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AIRC Aimco Properties

Filed: 4 Aug 20, 8:00pm

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2020  

OR

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

For the transition period from          to

Commission File Number: 1-13232 (Apartment Investment and Management Company)

Commission File Number: 0-24497 (AIMCO Properties, L.P.)

Apartment Investment and Management Company

AIMCO Properties, L.P.

(Exact name of registrant as specified in its charter)

 

Maryland (Apartment Investment and Management Company)

 

84-1259577

Delaware (AIMCO Properties, L.P.)

 

84-1275621

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

4582 South Ulster Street, Suite 1700

 

 

Denver, Colorado

 

80237

(Address of principal executive offices)

 

(Zip Code)

 

(303) 757-8101

(Registrant’s telephone number, including area code)

Not Applicable

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

 

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

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Class A Common Stock (Aimco Investment and Management Company)

 

AIV

 

New York Stock Exchange

 

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

 

Apartment Investment and Management Company:  Yes      No  

 

AIMCO Properties, L.P.:  Yes      No  

 

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

 

Apartment Investment and Management Company:  Yes      No  

 

AIMCO Properties, L.P.:  Yes      No  

 

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

Apartment Investment and Management Company:

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

AIMCO Properties, L.P.:

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

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

 

Apartment Investment and Management Company:

 

AIMCO Properties, L.P.:

 

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

 

Apartment Investment and Management Company:  Yes      No  

 

AIMCO Properties, L.P.:  Yes        No  

 

The number of shares of Apartment Investment and Management Company Class A Common Stock outstanding as of July 31, 2020: 148,865,047

 

 

 

 


Table of Contents

 

EXPLANATORY NOTE

This filing combines the reports on Form 10-Q for the quarterly period ended June 30, 2020, of Apartment Investment and Management Company, or Aimco, and AIMCO Properties, L.P., or the Aimco Operating Partnership. Where it is important to distinguish between the two entities, we refer to them specifically. Otherwise, references to “we,” “us,” or “our” mean, collectively, Aimco, the Aimco Operating Partnership, and their consolidated entities.

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

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

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

 

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

 

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

 

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

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

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

Equity, partners’ capital, and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of Aimco and those of the Aimco Operating Partnership. Interests in the Aimco Operating Partnership held by entities other than Aimco, which we refer to as OP Units, are classified within partners’ capital in the Aimco Operating Partnership’s financial statements and as noncontrolling interests in Aimco’s financial statements.

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

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for Aimco and the Aimco Operating Partnership in order to establish that the requisite certifications have been made and that Aimco and the Aimco 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.

 

1


Table of Contents

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO PROPERTIES, L.P.

 

TABLE OF CONTENTS

 

FORM 10-Q

 

 

Page

 

PART I.     FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

 

 

Apartment Investment and Management Company:

 

 

Condensed Consolidated Balance Sheets (Unaudited)

3

 

Condensed Consolidated Statements of Operations (Unaudited)

4

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

5

 

Condensed Consolidated Statements of Equity (Unaudited)

6

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

8

 

AIMCO Properties, L.P.:

 

 

Condensed Consolidated Balance Sheets (Unaudited)

9

 

Condensed Consolidated Statements of Operations (Unaudited)

10

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

11

 

Condensed Consolidated Statements of Partners’ Capital (Unaudited)

12

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

14

 

Notes to the Condensed Consolidated Financial Statements of Apartment Investment and Management Company and AIMCO Properties, L.P. (Unaudited)

15

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

23

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

43

ITEM 4.

CONTROLS AND PROCEDURES

43

 

PART II.     OTHER INFORMATION

 

ITEM 1A.

RISK FACTORS

45

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

45

ITEM 6.

EXHIBITS

47

Signatures

 

48

 

 

2


Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

June 30, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Buildings and improvements

 

$

6,928,584

 

 

$

6,868,543

 

Land

 

 

1,866,009

 

 

 

1,869,048

 

   Total real estate

 

 

8,794,593

 

 

 

8,737,591

 

Accumulated depreciation

 

 

(2,786,104

)

 

 

(2,718,284

)

   Net real estate

 

 

6,008,489

 

 

 

6,019,307

 

Cash and cash equivalents

 

 

398,408

 

 

 

142,902

 

Restricted cash

 

 

44,100

 

 

 

34,800

 

Mezzanine investment

 

 

293,427

 

 

 

280,258

 

Other assets

 

 

376,723

 

 

 

351,472

 

   Total assets

 

$

7,121,147

 

 

$

6,828,739

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Non-recourse property debt, net

 

$

4,543,743

 

 

$

4,230,590

 

Term loan, net

 

 

348,440

 

 

 

 

Revolving credit facility borrowings

 

 

 

 

 

275,000

 

   Total indebtedness

 

 

4,892,183

 

 

 

4,505,590

 

Accrued liabilities and other

 

 

353,787

 

 

 

360,574

 

   Total liabilities

 

 

5,245,970

 

 

 

4,866,164

 

 

 

 

 

 

 

 

 

 

Redeemable preferred OP Units

 

 

96,449

 

 

 

97,064

 

Redeemable noncontrolling interests in consolidated real estate partnership

 

 

4,492

 

 

 

4,716

 

Commitments and contingencies (Note 4)

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

      Common Stock, $0.01 par value, 510,587,500 shares authorized,

         148,865,047 and 148,885,197 shares issued/outstanding at June 30, 2020

         and December 31, 2019, respectively

 

 

1,489

 

 

 

1,489

 

      Additional paid-in capital

 

 

3,491,277

 

 

 

3,497,367

 

      Accumulated other comprehensive income

 

 

3,807

 

 

 

4,195

 

      Distributions in excess of earnings

 

 

(1,798,561

)

 

 

(1,722,402

)

   Total Aimco equity

 

 

1,698,012

 

 

 

1,780,649

 

Noncontrolling interests in consolidated real estate partnerships

 

 

(3,190

)

 

 

(3,296

)

Common noncontrolling interests in Aimco Operating Partnership

 

 

79,414

 

 

 

83,442

 

   Total equity

 

 

1,774,236

 

 

 

1,860,795

 

   Total liabilities and equity

 

$

7,121,147

 

 

$

6,828,739

 

 

See notes to condensed consolidated financial statements.

3

 


Table of Contents

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

218,808

 

 

$

224,200

 

 

$

443,360

 

 

$

454,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

74,123

 

 

 

75,647

 

 

 

149,603

 

 

 

154,606

 

Depreciation and amortization

 

 

97,689

 

 

 

91,924

 

 

 

198,165

 

 

 

185,489

 

General and administrative expenses

 

 

9,696

 

 

 

11,498

 

 

 

19,804

 

 

 

21,327

 

Investment management expenses

 

 

1,121

 

 

 

1,406

 

 

 

2,305

 

 

 

2,738

 

Other expenses, net

 

 

4,239

 

 

 

3,621

 

 

 

5,881

 

 

 

8,757

 

   Total operating expenses

 

 

186,868

 

 

 

184,096

 

 

 

375,758

 

 

 

372,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,843

 

 

 

3,065

 

 

 

7,366

 

 

 

5,791

 

Interest expense

 

 

(48,802

)

 

 

(39,541

)

 

 

(90,138

)

 

 

(80,950

)

Gain on dispositions of real estate

 

 

47,238

 

 

 

64,310

 

 

 

47,204

 

 

 

355,783

 

Mezzanine investment income, net

 

 

6,936

 

 

 

 

 

 

13,683

 

 

 

 

Income from unconsolidated real estate partnerships

 

 

170

 

 

 

231

 

 

 

352

 

 

 

303

 

   Income before income tax benefit (expense)

 

 

40,325

 

 

 

68,169

 

 

 

46,069

 

 

 

362,445

 

Income tax benefit (expense)

 

 

2,879

 

 

 

1,827

 

 

 

6,112

 

 

 

(1,154

)

   Net income

 

 

43,204

 

 

 

69,996

 

 

 

52,181

 

 

 

361,291

 

Noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Net loss (income) attributable to noncontrolling interests in

         consolidated real estate partnerships

 

 

17

 

 

 

(70

)

 

 

(1

)

 

 

(161

)

      Net income attributable to preferred noncontrolling interests

         in Aimco Operating Partnership

 

 

(1,859

)

 

 

(1,933

)

 

 

(3,728

)

 

 

(3,867

)

      Net income attributable to common noncontrolling interests

         in Aimco Operating Partnership

 

 

(2,107

)

 

 

(3,534

)

 

 

(2,475

)

 

 

(18,671

)

   Net income attributable to noncontrolling interests

 

 

(3,949

)

 

 

(5,537

)

 

 

(6,204

)

 

 

(22,699

)

      Net income attributable to Aimco

 

 

39,255

 

 

 

64,459

 

 

 

45,977

 

 

 

338,592

 

      Net income attributable to Aimco preferred stockholders

 

 

 

 

 

(5,187

)

 

 

 

 

 

(7,335

)

      Net income attributable to participating securities

 

 

(43

)

 

 

(38

)

 

 

(86

)

 

 

(455

)

   Net income attributable to Aimco common stockholders

 

$

39,212

 

 

$

59,234

 

 

$

45,891

 

 

$

330,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Net income attributable to Aimco per common share –

      basic and diluted

 

$

0.26

 

 

$

0.40

 

 

$

0.31

 

 

$

2.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Weighted average common shares outstanding – basic

 

 

148,535

 

 

 

148,367

 

 

 

148,527

 

 

 

146,994

 

   Weighted average common shares outstanding – diluted

 

 

148,553

 

 

 

148,599

 

 

 

148,670

 

 

 

147,220

 

 

See notes to condensed consolidated financial statements.

4

 


Table of Contents

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

43,204

 

 

$

69,996

 

 

$

52,181

 

 

$

361,291

 

Unrealized (losses) gains on available for sale debt securities

 

 

(355

)

 

 

16

 

 

 

(415

)

 

 

77

 

Comprehensive income

 

 

42,849

 

 

 

70,012

 

 

 

51,766

 

 

 

361,368

 

Comprehensive income attributable to noncontrolling

     interests

 

 

(3,926

)

 

 

(5,538

)

 

 

(6,177

)

 

 

(22,704

)

Comprehensive income attributable to Aimco

 

$

38,923

 

 

$

64,474

 

 

$

45,589

 

 

$

338,664

 

 

 

 

See notes to condensed consolidated financial statements.

5

 


Table of Contents

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended June 30, 2020 and 2019

(In thousands)

(Unaudited)

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Noncontrolling

Interests in

 

 

Common

Noncontrolling

Interests in

 

 

 

 

 

 

 

Shares

Issued

 

 

Amount

 

 

Shares

Issued

 

 

Amount

 

 

Additional

Paid-

in Capital

 

 

Other

Comprehensive

Income (Loss)

 

 

Distributions

in Excess

of Earnings

 

 

Total Aimco

Equity

 

 

Consolidated

Real Estate

Partnerships

 

 

Aimco

Operating

Partnership

 

 

Total

Equity

 

Balances at March 31, 2019

 

 

5,000

 

 

$

125,000

 

 

 

148,758

 

 

$

1,488

 

 

$

3,495,295

 

 

$

4,851

 

 

$

(1,742,998

)

 

$

1,883,636

 

 

$

(2,857

)

 

$

79,493

 

 

$

1,960,272

 

Redemption of Preferred Stock

 

 

(5,000

)

 

 

(125,000

)

 

 

 

 

 

 

 

 

4,089

 

 

 

 

 

 

(4,089

)

 

 

(125,000

)

 

 

 

 

 

 

 

 

(125,000

)

Issuance of Aimco Operating Partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,034

 

 

 

3,034

 

Redemption of Aimco Operating Partnership units

 

 

 

 

 

 

 

 

70

 

 

 

1

 

 

 

3,422

 

 

 

 

 

 

 

 

 

3,423

 

 

 

 

 

 

(4,998

)

 

 

(1,575

)

Amortization of share-based compensation cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,190

 

 

 

 

 

 

 

 

 

1,190

 

 

 

 

 

 

796

 

 

 

1,986

 

Effect of changes in ownership for consolidated entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,851

)

 

 

 

 

 

 

 

 

(4,851

)

 

 

1,042

 

 

 

3,809

 

 

 

 

Purchase of noncontrolling interest in consolidated real estate partnerships

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(917

)

 

 

 

 

 

(917

)

Change in accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

 

 

 

15

 

 

 

 

 

 

1

 

 

 

16

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64,459

 

 

 

64,459

 

 

 

70

 

 

 

3,534

 

 

 

68,063

 

Common Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(58,039

)

 

 

(58,039

)

 

 

 

 

 

 

 

 

 

(58,039

)

Common Stock issued to Common Stockholders in special dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(516

)

 

 

 

 

 

 

 

 

(516

)

 

 

 

 

 

 

 

 

(516

)

Preferred Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,098

)

 

 

(1,098

)

 

 

 

 

 

 

 

 

(1,098

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56

)

 

 

(3,303

)

 

 

(3,359

)

Other, net

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Balances at June 30, 2019

 

 

 

 

$

 

 

 

148,827

 

 

$

1,488

 

 

$

3,498,629

 

 

$

4,866

 

 

$

(1,741,765

)

 

$

1,763,218

 

 

$

(2,718

)

 

$

82,366

 

 

$

1,842,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2020

 

 

 

 

$

 

 

 

148,700

 

 

$

1,487

 

 

$

3,488,611

 

 

$

4,139

 

 

$

(1,776,782

)

 

$

1,717,455

 

 

$

(3,409

)

 

$

81,502

 

 

$

1,795,548

 

Redemption of Aimco Operating Partnership units

 

 

 

 

 

 

 

 

159

 

 

 

2

 

 

 

5,135

 

 

 

 

 

 

 

 

 

5,137

 

 

 

 

 

 

(5,423

)

 

 

(286

)

Amortization of share-based compensation cost

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

1,080

 

 

 

 

 

 

 

 

 

1,080

 

 

 

 

 

 

1,051

 

 

 

2,131

 

Effect of changes in ownership of consolidated entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,579

)

 

 

 

 

 

 

 

 

(3,579

)

