		1,322,096			1,308,093			2,263,838		��	1,939,155
Total liabilities and equity	$	6,321,504		$	6,229,278
Total liabilities, preferred noncontrolling interests in AIR Operating Partnership, and equity							$	6,302,856		$	6,440,360

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


2022 (remaining)	$	8,116
2023		10,499
2024		10,011
2025		9,456
2026		8,379
Thereafter		39,255
Total	$	85,716


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

	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

	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


	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

	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

	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

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

	Three Months Ended March 31,					Historical Change						Ownership-Effected Change (1)
(in thousands)	2021			2020		$			%			$			%
Rental and other property revenues, before utility reimbursements:
Same Store	$	153,652		$	176,757	$	(23,105	)		(13.1	%)	$	(9,238	)		(5.7	%)
Other Real Estate		1,056			1,715		(659	)		(38.4	%)		(659	)		(38.4	%)
Total		154,708			178,472		(23,764	)		(13.3	%)		(9,897	)		(6.0	%)
Property operating expenses, net of utility reimbursements:
Same Store		44,097			46,049		(1,952	)		(4.2	%)		1,351			3.2	%
Other Real Estate		1,067			1,093		(26	)		(2.4	%)		(26	)		(2.4	%)
Total		45,164			47,142		(1,978	)		(4.2	%)		1,325			3.0	%
Proportionate property net operating income:
Same Store		109,555			130,708		(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	%)

	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

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

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

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