 

 

36

 

 

 

3,543

 

 

 

 

Change in accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(332

)

 

 

 

 

 

(332

)

 

 

 

 

 

(23

)

 

 

(355

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,255

 

 

 

39,255

 

 

 

107

 

 

 

2,107

 

 

 

41,469

 

Common Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(61,034

)

 

 

(61,034

)

 

 

 

 

 

 

 

 

(61,034

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35

)

 

 

(3,343

)

 

 

(3,378

)

Other, net

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

 

 

111

 

 

 

 

 

 

141

 

Balances at June 30, 2020

 

 

 

 

$

 

 

 

148,865

 

 

$

1,489

 

 

$

3,491,277

 

 

$

3,807

 

 

$

(1,798,561

)

 

$

1,698,012

 

 

$

(3,190

)

 

$

79,414

 

 

$

1,774,236

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

6

 


Table of Contents

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, 2020 and 2019

(In thousands)

(Unaudited)

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Noncontrolling

Interests in

 

 

Common

Noncontrolling

Interests in

 

 

 

 

 

 

 

Shares

Issued

 

 

Amount

 

 

Shares

Issued

 

 

Amount

 

 

Additional

Paid-

in Capital

 

 

Other

Comprehensive

Income (Loss)

 

 

Distributions

in Excess

of Earnings

 

 

Total Aimco

Equity

 

 

Consolidated

Real Estate

Partnerships

 

 

Aimco

Operating

Partnership

 

 

Total

Equity

 

Balances at December 31, 2018

 

 

5,000

 

 

$

125,000

 

 

 

144,623

 

 

$

1,446

 

 

$

3,515,686

 

 

$

4,794

 

 

$

(1,947,507

)

 

$

1,699,419

 

 

$

(2,967

)

 

$

67,189

 

 

$

1,763,641

 

Repurchases of Common Stock

 

 

 

 

 

 

 

 

(461

)

 

 

(5

)

 

 

(20,677

)

 

 

 

 

 

 

 

 

(20,682

)

 

 

 

 

 

 

 

 

(20,682

)

Redemption of Preferred Stock

 

 

(5,000

)

 

 

(125,000

)

 

 

 

 

 

 

 

 

4,089

 

 

 

 

 

 

(4,089

)

 

 

(125,000

)

 

 

 

 

 

 

 

 

(125,000

)

Issuance of Aimco Operating Partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,034

 

 

 

3,034

 

Redemption of Aimco Operating Partnership units

 

 

 

 

 

 

 

 

70

 

 

 

1

 

 

 

3,422

 

 

 

 

 

 

 

 

 

3,423

 

 

 

 

 

 

(7,555

)

 

 

(4,132

)

Amortization of share-based compensation cost

 

 

 

 

 

 

 

 

22

 

 

 

 

 

 

3,632

 

 

 

 

 

 

 

 

 

3,632

 

 

 

 

 

 

1,592

 

 

 

5,224

 

Effect of changes in ownership for consolidated entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,019

)

 

 

 

 

 

 

 

 

(7,019

)

 

 

1,042

 

 

 

5,977

 

 

 

 

Purchase of noncontrolling interest in consolidated real estate partnerships

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(917

)

 

 

 

 

 

(917

)

Change in accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72

 

 

 

 

 

 

72

 

 

 

 

 

 

5

 

 

 

77

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

338,592

 

 

 

338,592

 

 

 

161

 

 

 

18,671

 

 

 

357,424

 

Common Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(125,514

)

 

 

(125,514

)

 

 

 

 

 

 

 

 

(125,514

)

Common Stock issued to Common Stockholders in special dividend

 

 

 

 

 

 

 

 

4,492

 

 

 

45

 

 

 

(561

)

 

 

 

 

 

 

 

 

(516

)

 

 

 

 

 

 

 

 

(516

)

Preferred Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,247

)

 

 

(3,247

)

 

 

 

 

 

 

 

 

(3,247

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56

)

 

 

(6,547

)

 

 

(6,603

)

Other, net

 

 

 

 

 

 

 

 

81

 

 

 

1

 

 

 

57

 

 

 

 

 

 

 

 

 

58

 

 

 

19

 

 

 

 

 

 

77

 

Balances at June 30, 2019

 

 

 

 

$

 

 

 

148,827

 

 

$

1,488

 

 

$

3,498,629

 

 

$

4,866

 

 

$

(1,741,765

)

 

$

1,763,218

 

 

$

(2,718

)

 

$

82,366

 

 

$

1,842,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2019

 

 

 

 

$

 

 

 

148,885

 

 

$

1,489

 

 

$

3,497,367

 

 

$

4,195

 

 

$

(1,722,402

)

 

$

1,780,649

 

 

$

(3,296

)

 

$

83,442

 

 

$

1,860,795

 

Repurchases of Common Stock

 

 

 

 

 

 

 

 

(234

)

 

 

(2

)

 

 

(10,002

)

 

 

 

 

 

 

 

 

(10,004

)

 

 

 

 

 

 

 

 

(10,004

)

Redemption of Aimco Operating Partnership units

 

 

 

 

 

 

 

 

159

 

 

 

2

 

 

 

5,135

 

 

 

 

 

 

 

 

 

5,137

 

 

 

 

 

 

(6,392

)

 

 

(1,255

)

Amortization of share-based compensation cost

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

3,009

 

 

 

 

 

 

 

 

 

3,009

 

 

 

 

 

 

2,102

 

 

 

5,111

 

Effect of changes in ownership of consolidated entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,348

)

 

 

 

 

 

 

 

 

(4,348

)

 

 

36

 

 

 

4,312

 

 

 

 

Cumulative effect of a change in accounting principle

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(277

)

 

 

(277

)

 

 

 

 

 

 

 

 

(277

)

Change in accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(388

)

 

 

 

 

 

(388

)

 

 

 

 

 

(27

)

 

 

(415

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45,977

 

 

 

45,977

 

 

 

225

 

 

 

2,475

 

 

 

48,677

 

Common Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(121,859

)

 

 

(121,859

)

 

 

 

 

 

 

 

 

(121,859

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108

)

 

 

(6,498

)

 

 

(6,606

)

Other, net

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

116

 

 

 

 

 

 

 

 

 

116

 

 

 

(47

)

 

 

 

 

 

69

 

Balances at June 30, 2020

 

 

 

 

$

 

 

 

148,865

 

 

$

1,489

 

 

$

3,491,277

 

 

$

3,807

 

 

$

(1,798,561

)

 

$

1,698,012

 

 

$

(3,190

)

 

$

79,414

 

 

$

1,774,236

 

 

 

See notes to condensed consolidated financial statements.

7

 


Table of Contents

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

$

52,181

 

 

$

361,291

 

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

 

 

 

 

 

 

 

   Depreciation and amortization

 

198,165

 

 

 

185,489

 

Gain on dispositions of real estate

 

(47,204

)

 

 

(355,783

)

Income tax (benefit) expense

 

(6,112

)

 

 

1,154

 

   Other adjustments

 

7,411

 

 

 

6,443

 

   Net changes in operating assets and operating liabilities

 

(20,084

)

 

 

(28,555

)

Net cash provided by operating activities

 

184,357

 

 

 

170,039

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

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

 

(7,794

)

 

 

(43,743

)

Capital expenditures

 

(182,348

)

 

 

(176,488

)

Proceeds from dispositions of real estate

 

36,869

 

 

 

422,456

 

Purchases of corporate assets

 

(8,743

)

 

 

(7,186

)

Other investing activities

 

1,946

 

 

 

2,486

 

Net cash (used in) provided by investing activities

 

(160,070

)

 

 

197,525

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from non-recourse property debt

 

608,756

 

 

 

 

Principal repayments on non-recourse property debt

 

(274,347

)

 

 

(207,790

)

Proceeds from term loan

 

350,000

 

 

 

 

Net (repayments of) borrowings on revolving credit facility

 

(275,000

)

 

 

134,600

 

Repurchases of Common Stock

 

(10,004

)

 

 

(20,682

)

Repurchases of Preferred Stock

 

 

 

 

(125,000

)

Payment of dividends to holders of Common Stock

 

(122,058

)

 

 

(125,350

)

Payment of dividends to holders of Preferred Stock

 

 

 

 

(3,247

)

Payment of distributions to noncontrolling interests

 

(10,639

)

 

 

(10,937

)

Redemptions of noncontrolling interests in the Aimco Operating Partnership

 

(1,870

)

 

 

(4,244

)

Purchases of noncontrolling interests in consolidated real estate partnerships

 

 

 

 

(917

)

Other financing activities

 

(24,319

)

 

 

(10,685

)

Net cash provided by (used in) financing activities

 

240,519

 

 

 

(374,252

)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

 

264,806

 

 

 

(6,688

)

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

 

177,702

 

 

 

72,595

 

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

$

442,508

 

 

$

65,907

 

 

See notes to condensed consolidated financial statements.

8

 


Table of Contents

 

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

June 30, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Buildings and improvements

 

$

6,928,584

 

 

$

6,868,543

 

Land

 

 

1,866,009

 

 

 

1,869,048

 

   Total real estate

 

 

8,794,593

 

 

 

8,737,591

 

Accumulated depreciation

 

 

(2,786,104

)

 

 

(2,718,284

)

   Net real estate

 

 

6,008,489

 

 

 

6,019,307

 

Cash and cash equivalents

 

 

398,408

 

 

 

142,902

 

Restricted cash

 

 

44,100

 

 

 

34,800

 

Mezzanine investment

 

 

293,427

 

 

 

280,258

 

Other assets

 

 

376,723

 

 

 

351,472

 

   Total assets

 

$

7,121,147

 

 

$

6,828,739

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Non-recourse property debt, net

 

$

4,543,743

 

 

$

4,230,590

 

Term loan, net

 

 

348,440

 

 

 

 

Revolving credit facility borrowings

 

 

 

 

 

275,000

 

   Total indebtedness

 

 

4,892,183

 

 

 

4,505,590

 

Accrued liabilities and other

 

 

353,787

 

 

 

360,574

 

   Total liabilities

 

 

5,245,970

 

 

 

4,866,164

 

 

 

 

 

 

 

 

 

 

Redeemable preferred OP Units

 

 

96,449

 

 

 

97,064

 

Redeemable noncontrolling interests in consolidated real estate partnership

 

 

4,492

 

 

 

4,716

 

Commitments and contingencies (Note 4)

 

 

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

 

 

 

      General Partner and Special Limited Partner

 

 

1,698,012

 

 

 

1,780,649

 

      Limited Partners

 

 

79,414

 

 

 

83,442

 

   Partners’ capital attributable to the Aimco Operating Partnership

 

 

1,777,426

 

 

 

1,864,091

 

Noncontrolling interests in consolidated real estate partnerships

 

 

(3,190

)

 

 

(3,296

)

   Total partners’ capital

 

 

1,774,236

 

 

 

1,860,795

 

   Total liabilities and partners’ capital

 

$

7,121,147

 

 

$

6,828,739

 

 

See notes to condensed consolidated financial statements.

9

 


Table of Contents

 

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

218,808

 

 

$

224,200

 

 

$

443,360

 

 

$

454,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

74,123

 

 

 

75,647

 

 

 

149,603

 

 

 

154,606

 

Depreciation and amortization

 

 

97,689

 

 

 

91,924

 

 

 

198,165

 

 

 

185,489

 

General and administrative expenses

 

 

9,696

 

 

 

11,498

 

 

 

19,804

 

 

 

21,327

 

Investment management expenses

 

 

1,121

 

 

 

1,406

 

 

 

2,305

 

 

 

2,738

 

Other expenses, net

 

 

4,239

 

 

 

3,621

 

 

 

5,881

 

 

 

8,757

 

   Total operating expenses

 

 

186,868

 

 

 

184,096

 

 

 

375,758

 

 

 

372,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,843

 

 

 

3,065

 

 

 

7,366

 

 

 

5,791

 

Interest expense

 

 

(48,802

)

 

 

(39,541

)

 

 

(90,138

)

 

 

(80,950

)

Gain on dispositions of real estate

 

 

47,238

 

 

 

64,310

 

 

 

47,204

 

 

 

355,783

 

Mezzanine investment income, net

 

 

6,936

 

 

 

 

 

 

13,683

 

 

 

 

Income from unconsolidated real estate partnerships

 

 

170

 

 

 

231

 

 

 

352

 

 

 

303

 

   Income before income tax benefit (expense)

 

 

40,325

 

 

 

68,169

 

 

 

46,069

 

 

 

362,445

 

Income tax benefit (expense)

 

 

2,879

 

 

 

1,827

 

 

 

6,112

 

 

 

(1,154

)

   Net income

 

 

43,204

 

 

 

69,996

 

 

 

52,181

 

 

 

361,291

 

      Net loss (income) attributable to noncontrolling interests in

         consolidated real estate partnerships

 

 

17

 

 

 

(70

)

 

 

(1

)

 

 

(161

)

   Net income attributable to the Aimco Operating Partnership

 

 

43,221

 

 

 

69,926

 

 

 

52,180

 

 

 

361,130

 

      Net income attributable to the Aimco Operating

         Partnership’s preferred unitholders

 

 

(1,859

)

 

 

(7,120

)

 

 

(3,728

)

 

 

(11,202

)

      Net income attributable to participating securities

 

 

(43

)

 

 

11

 

 

 

(86

)

 

 

(472

)

   Net income attributable to the Aimco Operating

      Partnership’s common unitholders

 

$

41,319

 

 

$

62,817

 

 

$

48,366

 

 

$

349,456

 

   Net income attributable to the Aimco Operating

      Partnership per common unit – basic and diluted

 

$

0.26

 

 

$

0.40

 

 

$

0.31

 

 

$

2.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Weighted-average common units outstanding – basic

 

 

156,509

 

 

 

156,637

 

 

 

156,584

 

 

 

155,158

 

   Weighted-average common units outstanding – diluted

 

 

156,527

 

 

 

157,018

 

 

 

156,802

 

 

 

155,517

 

 

See notes to condensed consolidated financial statements.

10

 


Table of Contents

 

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

43,204

 

 

$

69,996

 

 

$

52,181

 

 

$

361,291

 

     Unrealized (losses) gains on available for sale debt securities

 

 

(355

)

 

 

16

 

 

 

(415

)

 

 

77

 

Comprehensive income

 

 

42,849

 

 

 

70,012

 

 

 

51,766

 

 

 

361,368

 

Comprehensive loss (income) attributable to noncontrolling

     interests

 

 

17

 

 

 

(70

)

 

 

(1

)

 

 

(161

)

Comprehensive income attributable to the Aimco

     Operating Partnership

 

$

42,866

 

 

$

69,942

 

 

$

51,765

 

 

$

361,207

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

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AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Three Months Ended June 30, 2020 and 2019

(In thousands)

(Unaudited)

 

 

 

Preferred Units

 

 

General Partner

and Special

Limited Partner

 

 

Limited Partners

 

 

Partners’ Capital

Attributable to

the Aimco

Operating

Partnership

 

 

Noncontrolling

Interests in

Consolidated

Real Estate

Partnerships

 

 

Total Partners’

Capital

 

Balances at March 31, 2019

 

$

125,000

 

 

$

1,758,636

 

 

$

79,493

 

 

$

1,963,129

 

 

$

(2,857

)

 

$

1,960,272

 

Redemption of preferred units

 

 

(125,000

)

 

 

 

 

 

 

 

 

(125,000

)

 

 

 

 

 

(125,000

)

Issuance of Aimco Operating Partnership units

 

 

 

 

 

 

 

 

3,034

 

 

 

3,034

 

 

 

 

 

 

3,034

 

Redemption of Aimco Operating Partnership units

 

 

 

 

 

3,423

 

 

 

(4,998

)

 

 

(1,575

)

 

 

 

 

 

(1,575

)

Amortization of share-based compensation cost

 

 

 

 

 

1,190

 

 

 

796

 

 

 

1,986

 

 

 

 

 

 

1,986

 

Effect of changes in ownership of consolidated entities

 

 

 

 

 

(4,851

)

 

 

3,809

 

 

 

(1,042

)

 

 

1,042

 

 

 

 

Purchase of noncontrolling interest in consolidated

   real estate partnerships

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(917

)

 

 

(917

)

Change in accumulated other comprehensive income

 

 

 

 

 

15

 

 

 

1

 

 

 

16

 

 

 

 

 

 

16

 

Net income

 

 

 

 

 

64,459

 

 

 

3,534

 

 

 

67,993

 

 

 

70

 

 

 

68,063

 

Distributions to common unitholders

 

 

 

 

 

(58,039

)

 

 

(3,303

)

 

 

(61,342

)

 

 

 

 

 

(61,342

)

Common partnership units issued to common unitholders

   in special distribution

 

 

 

 

 

(516

)

 

 

 

 

 

(516

)

 

 

 

 

 

(516

)

Distributions to preferred unitholders

 

 

 

 

 

(1,098

)

 

 

 

 

 

(1,098

)

 

 

 

 

 

(1,098

)

Distributions paid to noncontrolling interests in

   consolidated real estate partnerships

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56

)

 

 

(56

)

Other, net

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balances at June 30, 2019

 

$

 

 

$

1,763,218

 

 

$

82,366

 

 

$

1,845,584

 

 

$

(2,718

)

 

$

1,842,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2020

 

$

 

 

$

1,717,455

 

 

$

81,502

 

 

$

1,798,957

 

 

$

(3,409

)

 

$

1,795,548

 

Redemption of Aimco Operating Partnership units

 

 

 

 

 

5,137

 

 

 

(5,423

)

 

 

(286

)

 

 

 

 

 

(286

)

Amortization of share-based compensation cost

 

 

 

 

 

1,080

 

 

 

1,051

 

 

 

2,131

 

 

 

 

 

 

2,131

 

Effect of changes in ownership of consolidated entities

 

 

 

 

 

(3,579

)

 

 

3,543

 

 

 

(36

)

 

 

36

 

 

 

 

Change in accumulated other comprehensive income

 

 

 

 

 

(332

)

 

 

(23

)

 

 

(355

)

 

 

 

 

 

(355

)

Net income

 

 

 

 

 

39,255

 

 

 

2,107

 

 

 

41,362

 

 

 

107

 

 

 

41,469

 

Distributions to common unitholders

 

 

 

 

 

(61,034

)

 

 

(3,343

)

 

 

(64,377

)

 

 

 

 

 

(64,377

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35

)

 

 

(35

)

Other, net

 

 

 

 

 

30

 

 

 

 

 

 

30

 

 

 

111

 

 

 

141

 

Balances at June 30, 2020

 

$

 

 

$

1,698,012

 

 

$

79,414

 

 

$

1,777,426

 

 

$

(3,190

)

 

$

1,774,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

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AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Six Months Ended June 30, 2020 and 2019

(In thousands)

(Unaudited)

 

 

 

Preferred Units

 

 

General Partner

and Special

Limited Partner

 

 

Limited Partners

 

 

Partners’ Capital

Attributable to

the Aimco

Operating

Partnership

 

 

Noncontrolling

Interests in

Consolidated

Real Estate

Partnerships

 

 

Total Partners’

Capital

 

Balances at December 31, 2018

 

$

125,000

 

 

$

1,574,419

 

 

$

67,189

 

 

$

1,766,608

 

 

$

(2,967

)

 

$

1,763,641

 

Repurchases of common partnership units

 

 

 

 

 

(20,682

)

 

 

 

 

 

(20,682

)

 

 

 

 

 

(20,682

)

Redemption of preferred units

 

 

(125,000

)

 

 

 

 

 

 

 

 

(125,000

)

 

 

 

 

 

(125,000

)

Issuance of Aimco Operating Partnership units

 

 

 

 

 

 

 

 

3,034

 

 

 

3,034

 

 

 

 

 

 

3,034

 

Redemption of Aimco Operating Partnership units

 

 

 

 

 

3,423

 

 

 

(7,555

)

 

 

(4,132

)

 

 

 

 

 

(4,132

)

Amortization of share-based compensation cost

 

 

 

 

 

3,632

 

 

 

1,592

 

 

 

5,224

 

 

 

 

 

 

5,224

 

Effect of changes in ownership of consolidated entities

 

 

 

 

 

(7,019

)

 

 

5,977

 

 

 

(1,042

)

 

 

1,042

 

 

 

 

Purchase of noncontrolling interest in consolidated

   real estate partnerships

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(917

)

 

 

(917

)

Change in accumulated other comprehensive income

 

 

 

 

 

72

 

 

 

5

 

 

 

77

 

 

 

 

 

 

77

 

Net income

 

 

 

 

 

338,592

 

 

 

18,671

 

 

 

357,263

 

 

 

161

 

 

 

357,424

 

Distributions to common unitholders

 

 

 

 

 

(125,514

)

 

 

 

 

 

(125,514

)

 

 

 

 

 

(125,514

)

Common partnership units issued to common unitholders

   in special distribution

 

 

 

 

 

(516

)

 

 

 

 

 

(516

)

 

 

 

 

 

(516

)

Distributions to preferred unitholders

 

 

 

 

 

(3,247

)

 

 

 

 

 

(3,247

)

 

 

 

 

 

(3,247

)

Distributions paid to noncontrolling interests in

   consolidated real estate partnerships

 

 

 

 

 

 

 

 

(6,547

)

 

 

(6,547

)

 

 

(56

)

 

 

(6,603

)

Other, net

 

 

 

 

 

58

 

 

 

 

 

 

58

 

 

 

19

 

 

 

77

 

Balances at June 30, 2019

 

$

 

 

$

1,763,218

 

 

$

82,366

 

 

$

1,845,584

 

 

$

(2,718

)

 

$

1,842,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2019

 

$

 

 

$

1,780,649

 

 

$

83,442

 

 

$

1,864,091

 

 

$

(3,296

)

 

$

1,860,795

 

Repurchases of common partnership units

 

 

 

 

 

(10,004

)

 

 

 

 

 

(10,004

)

 

 

 

 

 

(10,004

)

Redemption of Aimco Operating Partnership units

 

 

 

 

 

5,137

 

 

 

(6,392

)

 

 

(1,255

)

 

 

 

 

 

(1,255

)

Amortization of share-based compensation cost

 

 

 

 

 

3,009

 

 

 

2,102

 

 

 

5,111

 

 

 

 

 

 

5,111

 

Effect of changes in ownership of consolidated entities

 

 

 

 

 

(4,348

)

 

 

4,312

 

 

 

(36

)

 

 

36

 

 

 

 

Cumulative effect of a change in accounting principle

 

 

 

 

 

(277

)

 

 

 

 

 

(277

)

 

 

 

 

 

(277

)

Change in accumulated other comprehensive income

 

 

 

 

 

(388

)

 

 

(27

)

 

 

(415

)

 

 

 

 

 

(415

)

Net income

 

 

 

 

 

45,977

 

 

 

2,475

 

 

 

48,452

 

 

 

225

 

 

 

48,677

 

Distributions to common unitholders

 

 

 

 

 

(121,859

)

 

 

(6,498

)

 

 

(128,357

)

 

 

 

 

 

(128,357

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108

)

 

 

(108

)

Other, net

 

 

 

 

 

116

 

 

 

 

 

 

116

 

 

 

(47

)

 

 

69

 

Balances at June 30, 2020

 

$

 

 

$

1,698,012

 

 

$

79,414

 

 

$

1,777,426

 

 

$

(3,190

)

 

$

1,774,236

 

 

See notes to condensed consolidated financial statements.

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AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

$

52,181

 

 

$

361,291

 

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

 

 

 

 

 

 

 

   Depreciation and amortization

 

198,165

 

 

 

185,489

 

Gain on dispositions of real estate

 

(47,204

)

 

 

(355,783

)

Income tax (benefit) expense

 

(6,112

)

 

 

1,154

 

   Other adjustments

 

7,411

 

 

 

6,443

 

   Net changes in operating assets and operating liabilities

 

(20,084

)

 

 

(28,555

)

Net cash provided by operating activities

 

184,357

 

 

 

170,039

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

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

 

(7,794

)

 

 

(43,743

)

Capital expenditures

 

(182,348

)

 

 

(176,488

)

Proceeds from dispositions of real estate

 

36,869

 

 

 

422,456

 

Purchases of corporate assets

 

(8,743

)

 

 

(7,186

)

Other investing activities

 

1,946

 

 

 

2,486

 

Net cash (used in) provided by investing activities

 

(160,070

)

 

 

197,525

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from non-recourse property debt

 

608,756

 

 

 

 

Principal repayments on non-recourse property debt

 

(274,347

)

 

 

(207,790

)

Proceeds from term loan

 

350,000

 

 

 

 

Net (repayments of) borrowings on revolving credit facility

 

(275,000

)

 

 

134,600

 

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

 

(10,004

)

 

 

(20,682

)

Redemption of preferred units from Aimco

 

 

 

 

(125,000

)

Payment of distributions to General Partner and Special Limited Partner

 

(122,058

)

 

 

(125,350

)

Payment of distributions to Limited Partners

 

(6,793

)

 

 

(7,014

)

Payment of distributions to preferred OP Units

 

(3,728

)

 

 

(7,114

)

Payment of distributions to noncontrolling interests

 

(118

)

 

 

(56

)

Redemption of common and preferred OP Units

 

(1,870

)

 

 

(4,244

)

Purchases of noncontrolling interests in consolidated real estate partnerships

 

 

 

 

(917

)

Other financing activities

 

(24,319

)

 

 

(10,685

)

Net cash provided by (used in) financing activities

 

240,519

 

 

 

(374,252

)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

 

264,806

 

 

 

(6,688

)

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

 

177,702

 

 

 

72,595

 

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

$

442,508

 

 

$

65,907

 

 

 

 

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO PROPERTIES, L.P.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(Unaudited)

 

Note 1 — Organization

Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT. AIMCO Properties, L.P., or the Aimco Operating Partnership, is a Delaware limited partnership formed on May 16, 1994, to conduct our business, which is focused on the ownership, management, redevelopment, and some development of quality apartment communities located in several of the largest markets in the United States.

Aimco, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, holds a majority of the ownership interests in the Aimco Operating Partnership. Aimco conducts all of its business and owns all of its assets through the Aimco Operating Partnership. Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as OP Units. OP Units include common partnership units, which we refer to as common OP Units, as well as preferred partnership units, which we refer to as preferred OP Units. As of June 30, 2020, after elimination of units held by consolidated subsidiaries, the Aimco Operating Partnership had 159,195,031 common OP Units outstanding. As of June 30, 2020, Aimco owned 148,865,047 of the common OP Units of the Aimco Operating Partnership and Aimco had an equal number of shares of its Class A Common Stock outstanding, which we refer to as Common Stock. Aimco’s ownership of the total common OP units outstanding represents a 93.5% legal interest in the Aimco Operating Partnership and a 94.9% economic interest.

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

We own and operate a portfolio of apartment communities, diversified by both geography and price point, in 17 states and the District of Columbia. As of June 30, 2020, our portfolio included 125 apartment communities with 32,938 apartment homes in which we held an average ownership of approximately 99%. We consolidated 121 of these apartment communities with 32,796 apartment homes.

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

Basis of Presentation

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

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

Principles of Consolidation

Aimco’s accompanying condensed consolidated financial statements include the accounts of Aimco, the Aimco Operating Partnership, and their consolidated subsidiaries. The Aimco Operating Partnership’s condensed consolidated financial statements include the accounts of the Aimco Operating Partnership and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

15

 


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We consolidate a variable interest entity, or VIE, in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. As of June 30, 2020, and December 31, 2019, Aimco consolidated 5 and 6 VIEs, respectively, in addition to the Aimco Operating Partnership.

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

We have an interest in a partnership that owns Parkmerced Apartments, which meets the definition of a VIE. However, we are not the primary beneficiary and do not consolidate this partnership. We loaned $275.0 million to the partnership, which accrues interest at 10% per annum with a five-year term and the right to extend for a second five-year term. Our investment balance of $293.4 million, reflected in mezzanine investment in our condensed consolidated balance sheets, consists primarily of notes receivable and represents our maximum exposure to loss in this VIE.

Redeemable Preferred OP Units

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

Balance at December 31, 2019

 

$

97,064

 

Preferred distributions

 

 

(3,728

)

Redemption of preferred units

 

 

(615

)

Net income

 

 

3,728

 

Balance at June 30, 2020

 

$

96,449

 

 

The Aimco Operating Partnership has outstanding various classes of redeemable preferred OP Units. As of June 30, 2020, the Aimco Operating Partnership had 3,618,802 redeemable preferred OP Units issued and outstanding with a total redemption value of $96.4 million. Distributions per annum range from $0.48 to $8.00 per unit.

Revenue from Leases

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

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Fixed lease income

 

$

205,736

 

 

$

209,890

 

 

$

419,152

 

 

$

425,471

 

Variable lease income

 

 

12,649

 

 

 

13,608

 

 

 

26,264

 

 

 

27,752

 

Straight-line rent write-off (1)

 

 

(19

)

 

 

 

 

 

(2,927

)

 

 

 

   Total lease income

 

$

218,366

 

 

$

223,498

 

 

$

442,489

 

 

$

453,223

 

(1)

We monitor the collectability of all unpaid rent amounts. The onset of COVID-19 and the anticipated economic slowdown resulted in a $2.9 million write-off of accrued straight-line rent during the three months ended March 31, 2020. Additionally, we wrote-off the related deferred leasing costs of $2.2 million during the three months ended March 31, 2020. The write-offs of deferred leasing costs are recorded in depreciation and amortization in our condensed consolidated statements of operations.

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

On April 10, 2020, the Financial Accounting Standards Board, or FASB, issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions, including deferrals or reductions of future lease payments.

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Consequently, in accordance with the Staff Q&A issued by the FASB, we may elect to record rent relief when granted rather than over the remaining term of the lease. Our commercial tenants represent 3.1% of revenue for the three months ended June 30, 2020. For the three and six months ended June 30, 2020, we granted to commercial tenants $0.4 million in rent relief and elected to record this as a reduction of variable lease income in the table above.

Use of Estimates

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

Reclassifications and Revisions

For the 2020 presentation of our condensed consolidated statements of operations, we have added a caption for investment management expenses. We have reclassified certain items from property operating expenses, general and administrative expenses, and other expenses, net, in our 2019 presentation to conform to the current presentation.

Accounting Pronouncements Adopted in the Current Year

On January 1, 2020, we adopted ASC 326, Financial Instruments – Credit Losses, issued by the FASB which changes the method and timing of the recognition of credit losses on financial assets. The standard requires us to estimate and record credit losses over the life of a financial instrument, including receivables, at its inception. Our notes receivable and investments in available for sale, or AFS, debt securities are subject to the new standard. For AFS debt securities, the new standard requires us to estimate a credit loss if the fair value of the instruments is less than the carrying value of the instruments.

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

Note 3 — Significant Transactions

Financing Activity

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

Dispositions of Apartment Communities

During the three and six months ended June 30, 2020, we sold 1 apartment community with 219 apartment homes for a gain on disposition of $47.2 million. The apartment community sold in 2020 was in a lower-rated location within our primary markets and had average revenues per apartment home significantly below those of our retained portfolio.

During the three months ended June 30, 2019, we sold 1 apartment community with 399 apartment homes for a gain on disposition of $64.3 million. During the six months ended June 30, 2019, we sold 8 apartment communities with 2,605 apartment homes for a gain on dispositions of $355.8 million.

From time to time we may be marketing for sale certain apartment communities that are inconsistent with our long-term investment strategy. At the end of each reporting period we evaluate whether such communities meet the criteria to be classified as held for sale. As of June 30, 2020, 0 apartment communities were classified as held for sale. Subsequent to June 30, 2020, we received a $5.0 million non-refundable deposit on a community to be sold for approximately $126 million later in 2020.

Note 4 — Commitments and Contingencies

Commitments

In connection with our redevelopment, development, and other capital additions activities, we have entered into various construction-related contracts and we have made commitments to complete redevelopment and development of certain apartment communities, pursuant to financing or other arrangements. As of June 30, 2020, our commitments related to these capital activities totaled approximately $179 million, most of which we expect to incur during the next 12 months.

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We enter into certain commitments for future purchases of goods and services in connection with the operations of our apartment communities. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.

Legal Matters

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

Environmental

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

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

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

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

Note 5 — Earnings and Dividends per Share and Unit

Aimco and the Aimco Operating Partnership calculate basic earnings per common share and basic earnings per common unit based on the weighted-average number of shares of Common Stock and common partnership units outstanding. 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 Aimco’s issuance of additional shares and the Aimco Operating Partnership’s issuance to Aimco of additional common partnership units equal to the number of shares purchased under the options. These equivalents also include

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unvested total shareholder return, or 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 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 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.

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

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and dilutive net income attributable to Aimco common

   stockholders

$

39,212

 

 

$

59,234

 

 

$

45,891

 

 

$

330,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator – shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Basic weighted-average Common Stock outstanding

 

148,535

 

 

 

148,367

 

 

 

148,527

 

 

 

146,994

 

   Dilutive share equivalents outstanding

 

18

 

 

 

232

 

 

 

143

 

 

 

226

 

Dilutive weighted-average Common Stock outstanding

 

148,553

 

 

 

148,599

 

 

 

148,670

 

 

 

147,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – basic and diluted

$

0.26

 

 

$

0.40

 

 

$

0.31

 

 

$

2.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-dilutive share equivalents outstanding

 

8,929

 

 

 

 

 

 

8,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per unit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and dilutive net income attributable to the Aimco Operating

   Partnership's common unitholders

$

41,319

 

 

$

62,817

 

 

$

48,366

 

 

$

349,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator – units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Basic weighted-average common partnership units outstanding

 

156,509

 

 

 

156,637

 

 

 

156,584

 

 

 

155,158

 

   Dilutive partnership unit equivalents outstanding

 

18

 

 

 

381

 

 

 

218

 

 

 

359

 

Dilutive weighted-average common partnership units

   outstanding

 

156,527

 

 

 

157,018

 

 

 

156,802

 

 

 

155,517

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per unit – basic and diluted

$

0.26

 

 

$

0.40

 

 

$

0.31

 

 

$

2.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-dilutive partnership unit equivalents outstanding

 

2,081

 

 

 

 

 

 

1,214

 

 

 

 

The Aimco Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holders’ option. The Aimco Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of June 30, 2020, these preferred OP Units were potentially redeemable for approximately 2.6 million shares of Common Stock (based on the period end market price), or cash. The Aimco Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. Accordingly, we have excluded these securities from earnings per share and unit computations for the periods presented above, and we expect to exclude them in future periods.

During the three and six months ended June 30, 2020, we paid $0.41 and $0.82, respectively, in dividends and distributions per share and per unit. During the three and six months ended June 30, 2019, we paid $0.39 and $2.41, respectively, in dividends and distributions per share and per unit. Of the $2.41 paid in dividends and distributions in 2019, $2.02 represents the per share and per unit value of the special dividend and special distribution authorized by the Board of Directors in the first quarter of 2019. The special dividend consisted of $67.1 million in cash, 4.5 million shares of Common Stock, and $0.4 million of cash paid in lieu of issuing fractional shares. The special distribution consisted of $72.7 million in cash, 4.8 million common partnership units, and $0.4 million of cash paid in lieu of issuing fractional units.  

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

Note 6 — Fair Value Measurements

Recurring Fair Value Measurements

We measure at fair value on a recurring basis our investments in the securitization trust that holds certain of our property debt, which we classify as 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 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 as of June 30, 2020, was approximately 1.1 years. Our amortized cost basis for these investments, which represents the original cost adjusted for interest accretion less interest payments received, was $93.5 million and $90.0 million as of June 30, 2020, and December 31, 2019, respectively.

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

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

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

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

 

 

As of June 30, 2020

 

 

As of December 31, 2019

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

AFS debt securities

 

$

97,311

 

 

$

 

 

$

97,311

 

 

$

 

 

$

94,251

 

 

$

 

 

$

94,251

 

 

$

 

Interest rate option

 

$

11,008

 

 

$

 

 

$

11,008

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Fair Value Disclosures

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

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

 

As of June 30, 2020

 

 

As of December 31, 2019

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

Non-recourse property debt

$

4,565,673

 

 

$

4,656,612

 

 

$

4,251,339

 

 

$

4,298,630

 

 

Note 7 — Business Segments

We have 3 segments: (i) Same Store, (ii) Redevelopment and Development, and (iii) Acquisition and Other Real Estate.

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

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

As of June 30, 2020, our Same Store segment included 94 consolidated apartment communities with 27,876 apartment homes; our Redevelopment and Development segment included 8 consolidated communities with 2,521 homes; and our Acquisition and Other Real Estate segment included 19 communities with 2,399 homes and 1 office building.

The following tables present the rental and other property revenues, property operating expenses, proportionate property net operating income, and income before income tax benefit (expense) of our segments on a proportionate basis, excluding amounts related to sold communities and our proportionate share of 4 apartment communities with 142 apartment homes that we neither manage nor consolidate, for the three and six months ended June 30, 2020 and 2019 (in thousands):

 

Same Store

 

 

Redevelopment

and

Development

 

 

Acquisition

and Other

Real Estate

 

 

Proportionate

and Other

Adjustments (1)

 

 

Corporate and

Amounts Not

Allocated to

Segments (2)

 

 

Consolidated

 

Three months ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

$

180,779

 

 

$

11,589

 

 

$

17,415

 

 

$

8,519

 

 

$

506

 

 

$

218,808

 

Property operating expenses

 

48,720

 

 

 

4,912

 

 

 

6,485

 

 

 

7,931

 

 

 

6,075

 

 

 

74,123

 

Other operating expenses not allocated

   to segments (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

112,745

 

 

 

112,745

 

Total operating expenses

 

48,720

 

 

 

4,912

 

 

 

6,485

 

 

 

7,931

 

 

 

118,820

 

 

 

186,868

 

Proportionate property net operating

   income (loss)

 

132,059

 

 

 

6,677

 

 

 

10,930

 

 

 

588

 

 

 

(118,314

)

 

 

31,940

 

Other items included in income before

   income tax benefit (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

8,385

 

 

 

8,385

 

Income before income tax benefit

$

132,059

 

 

$

6,677

 

 

$

10,930

 

 

$

588

 

 

$

(109,929

)

 

$

40,325

 

 

 

Same Store

 

 

Redevelopment

and

Development

 

 

Acquisition

and Other

Real Estate

 

 

Proportionate

and Other

Adjustments (1)

 

 

Corporate and

Amounts Not

Allocated to

Segments (2)

 

 

Consolidated

 

Three months ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

$

182,816

 

 

$

12,695

 

 

$

14,097

 

 

$

7,905

 

 

$

6,687

 

 

$

224,200

 

Property operating expenses

 

48,893

 

 

 

4,990

 

 

 

5,431

 

 

 

7,378

 

 

 

8,955

 

 

 

75,647

 

Other operating expenses not allocated

   to segments (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

108,449

 

 

 

108,449

 

Total operating expenses

 

48,893

 

 

 

4,990

 

 

 

5,431

 

 

 

7,378

 

 

 

117,404

 

 

 

184,096

 

Proportionate property net operating

   income (loss)

 

133,923

 

 

 

7,705

 

 

 

8,666

 

 

 

527

 

 

 

(110,717

)

 

 

40,104

 

Other items included in income before

   income tax benefit (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

28,065

 

 

 

28,065

 

Income before income tax benefit

$

133,923

 

 

$

7,705

 

 

$

8,666

 

 

$

527

 

 

$

(82,652

)

 

$

68,169

 

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Same

Store

 

 

Redevelopment

and

Development

 

 

Acquisition

and Other

Real Estate

 

 

Proportionate

and Other

Adjustments (1)

 

 

Corporate and

Amounts Not

Allocated to

Segments (2)

 

 

Consolidated

 

Six months ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

$

367,564

 

 

$

23,502

 

 

$

36,174

 

 

$

17,215

 

 

$

(1,095

)

 

$

443,360

 

Property operating expenses

 

97,154

 

 

 

9,599

 

 

 

13,061

 

 

 

15,989

 

 

 

13,800

 

 

 

149,603

 

Other operating expenses not allocated

   to segments (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

226,155

 

 

 

226,155

 

   Total operating expenses

 

97,154

 

 

 

9,599

 

 

 

13,061

 

 

 

15,989

 

 

 

239,955

 

 

 

375,758

 

Proportionate property net operating

   income (loss)

 

270,410

 

 

 

13,903

 

 

 

23,113

 

 

 

1,226

 

 

 

(241,050

)

 

 

67,602

 

Other items included in income before

   income tax benefit (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,533

)

 

 

(21,533

)

   Income before income tax benefit

$

270,410

 

 

$

13,903

 

 

$

23,113

 

 

$

1,226

 

 

$

(262,583

)

 

$

46,069

 

 

 

Same

Store

 

 

Redevelopment

and

Development

 

 

Acquisition

and Other

Real Estate

 

 

Proportionate

and Other

Adjustments (1)

 

 

Corporate and

Amounts Not

Allocated to

Segments (2)

 

 

Consolidated

 

Six months ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

$

363,187

 

 

$

26,708

 

 

$

28,210

 

 

$

16,068

 

 

$

20,262

 

 

$

454,435

 

Property operating expenses

 

97,519

 

 

 

10,245

 

 

 

10,547

 

 

 

14,983

 

 

 

21,312

 

 

 

154,606

 

Other operating expenses not allocated

   to segments (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

218,311

 

 

 

218,311

 

   Total operating expenses

 

97,519

 

 

 

10,245

 

 

 

10,547

 

 

 

14,983

 

 

 

239,623

 

 

 

372,917

 

Proportionate property net operating

   income (loss)

 

265,668

 

 

 

16,463

 

 

 

17,663

 

 

 

1,085

 

 

 

(219,361

)

 

 

81,518

 

Other items included in income before

   income tax expense (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

280,927

 

 

 

280,927

 

   Income before income tax expense

$

265,668

 

 

$

16,463

 

 

$

17,663

 

 

$

1,085

 

 

$

61,566

 

 

$

362,445

 

(1)

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

(2)

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

(3)

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

(4)

Includes gain on dispositions of real estate, mezzanine investment income, interest income, and interest expense.

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

 

June 30, 2020

 

 

December 31, 2019

 

Same Store

$

4,592,960

 

 

$

4,669,022

 

Redevelopment and Development

 

826,200

 

 

 

716,750

 

Acquisition and Other Real Estate

 

795,039

 

 

 

803,777

 

Corporate and other assets (1)

 

906,948

 

 

 

639,190

 

   Total consolidated assets

$

7,121,147

 

 

$

6,828,739

 

(1)

Includes the assets not allocated to our segments, primarily corporate assets, our mezzanine investment, and assets of sold apartment communities.

For the six months ended June 30, 2020 and 2019, capital additions related to our segments were as follows (in thousands):

 

2020

 

 

2019

 

Same Store

$

51,608

 

 

$

85,280

 

Redevelopment and Development

 

115,140

 

 

 

78,089

 

Acquisition and Other Real Estate

 

12,376

 

 

 

14,433

 

Total capital additions

$

179,124

 

 

$

177,802

 

 

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

Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding: the impact of the COVID-19 pandemic, including on our ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, redevelopments, and developments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our redevelopment and development investments; expectations regarding sales of our apartment communities and the use of proceeds thereof; the availability and cost of corporate debt; and our ability to comply with debt covenants, including financial coverage ratios.

Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond our control, including, without limitation:

 

Real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing of acquisitions, dispositions, redevelopments, and developments; and changes in operating costs, including energy costs;

 

Impact of the COVID-19 pandemic on our residents, commercial tenants, and operations, including as a result of government restrictions and the overall impact on the real estate industry and economy 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 below;

 

Financing risks, including the availability and cost of capital markets’ financing; the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; and the risk that our earnings may not be sufficient to maintain compliance with debt covenants;

 

Insurance risks, including the cost of insurance, natural disasters, and severe weather such as hurricanes; and

 

Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect us and interpretations of those regulations; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by us.

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 and depends on our ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership.

Readers should carefully review our financial statements and the notes thereto, as well as Item 1A. Risk Factors in Part II of this report, the section entitled “Risk Factors” described in Item 1A of Apartment Investment and Management Company’s and AIMCO Properties, L.P.’s combined Annual Report on Form 10-K for the year ended December 31, 2019, and the other documents we file from time to time with the Securities and Exchange Commission.

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

Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States, or GAAP. 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, Adjusted Funds from Operations, Free Cash Flow, Net Asset Value, Economic Income, and the measures used to compute our leverage ratios.

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Executive Overview

We are focused on the ownership, management, redevelopment, and some development of quality apartment communities located in several of the largest markets in the United States.

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

Our Economic Income is the result of performance in five key business areas:

 

increase revenue based on high levels of resident retention, through superior customer selection and satisfaction, coupled with innovation resulting in sustained cost control, to further improve net operating income margins;

 

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

 

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

 

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

 

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

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

Impacts of COVID-19 and Government Lockdown

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

We also implemented enhanced cleaning procedures and physical distancing measures during the second quarter.

Seeing residents as individuals, each impacted differently by the pandemic and lockdown, our teammates have undertaken to speak to every resident in need, to listen, and to help each solve his or her problems.

We also seek to assist the communities where our residents and employees live and work. Since March, we have provided free temporary furnished housing for healthcare providers at 21 Fitzsimons on the Anschutz Medical Campus, Parc Mosaic near Boulder Community Health, and River Club near Newark University Hospital.

During the three months ended June 30, 2020, we estimate that we incurred $8.0 million of incremental costs related to additional interest costs resulting from our increased liquidity; incremental bad debt expense; lower commercial revenue; local restrictions on our ability to charge late fees; and enhanced cleaning and safety procedures and other COVID-19 related items.

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Since the outbreak of the COVID-19 pandemic and government lockdown, we have sold one community and entered into a contract to sell another, both at values greater than their respective gross asset value one year ago. We continue to monitor economic and market conditions and can provide no assurance that a prolonged recession will not result in lower property values and non-cash impairment losses.

As of June 30, 2020, we had $1.2 billion of cash and available credit, providing increased liquidity and financial flexibility.  

Residential Rent Collection Update

In response to the economic effects of the COVID-19 pandemic and government lockdown, some jurisdictions where our communities are located, including Los Angeles, Philadelphia, and New York City, have enacted laws seeking to suspend contractual obligations of residents, including government-mandated deferrals, rent freezes, repayment extensions, fee abatement measures or concessions, and prohibitions on lease terminations or evictions for tenants. Some states and municipalities are also implementing rental assistance programs and encouraging landlord-tenant negotiations.

We measure residential rent collection as the amount of payments received as a percentage of all residential amounts billed. The table below represents the percentage of residential billed amounts for the three months ended June 30, 2020, and the month ended July 31, 2020.

 

 

Three months ended

 

 

2020

 

 

 

June 30, 2020

 

 

April

 

 

May

 

 

June

 

 

July

 

Payments received during the period

 

 

95.3

%

 

 

95.6

%

 

 

95.1

%

 

 

95.0

%

 

 

95.8

%

Payments received after period close

 

 

1.9

%

 

 

3.1

%

 

 

1.7

%

 

 

1.1

%

 

n/a

 

   Total payments received as of July 31, 2020

 

 

97.2

%

 

 

98.7

%

 

 

96.8

%

 

 

96.1

%

 

 

95.8

%

During the three months ended June 30, 2020, we recognized 98.4% of all residential revenue, treating the balance of 1.6% as bad debt. Of the 98.4% of residential revenue recognized, we collected in cash all but 120 basis points. The amounts uncollected and not reserved as bad debt include balances collateralized by security deposits of approximately 70 basis points, or those considered collectable based on our review of individual customers’ credit of approximately 50 basis points, or $1.0 million.

In July, we recognized 98.4% of all residential revenue, treating the balance of 1.6% as bad debt. Of the 98.4% of residential revenue recognized, we collected 95.8% in cash, 30 basis points is collateralized by security deposits, and $1.6 million, or 2.3%, is expected to be collected in future periods, half of which is expected to be collected in August.

Results for the Three Months Ended June 30, 2020

The results from the execution of our business plan during the three months ended June 30, 2020, are further described below.

Operations

We own and operate a portfolio of apartment communities, diversified by both geography and price point. As of June 30, 2020, our portfolio included 125 apartment communities with 32,938 apartment homes in which we held an average ownership of approximately 99%.

Our property operations team, adapting to changing guidelines and regulations due to COVID-19, produced solid results for our portfolio for the three months ended June 30, 2020. Same Store highlights include:

 

Renewal rents increased 5.1%, whereas new lease rents decreased 2.4%, for a weighted-average increase of 1.8%;

 

Net operating income margin declined approximately 30 basis points year-over-year to 73.0% due to elevated bad debt expense and lower commercial revenue resulting from COVID-19 and the government lockdown, but increased approximately 40 basis points over the six months ended June 30, 2020, as compared to 2019; and

 

Average daily occupancy of 95.5%, a year-over-year decline of approximately 140 basis points due primarily to reduced demand resulting from COVID-19 and the government lockdown.

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

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of negative 0.2%. During the three months ended June 30, 2020, Same Store controllable operating expenses decreased 6.3% compared to the three months ended June 30, 2019, due primarily to the timing of repairs, which were slowed during the lockdown.

Redevelopment and Development

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

We execute redevelopments using a range of approaches. We prefer to limit risk by executing redevelopments using a short-cycle approach, in which we renovate an apartment community in stages. These short-cycle redevelopments can be completed one apartment home at a time, when that home is vacated and available for renovation, or one floor at a time, thereby limiting the number of down homes and lease-up risk. As a result, short-cycle redevelopments provide us the flexibility to maintain current earnings while aligning the timing of the completed apartment homes with market demand. When short-cycle redevelopments are not possible, we may engage in redevelopment activities where an entire building or community is vacated. We refer to these as long-cycle redevelopments. Redevelopment work may include seeking entitlements from local governments, which enhance the value of our existing portfolio by increasing density; that is, the right to add apartment homes to a site.

During the three months ended June 30, 2020, we invested $62.3 million in redevelopment and development. We continued five long-cycle redevelopment and development projects already under construction, including the full redevelopment of the North Tower at Flamingo Point and 707 Leahy; and ground-up construction at The Fremont on the Anschutz Medical Campus; Eldridge Townhomes; and Prism. Our estimated cost to complete these projects is $151.0 million, an amount readily funded from our liquidity.

In the first quarter, we announced plans to pause our short-cycle redevelopments in response to COVID-19 and the government lockdown, and their potential economic ramifications. In June, with the economy beginning to reopen, we resumed short-cycle redevelopments at Bay Parc and the Center Tower at Flamingo Point. Our estimated cost to complete these projects is $13.4 million.

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

 

Location

 

Homes

Approved for

Redevelopment

 

 

Homes Completed

 

 

Homes Leased

 

 

Total Planned Investment

(1)

 

 

Investment to Date

 

 

Expected Initial Occupancy (2)

 

Expected NOI

Stabilization

(3)

Short-cycle redevelopments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bay Parc

Miami, FL

 

 

90

 

 

 

75

 

 

 

67

 

 

$

27.7

 

 

$

26.4

 

 

N/A

 

N/A

Flamingo Point Center Tower

Miami Beach, FL

 

 

58

 

 

 

18

 

 

 

13

 

 

 

16.0

 

 

 

3.9

 

 

N/A

 

N/A

Long-cycle redevelopments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

707 Leahy (4)

Redwood City, CA

 

 

110

 

 

 

12

 

 

 

41

 

 

 

25.0

 

 

 

21.7

 

 

1Q 2020

 

2Q 2022

Eldridge Townhomes (5)

Elmhurst, IL

 

 

58

 

 

 

18

 

 

 

29

 

 

 

35.1

 

 

 

31.0

 

 

2Q 2020

 

4Q 2022

Flamingo Point North Tower

Miami Beach, FL

 

 

366

 

 

 

 

 

 

 

 

 

171.0

 

 

 

64.4

 

 

4Q 2021

 

2Q 2024

The Fremont (6)

Denver, CO (MSA)

 

 

253

 

 

 

21

 

 

 

37

 

 

 

87.0

 

 

 

81.1

 

 

3Q 2020

 

1Q 2023

Parc Mosaic (7)

Boulder, CO

 

 

226

 

 

 

226

 

 

 

175

 

 

 

124.6

 

 

 

123.6

 

 

3Q 2019

 

1Q 2022

Prism (8)

Cambridge, MA

 

 

136

 

 

 

 

 

 

1

 

 

 

73.2

 

 

 

42.1

 

 

1Q 2021

 

3Q 2023

   Total

 

 

 

1,297

 

 

 

370

 

 

 

363

 

 

$

559.6

 

 

$

394.2

 

 

 

 

 

(1)

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

(2)

Delivery timing and stabilization is subject to change and are based on the best estimate at this time. Temporary local restrictions halting construction activity and extended ‘‘shelter-in-place” orders, related to COVID-19 or otherwise, may delay project completion and impact the timing of stabilization. Any additional delays may also result in increased costs.

(3)

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

(4)

In May 2020, construction resumed following a five-week county-mandated work stoppage. We have completed construction on 43 apartment homes and leased 77% of those completed.

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(5)

As of July 31, 2020, 23 townhomes have been delivered and 91% of those have been leased. Construction is on track to deliver the remaining 35 townhomes by year end.

(6)

As of July 31, 2020, 86 apartment homes have been delivered and 49% have been leased. Completion is expected in the fourth quarter 2020.

(7)

Construction is substantially complete. As of July 31, 2020, we had leased 84% of the apartment homes at rents exceeding underwriting.

(8)

In June 2020, COVID-19 related construction bans by The City of Cambridge were lifted, allowing construction activities to resume. Completion of this community is expected in the first quarter of 2021.

As of June 30, 2020, our total estimated net investment at redevelopment and development communities is $559.6 million, of which we have funded $394.2 million. We expect to fund the remaining estimated net investment of $165.4 million on these communities in 2020 and future years, on a leverage-neutral basis, with proceeds from sales of apartment communities with lower forecasted free cash flow, or FCF, internal rates of return.

During the three months ended June 30, 2020, we leased 59 redeveloped or newly developed apartment homes. As of June 30, 2020, our exposure to lease-up at long-cycle redevelopment and development communities was 809 apartment homes; 44 homes where construction is complete, 289 homes expected to be delivered during the remainder of 2020, and 476 homes expected to be delivered in 2021.

Portfolio Management and Capital Allocation

Our portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points, averaging “B/B+” in quality, and is also diversified across several of the largest markets in the United States. 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; as “B” quality apartment communities those earning rents between 90% and 125% of local market average; as “C+” quality apartment communities those earning rents greater than $1,100 per month, but lower than 90% of local market average; and as “C” quality apartment communities those earning rents less than $1,100 per month and lower than 90% of local market average. We classify as “B/B+” quality a portfolio that on average earns rents between 100% and 125% of local market average rents. Although some companies and analysts within the multifamily real estate industry use apartment community quality ratings of “A,” “B,” and “C,” some of which are tied to local market rent averages, the metrics used to classify apartment community quality as well as the period for which local market rents are calculated may vary from company to company. Accordingly, our rating system for measuring apartment community quality is neither broadly nor consistently used in the multifamily real estate industry.

The following table summarizes information about our portfolio relative to the market for the three months ended June 30, 2020:

Average revenue per Aimco apartment home (1)

 

$

2,254

 

Portfolio average rents as a percentage of local market average rents

 

 

112

%

Percentage A (average revenue per Aimco apartment home $2,942)

 

 

53

%

Percentage B (average revenue per Aimco apartment home $1,987)

 

 

29

%

Percentage C+ (average revenue per Aimco apartment home $1,758)

 

 

18

%

(1)

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

Our average monthly revenue per apartment home was $2,254 for the three months ended June 30, 2020, representing an increase of approximately 2% compared to the same period in 2019. This increase is due primarily to growth in Same Store rent, lease-up of redeveloped apartment homes, and the sale of communities with average monthly rent per apartment home lower than those of the retained portfolio, offset partially by lower average fees and other revenue per home.

We follow a disciplined paired trade policy in making investments. As part of our portfolio strategy, we seek to sell up to 10% of our portfolio annually and to reinvest the proceeds from such sales in accretive uses such as capital enhancements, redevelopments, some developments, and selective acquisitions with projected FCF internal rates of return higher than expected from the communities being sold. We prefer well-located real estate where land is a significant percentage of total value and provides potential upside from development or redevelopment. Through this disciplined approach to capital recycling, we increase the quality and expected growth rate of our portfolio.

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

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Acquisitions

During the three months ended June 30, 2020, we made no acquisitions.

Dispositions

During the three months ended June 30, 2020, we sold one apartment community located in Annandale, Virginia with 219 homes at a price of $58.9 million, 3% better than its estimated gross asset value one year prior. Net sales proceeds from this transaction were $36.9 million.

In July, we accepted a non-refundable deposit on a community to be sold later in 2020, and agreed to sell this community at a price of approximately $126 million, 3% better than its estimated gross asset value as of December 31, 2019. Proceeds from this transaction are expected to be used to reduce leverage.

Balance Sheet

Leverage

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

Our leverage includes our share of long-term, non-recourse property debt encumbering apartment communities, outstanding borrowings on the revolving credit facility, our term loan, and other leverage. Please refer to the Liquidity and Capital Resources section for additional information regarding our leverage. Other leverage includes mezzanine equity instruments, including preferred OP Units and redeemable noncontrolling interests in a consolidated real estate partnership.

Our target leverage ratios are Net Leverage to Adjusted EBITDAre below 7.0x and Adjusted EBITDAre to Adjusted Interest Expense and Preferred Distributions greater than 2.5x. We calculate Adjusted EBITDAre and Adjusted Interest Expense used in our leverage ratios based on the most recent three-month amounts, annualized. Our leverage ratios for the three months ended June 30, 2020, are presented below:

Proportionate Debt to Adjusted EBITDAre

 

7.9x

Net Leverage to Adjusted EBITDAre

 

8.1x

Adjusted EBITDAre to Adjusted Interest Expense

 

3.5x

Adjusted EBITDAre to Adjusted Interest Expense and Preferred Distributions

 

3.3x

Net Leverage to Adjusted EBITDAre increased by 0.4x from March 31, 2020, due primarily to a $6.1 million reduction in quarterly Adjusted EBITDAre primarily as a result of COVID-19 and the government lockdown.

We expect to meet our leverage target through a combination of property net operating income growth, including the $30 million of incremental net operating income we expect to receive from our long-cycle redevelopment communities now underway, and through approximately $350 million of property sales, including the previously mentioned under-contract community, expected to close in 2020. Depending upon the communities sold and the timing of sales, taxable gains may exceed our regular quarterly dividend. If so, our Board of Directors may declare a taxable stock dividend.

Under our revolving credit facility and term loan, we have agreed to maintain a fixed charge coverage ratio of 1.40x, as well as other covenants customary for similar revolving credit arrangements. For the trailing twelve months ended June 30, 2020, our fixed charge coverage ratio was 2.02x. We expect to remain in compliance with these covenants.

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

Liquidity

Our $1.2 billion liquidity consists of cash and restricted cash balances and available capacity on our revolving credit facility. As of June 30, 2020, we had cash and restricted cash, excluding amounts related to tenant security deposits, of $428.4 million and had the capacity to borrow up to $793.5 million on our revolving credit facility, after consideration of $6.5 million of letters of credit backed by the facility.

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We manage our financial flexibility by maintaining an investment grade rating and holding apartment communities that are unencumbered by property debt. As of June 30, 2020, we held unencumbered communities with an estimated fair value of approximately $2.3 billion.

Two credit rating agencies rate our creditworthiness, using different methodologies and ratios for assessing our credit, and both have rated our credit and outlook as BBB- (stable), an investment grade rating. Although some of the ratios they use are similar to those we use to measure our leverage, there are differences in our methods of calculation and therefore our leverage ratios disclosed above are not indicative of the ratios that may be calculated by these agencies.

Financing Activity

During the three months ended June 30, 2020, we placed $608.8 million of new property debt, generating incremental proceeds of $370.6 million, and closed the refinancing of another $79.9 million in July 2020. The loans have a weighted-average term to maturity of 9.3 years and a weighted-average interest rate of 2.9%, lowering our weighted-average borrowing cost of leverage to 3.69%. We addressed all of our 2020 loan maturities and reduced 2021 to 2024 maturities by 18%, resulting in average annual maturities of $262 million remaining for the four years.

Also during the three months ended June 30, 2020, we secured a $350.0 million term loan. Proceeds from the loan were primarily used to repay borrowings on our $800.0 million revolving credit facility. Please refer to the Leverage and Capital Resources section for further information about the terms of our term loan.

Equity Capital Activities

On July 28, 2020, our Board of Directors declared a quarterly cash dividend of $0.41 per share of Common Stock, an increase of 5% compared to the regular quarterly dividends paid in 2019. This amount is payable on August 28, 2020, to stockholders of record on August 14, 2020.

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 paid time for parental leave, paid time annually to volunteer in local communities, college scholarships for the children of team members, an emergency fund to help team members in crisis, financial support for our team members who are becoming United States citizens, and a bonus structure at all levels of the organization. We also pay full compensation and benefits for team members who are actively deployed by the United States military. Out of hundreds of participating companies in 2020, we were one of only six recognized as a “Top Workplace” in Colorado for each of the past eight years, and were one of only two real estate companies to receive a BEST award from the Association for Talent Development in recognition of our company-wide success in talent development, marking our third consecutive year receiving this award.

Results of Operations

Because our operating results depend primarily on income from our apartment communities, the supply of and demand for apartments influences our operating results. Additionally, the level of expenses required to operate and maintain our apartment communities and the pace and price at which we redevelop, acquire, and dispose of our apartment communities affect 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 attributable to common stockholders per common share, on a dilutive basis, decreased by $0.14 during the three months ended June 30, 2020, compared to 2019, due primarily to fewer gains from dispositions and more prepayment penalties incurred during second quarter refinancing activity undertaken to increase liquidity and to benefit from current interest rates.

Pro forma FFO per share increased $0.03 during the three months ended June 30, 2020, compared to 2019, due primarily to the contribution from communities in lease-up, the net contribution from the Parkmerced mezzanine loan, and lower general and administrative expenses; offset partially by impacts of the pandemic and government lockdown mentioned previously and by “drag”, or lower contribution, from Redevelopment communities under construction.

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We have not excluded from Pro forma FFO and AFFO $8.0 million, or $0.05 per share, for the following COVID-19 related impacts: $2.6 million of net incremental interest expense primarily on our $350.0 million term loan, which we secured to increase liquidity; $2.5 million of incremental bad debt expense; $1.5 million of lower commercial revenue; $0.6 million of lower other income, resulting from local restrictions on our contractual right to charge late fees; and $0.8 million of other amounts resulting from COVID-19. Additionally, we have not excluded from Pro forma FFO and AFFO for the six months ended June 30, 2020, the write-off of $2.9 million of our straight-line rent receivables for certain commercial tenants for which collectability of future rent is uncertain and $2.2 million of deferred broker commissions related to the same commercial tenants.

AFFO per share increased $0.04 for the three months ended June 30, 2020, compared to 2019, due primarily to the $0.03 increase in Pro forma FFO per share and $0.01 due to lower capital replacement spending.

Detailed Results of Operations for the Three and Six Months Ended June 30, 2020, Compared to June 30, 2019

Net income decreased by $26.8 million and $309.1 million during the three and six months ended June 30, 2020, compared to 2019, respectively, as described more fully below.

Property Operations

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

As of June 30, 2020, our Same Store segment included 94 apartment communities with 27,876 apartment homes.

From December 31, 2019, to June 30, 2020, on a net basis, our Same Store segment increased by three apartment communities and 1,227 apartment homes. These changes consisted of:

 

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

 

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

 

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

 

the reduction of one apartment community with 219 apartment homes that was sold as of June 30, 2020.

As of June 30, 2020, our Redevelopment and Development segment included eight apartment communities with 2,521 apartment homes, and our Acquisition and Other Real Estate segment included 19 apartment communities with 2,399 apartment homes and one office building.

We use proportionate property net operating income to assess the operating performance of our communities. Proportionate property net operating income reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. Accordingly, the results of operations of our segments discussed below are presented on a proportionate basis and exclude the results of four apartment communities with 142 apartment homes that we do not consolidate.

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

Please refer to Note 7 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.

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Proportionate Property Net Operating Income

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

 

Three Months Ended June 30,

 

 

 

 

 

 

 

 

 

(in thousands)

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

Rental and other property revenues, before utility reimbursements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Same Store

$

180,779

 

 

$

182,816

 

 

$

(2,037

)

 

 

(1.1

%)

   Redevelopment and Development

 

11,589

 

 

 

12,695

 

 

 

(1,106

)

 

 

(8.7

%)

   Acquisition and Other Real Estate

 

17,415

 

 

 

14,097

 

 

 

3,318

 

 

 

23.5

%

      Total

 

209,783

 

 

 

209,608

 

 

 

175

 

 

 

0.1

%

Property operating expenses, net of utility reimbursements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Same Store

 

48,720

 

 

 

48,893

 

 

 

(173

)

 

 

(0.4

%)

   Redevelopment and Development

 

4,912

 

 

 

4,990

 

 

 

(78

)

 

 

(1.6

%)

   Acquisition and Other Real Estate

 

6,485

 

 

 

5,431

 

 

 

1,054

 

 

 

19.4

%

      Total

 

60,117

 

 

 

59,314

 

 

 

803

 

 

 

1.4

%

Proportionate property net operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Same Store

 

132,059

 

 

 

133,923

 

 

 

(1,864

)

 

 

(1.4

%)

   Redevelopment and Development

 

6,677

 

 

 

7,705

 

 

 

(1,028

)

 

 

(13.3

%)

   Acquisition and Other Real Estate

 

10,930

 

 

 

8,666

 

 

 

2,264

 

 

 

26.1

%

      Total

$

149,666

 

 

$

150,294

 

 

$

(628

)

 

 

(0.4

%)

For the three months ended June 30, 2020, compared to 2019, our Same Store proportionate property net operating income decreased by $1.9 million, or 1.4%. This decrease was attributable primarily to a $2.0 million, or 1.1%, decrease in rental and other property revenues due to $2.1 million, or 120 basis point, increase in bad debt and $1.1 million, or 70 basis point, reduction in other rental income due to local restrictions on our contractual right to charge late fees, and an approximately 140-basis point decrease in average daily occupancy. This decrease was offset partially by a 250 basis point increase in average residential rents. Same Store property operating expenses decreased $0.2 million for the three months ended June 30, 2020, compared to 2019, due primarily to a $1.6, or 6.3%, decrease in controllable operating expenses, which exclude utility costs, real estate taxes, and insurance.

Redevelopment and Development proportionate property net operating income decreased by $1.0 million, or 13.3%, for the three months ended June 30, 2020, compared to 2019. This decrease was attributable primarily to de-leasing in 2019 at Flamingo Point and 707 Leahy in preparation for redevelopment, offset partially by increased occupancy driven by the lease-up at Parc Mosaic.

Acquisition and Other Real Estate proportionate property net operating income increased by $2.3 million, or 26.1%, for the three months ended June 30, 2020, compared to 2019, due to the lease-up of One Ardmore acquired in April 2019 and the acquisition of 1001 Brickell Bay Drive in July 2019, offset partially by a decrease in revenues related to commercial tenants due to the economic impacts of COVID-19 and the government lockdown.

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

 

Six Months Ended June 30,

 

 

 

 

 

 

 

 

 

(in thousands)

2020

 

 

2019

 

 

$ Change

 

 

% Change

 

Rental and other property revenues, before utility reimbursements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Same Store

$

367,564

 

 

$

363,187

 

 

$

4,377

 

 

 

1.2

%

   Redevelopment and Development

 

23,502

 

 

 

26,708

 

 

 

(3,206

)

 

 

(12.0

%)

   Acquisition and Other Real Estate

 

36,174

 

 

 

28,210

 

 

 

7,964

 

 

 

28.2

%

      Total

 

427,240

 

 

 

418,105

 

 

 

9,135

 

 

 

2.2

%

Property operating expenses, net of utility reimbursements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Same Store

 

97,154

 

 

 

97,519

 

 

 

(365

)

 

 

(0.4

%)

   Redevelopment and Development

 

9,599

 

 

 

10,245

 

 

 

(646

)

 

 

(6.3

%)

   Acquisition and Other Real Estate

 

13,061

 

 

 

10,547

 

 

 

2,514

 

 

 

23.8

%

      Total

 

119,814

 

 

 

118,311

 

 

 

1,503

 

 

 

1.3

%

Proportionate property net operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Same Store

 

270,410

 

 

 

265,668

 

 

 

4,742

 

 

 

1.8

%

   Redevelopment and Development

 

13,903

 

 

 

16,463

 

 

 

(2,560

)

 

 

(15.6

%)

   Acquisition and Other Real Estate

 

23,113

 

 

 

17,663

 

 

 

5,450

 

 

 

30.9

%

      Total

$

307,426

 

 

$

299,794

 

 

$

7,632

 

 

 

2.5

%

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For the six months ended June 30, 2020, compared to 2019, our Same Store proportionate property net operating income increased by $4.7 million, or 1.8%. This increase was attributable primarily to a $4.4 million, or 1.2%, increase in rental and other property revenues due primarily to a 270 basis point increase in average residential rents, offset partially by a 60 basis point increase in bad debt and a 40 basis point reduction in other rental income due to local restrictions on our contractual right to charge late fees. Same Store property operating expenses decreased by $0.4 million, contributing to the proportionate property net operating income growth, driven by a $2.4 million, or 4.9%, decrease in controllable operating expenses, offset primarily by an increase in real estate taxes and insurance.

Redevelopment and Development proportionate property net operating income decreased by $2.6 million, or 15.6%, for the six months ended June 30, 2020, compared to 2019. This decrease was attributable primarily to de-leasing in 2019 at Flamingo Point and 707 Leahy in preparation for redevelopment, offset partially by increased occupancy driven by the lease-up at Parc Mosaic.

Acquisition and Other Real Estate proportionate property net operating income increased by $5.5 million, or 30.9%, for the six months ended June 30, 2020, compared to 2019, due to the lease-up of One Ardmore acquired in April 2019 and the acquisition of 1001 Brickell Bay Drive in July 2019, offset partially by a decrease in revenues related to commercial tenants due to the economic impacts of COVID-19 and government lockdown.

Non-Segment Real Estate Operations

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

During the six months ended June 30, 2020, we recognized a $2.9 million write-off of straight-line rent receivables due to the impact of COVID-19 and government lockdown, and the resulting economic impact on our commercial tenants. No similar write-off was recognized in 2019.

Net operating income decreased for the three and six months ended June 30, 2020, compared to 2019, by $4.0 million and $11.7 million, respectively, due to the sale of apartment communities in 2020 and 2019.

Depreciation and Amortization

For the three and six months ended June 30, 2020, compared to 2019, depreciation and amortization expense increased by $5.8 million, or 6.3%, and $12.7 million, or 6.8%, respectively, due primarily to communities acquired in 2019, redeveloped apartment homes placed in service after completion of construction, and the write-off of deferred leasing costs. This increase was offset partially by decreases in depreciation associated with apartment communities sold and assets fully depreciated in 2020 and 2019.

General and Administrative Expenses

For the three and six months ended June 30, 2020, compared to 2019, general and administrative expenses decreased by $1.8 million, or 15.7%, and $1.5 million, or 7.1%, respectively, due primarily to a decrease in personnel costs.

Other Expenses, Net

Other expenses, net, includes costs associated with our risk management activities, partnership administration expenses, ground lease rent expense, and certain non-recurring items.

For the three months ended June 30, 2020, compared to 2019, other expenses, net, were relatively flat.

For the six months ended June 30, 2020, compared to 2019, other expenses, net decreased by $2.9 million, or 32.8%, due primarily to a favorable incremental cash receipt in the first quarter of 2020 related to a previous settlement and lower ground lease expense, offset partially by unrealized losses on our interest rate derivative.

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Interest Income

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

Interest income for six months ended June 30, 2020, compared to 2019, increased $1.6 million, or 27.2%, due primarily to a gain recognized on the early payoff of a seller financing note.

Interest Expense

For the three months ended June 30, 2020, compared to 2019, interest expense increased by $9.3 million, or 23.4%, due primarily to refinancing activity and interest expense related to our term loan. As a result of our refinancing activity, we incurred prepayment penalties, offset partially by more favorable interest rates on refinanced fixed rate debt.

For the six months ended June 30, 2020, compared to 2019, interest expense increased by $9.2 million, or 11.4%, due primarily to refinancing activity and interest expense related to our term loan, offset partially by an increase in capitalized interest related to our active redevelopments and developments. As a result of our refinancing activity, we incurred prepayment penalties, offset partially by more favorable interest rates on refinanced fixed rate debt.

Gain on Dispositions of Real Estate

During the three and six months ended June 30, 2020, we sold one apartment community with 219 apartment homes for a gain on disposition of $47.2 million and net proceeds of $36.9 million.

During the three months ended June 30, 2019, we sold one apartment community with 399 apartment homes for a gain on disposition of $64.3 million and net proceeds of $78.1 million. During the six months ended June 30, 2019, we sold eight apartment communities with 2,605 apartment homes for a gain on dispositions of $355.8 million and net proceeds of $418.3 million.

The apartment community sold in 2020 was in a lower-rated location within our primary markets and had average revenues per apartment home significantly below those of our retained portfolio.

Mezzanine Investment Income, Net

On November 26, 2019, we loaned $275.0 million to the partnership owning Parkmerced Apartments. During the three and six months ended June 30, 2020, we recognized $6.9 million and $13.7 million, respectively, of income in connection with the mezzanine loan. For the six months ended June 30, 2020, we have received a cash payment of $0.6 million.

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

Income Tax Benefit (Expense)

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

Our income tax benefit calculated in accordance with GAAP includes: (a) income taxes associated with the income or loss of our TRS entities including tax on gains on dispositions, for which the tax consequences have been realized or will be realized in future periods; (b) low income housing tax credits generated prior to the sale of our Asset Management business that offset REIT taxable income, primarily from retained capital gains; and (c) historic tax credits that offset income tax obligations of our TRS entities. Income taxes related to these items, as well as changes in valuation allowance and the establishment of incremental deferred tax items in conjunction with intercompany asset transfers (if applicable), are included in income tax benefit in our condensed consolidated statements of operations.

For the three months ended June 30, 2020, we recognized income tax benefit of $2.9 million, compared to a $1.8 million benefit during the same period in 2019. The change is due primarily to income tax benefit associated with 1001 Brickell Bay Drive, offset partially by decreased benefit due to lower net operating losses at communities held by TRS entities.  

For the six months ended June 30, 2020, we recognized income tax benefit of $6.1 million, compared to income tax provision of $1.2 million during the same period in 2019. The change is due primarily to income tax provision on the gain on dispositions of real estate in 2019 and an income tax benefit associated with 1001 Brickell Bay Drive, offset partially by decreased benefit due to lower net operating losses at communities held by TRS entities.

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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 the impairment of long-lived assets and capitalized costs.

Our critical accounting policies are described in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Aimco’s and the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes in our critical accounting policies from those reported in our Form 10-K and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented.

Non-GAAP Measures

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

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

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

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

Nareit FFO is a non-GAAP financial measure that we believe, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains 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: depreciation and amortization related to real estate; gains and losses from sales and impairment of depreciable assets and land used in our primary business; and income taxes directly associated with a gain or loss on the sale of real estate, and including 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 Aimco common stockholders (diluted) by subtracting amounts allocated from Nareit FFO to participating securities.

In addition to Nareit FFO, we compute Pro forma FFO and AFFO, which are also non-GAAP financial measures that we believe are helpful to investors in understanding our short-term performance. Pro forma FFO represents Nareit FFO attributable to Aimco common stockholders (diluted), excluding certain amounts that are unique or occur infrequently.

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

 

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

 

Straight-line rent: in 2018, we assumed a 99-year ground lease with scheduled rent increases. Due to the terms of the lease, GAAP rent expense will exceed cash rent payments until 2076. We include the cash rent payments for this

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ground lease in Pro forma FFO but exclude the incremental straight-line non-cash rent expense. We include the rent expense for this lease in other expenses, net, in our condensed consolidated statements of operations.

 

Severance costs, litigation, and other, net: during the three months ended June 30, 2020, we incurred an unrealized loss on a derivative agreement and incurred other non-recurring costs. We excluded the unrealized loss and other costs from Pro forma FFO because we believe they are not representative of current operating performance. The unrealized loss and costs are included in other expenses, net, on our condensed consolidated statements of operations.

In computing 2019 Pro forma FFO, we made the following adjustments to Nareit FFO:

 

Preferred equity redemption related costs: on May 16, 2019, we redeemed our Class A Preferred Perpetual Stock. We excluded the redemption-related costs from Pro forma FFO because we believe these costs are not representative of operating performance.

 

Straight-line rent: as described above.

 

Severance costs, litigation, and other, net: in 2019, we incurred severance and restructuring costs, and costs related to our litigation with Airbnb. We excluded these amounts from Pro forma FFO because we believe these costs are not representative of operating performance.

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

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

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

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income attributable to Aimco common stockholders (1)

 

$

39,212

 

 

$

59,234

 

 

$

45,891

 

 

$

330,802

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate depreciation and amortization, net of noncontrolling

   partners’ interest

 

 

95,109

 

 

 

89,780

 

 

 

192,901

 

 

 

181,154

 

Gain on dispositions and other, net of noncontrolling

   partners’ interest

 

 

(47,238

)

 

 

(64,310

)

 

 

(47,204

)

 

 

(355,783

)

Income tax adjustments related to gain on dispositions and other

   tax-related items

 

 

152

 

 

 

210

 

 

 

378

 

 

 

6,736

 

Common noncontrolling interests in Aimco Operating Partnership’s

   share of above adjustments

 

 

(2,446

)

 

 

(1,356

)

 

 

(7,542

)

 

 

8,893

 

Amounts allocable to participating securities

 

 

(15

)

 

 

(73

)

 

 

(54

)

 

 

243

 

Nareit FFO attributable to Aimco common stockholders

 

$

84,774

 

 

$

83,485

 

 

$

184,370

 

 

$

172,045

 

Adjustments, all net of common noncontrolling interests in Aimco

   Operating Partnership and participating securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepayment penalties

 

 

6,203

 

 

 

 

 

 

6,203

 

 

 

 

Straight-line rent

 

 

633

 

 

 

634

 

 

 

1,268

 

 

 

2,946

 

Preferred equity redemption related amounts

 

 

 

 

 

3,864

 

 

 

 

 

 

3,864

 

Severance costs, litigation, and other, net

 

 

1,731

 

 

 

595

 

 

 

1,731

 

 

 

620

 

Pro forma FFO attributable to Aimco common stockholders

 

$

93,341

 

 

$

88,578

 

 

$

193,572

 

 

$

179,475

 

Capital Replacements, net of common noncontrolling interests in

   Aimco Operating Partnership and participating securities

 

 

(11,403

)

 

 

(13,134

)

 

 

(23,008

)

 

 

(22,845

)

AFFO attributable to Aimco common stockholders

 

$

81,938

 

 

$

75,444

 

 

$

170,564

 

 

$

156,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total share and dilutive share equivalents used to calculate Net

   income and Nareit FFO per share (2)

 

 

148,553

 

 

 

148,599

 

 

 

148,670

 

 

 

147,220

 

Adjustment to weight reverse stock split (3)

 

 

 

 

 

 

 

 

 

 

 

1,242

 

Pro forma shares and dilutive share equivalents used to calculate

   Pro forma FFO and AFFO per share

 

 

148,553

 

 

 

148,599

 

 

 

148,670

 

 

 

148,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Aimco per common share – diluted

 

$

0.26

 

 

$

0.40

 

 

$

0.31

 

 

$

2.25

 

Nareit FFO per share – diluted

 

$

0.57

 

 

$

0.56

 

 

$

1.24

 

 

$

1.17

 

Pro forma FFO per share – diluted

 

$

0.63

 

 

$

0.60

 

 

$

1.30

 

 

$

1.21

 

AFFO per share – diluted

 

$

0.55

 

 

$

0.51

 

 

$

1.15

 

 

$

1.06

 

(1)

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

(2)

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

(3)

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

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

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

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Leverage Ratios

As discussed under the Balance Sheet heading, our leverage strategy targets the ratio of Net Leverage to Adjusted EBITDAre to be below 7.0x and the ratio of Adjusted EBITDAre to Adjusted Interest Expense and Preferred Distributions to be greater than 2.5x. 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 companies within the same industry, and they are believed to be similar to measures used by rating agencies to assess entity credit quality.

Proportionate Debt, as used in our leverage ratios, is a non-GAAP measure and includes our share of the long-term, non-recourse property debt, outstanding borrowings under our revolving credit facility, and our term loan. 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.

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

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

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

 

 

June 30, 2020

 

Total indebtedness

 

$

4,892,183

 

Adjustments:

 

 

 

 

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

 

 

23,490

 

Proportionate share adjustments related to debt obligations of consolidated and unconsolidated

   partnerships

 

 

(7,639

)

Cash and restricted cash

 

 

(442,508

)

Tenant security deposits included in restricted cash

 

 

14,074

 

Proportionate share adjustments related to cash and restricted cash held by consolidated and

   unconsolidated partnerships

 

 

874

 

Securitization trust investment and other

 

 

(97,311

)

   Proportionate Debt

 

$

4,383,163

 

Preferred OP Units

 

 

96,449

 

Redeemable noncontrolling interests in consolidated real estate partnership

 

 

4,492

 

   Net Leverage

 

$

4,484,104

 

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

 

gains and losses on the dispositions of depreciated property;

 

impairment write-downs of depreciated property;

 

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

 

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

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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 the effect of the following items for 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;

 

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

 

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

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

 

 

Three Months Ended

 

 

 

June 30, 2020

 

Net income

 

$

43,204

 

Adjustments:

 

 

 

 

Interest expense

 

 

48,802

 

Income tax benefit

 

 

(2,879

)

Depreciation and amortization

 

 

97,689

 

Gain on dispositions of real estate

 

 

(47,238

)

Adjustment related to EBITDAre of unconsolidated partnerships

 

 

212

 

EBITDAre

 

$

139,790

 

Net loss attributable to noncontrolling interests in consolidated real

   estate partnerships

 

 

17

 

EBITDAre adjustments attributable to noncontrolling interests

 

 

(513

)

Interest income received on securitization investment

 

 

(2,216

)

Non-cash straight-line rent

 

 

633

 

Pro forma adjustments, net (1)

 

 

1,491

 

   Adjusted EBITDAre

 

$

139,202

 

   Annualized Adjusted EBITDAre

 

$

556,808

 

(1)

Adjusted EBITDAre has been calculated on a pro forma basis to reflect the disposition of one apartment community during the period as if the transaction closed on April 1, 2020, as well as other items affecting quarterly results for which annualization would distort results.

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; and

 

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

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

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

 

 

Three Months Ended

 

 

 

June 30, 2020

 

Interest expense

 

$

48,802

 

Adjustments:

 

 

 

 

Proportionate share adjustments related to interest of consolidated and

   unconsolidated partnerships

 

 

(84

)

Debt prepayment penalties

 

 

(6,537

)

Interest income earned on securitization trust investment

 

 

(2,216

)

   Adjusted Interest Expense

 

$

39,965

 

Preferred distributions

 

 

1,859

 

   Adjusted Interest Expense and Preferred Distributions

 

$

41,824

 

Annualized Adjusted Interest Expense

 

$

159,860

 

Annualized Adjusted Interest Expense and Preferred Distributions

 

$

167,296

 

 

Liquidity and Capital Resources

Liquidity

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

As of June 30, 2020, our available liquidity was approximately $1.2 billion. We have commitments for, and expect to spend, $151 million on long-cycle redevelopment and development projects underway.

Our available liquidity consists of:

 

$398.4 million in cash and cash equivalents;

 

$30.0 million of restricted cash, excluding amounts related to tenant security deposits, consists primarily of escrows held by lenders for capital additions, property taxes, and insurance; and

 

$793.5 million of available capacity to borrow under our revolving credit facility after consideration of $6.5 million of letters of credit backed by the facility.

Additional liquidity may also be provided through property debt financing at properties unencumbered by debt. As of June 30, 2020, we held unencumbered communities with an estimated fair market value of approximately $2.3 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 cover our short-term liquidity needs, we have additional means, such as short-term borrowing availability and proceeds from apartment community sales and refinancings. We may use our revolving credit facility for working capital and other short-term purposes, such as funding investments on an interim basis. We expect to meet our long-term liquidity requirements, including redevelopment spending and apartment community acquisitions, through primarily non-recourse, long-term borrowings, the issuance of equity securities (including OP Units), the sale of apartment communities, and cash generated from operations. Additionally, we expect to meet our liquidity requirements associated with our debt maturities. Our revolving credit facility matures on January 22, 2022, and our term loan matures on April 20, 2021, prior to consideration of its one-year extension option.

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

 

 

Total

 

 

Less than

One Year

(2020)

 

 

2-3 Years

(2021-2022)

 

 

4-5 Years

(2023-2024)

 

 

More than Five Years (2025 and Thereafter)

 

Non-recourse property debt

 

$

4,565,673

 

 

$

123,707

 

 

$

873,971

 

 

$

577,229

 

 

$

2,990,766

 

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During the six months ended June 30, 2020, we placed $608.8 million of new property debt and refinanced another $79.9 million in July. These financings generated incremental proceeds of $370.6 million.

Leverage and Capital Resources

The availability of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through changes in interest rates and access to financing. Currently, interest rates are low compared to historical levels. Recent events have increased volatility in interest rates, resulting in substantial movements, both up and down, in short periods of time. Capital is still available, but with fewer sources than in past periods. Any adverse changes in the lending environment could negatively affect our liquidity. We believe we have mitigated much of this exposure by reducing our short and intermediate term maturity risk through refinancing such loans with long-dated, fixed-rate property debt. However, if property financing options become unavailable for our future debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending or proceeds from apartment community dispositions.

Two credit rating agencies rate our creditworthiness and both have rated our credit and outlook as BBB- (stable), an investment grade rating. Our investment grade rating would be useful in accessing capital through the sale of bonds in private or public transactions. However, our intention and historical practice has been to raise debt capital in the form of property-level, non-recourse, long-dated, fixed-rate, amortizing debt, the cost of which is generally less than that of recourse debt and the terms of which also provide for greater balance sheet safety.

As of June 30, 2020, approximately 91% of our leverage consisted of property-level, non-recourse, long-dated, amortizing debt. Approximately 99% 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 7.7 years. On average, 6.2% of our unpaid principal balances will mature each year from 2021 through 2023.

While our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt, we also have a credit facility with a syndicate of financial institutions. As of June 30, 2020, we had no outstanding borrowings under our revolving credit facility and had capacity to borrow up to $793.5 million after consideration of $6.5 million of letters of credit backed by the facility.

During the three months ended June 30, 2020, we amended our Second Amended and Restated Senior Secured Credit Agreement to include a $350.0 million term loan. The term loan represents approximately 7% of our total leverage, includes a one-year extension option, and bears interest at 30-day LIBOR plus 185-basis points with a 50-basis point LIBOR floor.

As of June 30, 2020, our outstanding preferred OP Units represented approximately 2% of our total leverage. Preferred OP Units are redeemable at the holder’s option; however, for illustrative purposes, we compute the weighted-average maturity of our total leverage assuming a 10-year maturity on the units.

The combination of non-recourse property-level debt, borrowings under our revolving credit facility, term loan, preferred OP Units, and redeemable noncontrolling interests in a consolidated real estate partnership comprise our total leverage. The weighted-average remaining term to maturity for our total leverage described above was 7.3 years as of June 30, 2020.

Under the revolving credit facility and term loan, we have agreed to maintain a Fixed Charge Coverage ratio of 1.40x, as well as other covenants customary for similar revolving credit arrangements. For the trailing 12-month period ended June 30, 2020, our Fixed Charge Coverage ratio was 2.02x. We expect to remain in compliance with this covenant during the next 12 months.

We like the discipline of financing our investments in real estate 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.

Operating Activities

For the six months ended June 30, 2020, net cash provided by operating activities was $184.4 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 six months ended June 30, 2020, increased by $14.3 million

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compared to 2019, due to higher contribution from our Same Store, Acquisition, and Other Real Estate communities, offset partially by lower net operating income associated with communities sold.

Investing Activities

For the six months ended June 30, 2020, our net cash used in investing activities of $160.1 million consisted primarily of capital expenditures, partially offset by proceeds from the disposition of one apartment community.

Total capital additions at apartment communities totaled $177.5 million and $177.7 million during the six months ended June 30, 2020 and 2019, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.

We categorize capital spending for communities in our portfolio broadly into seven 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, all of which differ from redevelopment additions in that they are generally lesser in scope and do not significantly disrupt property operations;

 

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

 

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

 

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

 

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

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

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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 six months ended June 30, 2020 and 2019, are presented below (in thousands):

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Capital replacements

 

$

18,521

 

 

$

18,886

 

Capital improvements

 

 

4,648

 

 

 

6,100

 

Capital enhancements

 

 

16,683

 

 

 

41,057

 

Redevelopment

 

 

69,512

 

 

 

41,240

 

Development

 

 

60,198

 

 

 

55,611

 

Initial capital expenditures

 

 

2,203

 

 

 

11,052

 

Casualty

 

 

5,709

 

 

 

3,750

 

   Total apartment community capital additions

 

$

177,474

 

 

$

177,696

 

Plus: additions related to commercial spaces

 

 

1,650

 

 

 

106

 

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

 

 

49

 

 

 

3,550

 

   Consolidated capital additions

 

$

179,173

 

 

$

181,352

 

Plus: net change in accrued capital spending

 

 

3,175

 

 

 

(4,864

)

Capital expenditures per condensed consolidated statement of cash flows

 

$

182,348

 

 

$

176,488

 

For the six months ended June 30, 2020 and 2019, we capitalized $7.1 million and $4.5 million of interest costs, respectively, and $18.1 million and $17.6 million of other direct and indirect costs, respectively.

We invested $16.7 million in capital enhancements and $129.7 million in redevelopment and development during the six months ended June 30, 2020. Capital enhancement spend decreased $24.4 million for the six months ended June 30, 2020, compared to 2019, due primarily to the delay of certain capital projects in response to the potential economic impacts of COVID-19 and the government lockdown. The increase in redevelopment spending is driven by the full redevelopments of Flamingo Point North Tower and 707 Leahy. Further details regarding our redevelopment and development activities, including apartment communities constructed and delivered as of June 30, 2020, is discussed in the Executive Overview section above.

Financing Activities

For the six months ended June 30, 2020, our net cash provided by financing activities of $240.5 million was attributed to the items discussed below:

Proceeds from non-recourse property debt during the period consisted of the closing of nine fixed-rate, amortizing, non-recourse property loans totaling $608.8 million.

Principal payments on non-recourse property debt during the period totaled $274.3 million, consisting of $45.1 million of scheduled principal amortization and $229.2 million of repayments.

Proceeds of $350.0 million from the term loan that closed during the three months ended June 30, 2020.

Net repayments on our revolving credit facility of $275.0 million are due primarily to proceeds from our term loan and property debt financing activities.

Aimco common share repurchases during the six months ended June 30, 2020, totaled $10.0 million.

Net cash provided by financing activities also includes $132.7 million of payments to equity holders, as further detailed in the tables below.

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Equity and Partners’ Capital Transactions

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

Cash distributions paid by the Aimco Operating Partnership to preferred unitholders

 

$

3,728

 

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

 

 

128,851

 

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

 

 

118

 

   Total cash distributions paid by the Aimco Operating Partnership

 

$

132,697

 

(1)

$122.1 million represented distributions to Aimco, and $6.8 million represented distributions paid to holders of common OP Units.

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

Cash distributions paid to holders of OP Units

 

$

10,521

 

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

 

 

118

 

Cash dividends paid by Aimco to common stockholders

 

 

122,058

 

   Total cash dividends and distributions paid by Aimco

 

$

132,697

 

Future Capital Needs

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2020, on a consolidated basis, we had approximately $69.5 million of variable-rate property-level debt outstanding in addition to our $350.0 million term loan. We estimate that a change in 30-day LIBOR of 100 basis points with constant credit risk spreads would reduce or increase interest expense by approximately $4.2 million on an annual basis.

As of June 30, 2020, we had approximately $442.5 million of cash and cash equivalents and restricted cash, a portion of which bears interest at variable rates, which may offset somewhat a change in rates on our variable-rate debt discussed above.

ITEM 4. CONTROLS AND PROCEDURES

Aimco

Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

The Aimco Operating Partnership

Disclosure Controls and Procedures

The Aimco Operating Partnership’s management, with the participation of the chief executive officer and chief financial officer of both Aimco and AIMCO-GP, Inc., the Aimco Operating Partnership’s general partner, has evaluated the effectiveness of the Aimco 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

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financial officer of AIMCO-GP, Inc. have concluded that, as of the end of such period, the Aimco Operating Partnership’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no change in the Aimco Operating Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the second quarter of 2020 that has materially affected, or is reasonably likely to materially affect, the Aimco 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, we are updating the risk factors in Aimco’s and the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2019, to include the following risk factor. The risk factors as-filed remain unchanged.

Pandemics may affect our operating results and financial condition.

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

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

 

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

 

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

 

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

 

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

 

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

 

our ability to complete redevelopments and developments as planned; and

 

potential litigation relating to the COVID-19 pandemic.

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

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

Aimco

Unregistered Sales of Equity Securities

From time to time, Aimco may issue shares of Common Stock in exchange for OP Units, defined under The Aimco Operating Partnership heading below. Such shares are issued based on an exchange ratio of one share for each common OP Unit. Aimco may also issue shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended June 30, 2020, Aimco issued 158,938 shares of Common Stock in exchange for OP Units in these transactions.

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Repurchases of Equity Securities

There were no repurchases by Aimco of its common equity securities during the three months ended June 30, 2020. Aimco’s Board of Directors has, from time to time, authorized Aimco to repurchase shares of its outstanding Common Stock. As of June 30, 2020, Aimco was authorized to repurchase approximately 10.4 million shares. This authorization has no expiration date. These repurchases may be made from time to time in the open market or in privately negotiated transactions.

The Aimco Operating Partnership

Unregistered Sales of Equity Securities

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

Repurchases of Equity Securities

The Aimco Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one year, limited partners other than Aimco have the right to redeem their common OP Units for cash or, at our election, shares of Aimco Common Stock on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended June 30, 2020, approximately 158,938 common OP Units were redeemed in exchange for shares of Common Stock.

The following table summarizes the Aimco Operating Partnership’s repurchases, or redemptions in exchange for cash, of common OP Units for the three months ended June 30, 2020.

Fiscal period

 

Total Number

of Units

Purchased

 

 

Average

Price Paid

per Unit

 

 

Total Number of Units

Purchased as Part of

Publicly Announced

Plans or Programs (1)

 

Maximum Number of

Units that May Yet Be

Purchased Under the

Plans or Programs (1)

April 1, 2020 ‒ April 30, 2020

 

 

24

 

 

$

43.59

 

 

N/A

 

N/A

May 1, 2020 ‒ May 31, 2020

 

 

7,407

 

 

 

36.52

 

 

N/A

 

N/A

June 1, 2020 ‒ June 30, 2020

 

 

19

 

 

 

38.56

 

 

N/A

 

N/A

Total

 

 

7,450

 

 

$

36.55

 

 

 

 

 

(1)

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

Dividend and Distribution Payments

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

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ITEM 6. EXHIBITS

The following exhibits are filed with this report:

EXHIBIT      NO. (1)

 

DESCRIPTION

 

 

 

3.1

 

Charter – Articles of Restatement (Exhibit 3.1 to Aimco’s Annual Report on Form 10-K dated February 24, 2020, is incorporated herein by this reference)

 

 

 

3.2

 

Amended and Restated Bylaws (Exhibit 3.1 to Aimco’s Current Report on Form 8-K dated January 26, 2016, is incorporated herein by this reference)

 

 

 

4.1

 

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

 

 

 

10.1

 

Fifth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of July 29, 1994, as amended and restated as of April 8, 2019 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K dated April 5, 2019, is incorporated herein by this reference)

 

 

 

31.1

 

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

 

 

 

31.2

 

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

 

 

 

31.3

 

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

 

 

 

31.4

 

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

 

 

 

32.1

 

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

 

 

 

32.2

 

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

 

 

 

101

 

The following materials from Aimco’s and the Aimco Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, 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).

(1)

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

 

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SIGNATURES

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

 

 

APARTMENT INVESTMENT AND

MANAGEMENT COMPANY

 

 

 

 

By:

/s/ Paul Beldin

 

 

Paul Beldin

 

 

Executive Vice President and Chief Financial Officer

 

 

(duly authorized officer and principal financial officer)

 

 

 

 

 

AIMCO PROPERTIES, L.P.

 

 

 

 

By:

AIMCO-GP, Inc., its general partner

 

 

 

 

By:

/s/ Paul Beldin

 

 

Paul Beldin

 

 

Executive Vice President and Chief Financial Officer

 

 

(duly authorized officer and principal financial officer)

 

 

 

 

Date: August 4, 2020

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