Published: 2023-05-04 00:00:00 ET

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2023

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: 0-56223 (Aimco OP L.P.)

Apartment Investment and Management Company

Aimco OP L.P.

(Exact name of registrant as specified in its charter)

 

Maryland (Apartment Investment and Management Company)		84-1259577
Delaware (Aimco OP L.P.)		85-2460835
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
4582 South Ulster Street, Suite 1450
Denver, Colorado		80237
(Address of principal executive offices)		(Zip Code)

 

(303) 224-7900

(Registrant’s telephone number, including area code)

Not Applicable

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

 

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

 

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Class A Common Stock (Apartment Investment and Management Company)		AIV		New York Stock Exchange

 

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

 

None (Apartment Investment and Management Company)

Partnership Common Units (Aimco OP L.P.)

(title of each class)

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 OP 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 OP 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 OP 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 OP 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 OP L.P.: Yes ☐ No ☒

The number of shares of Apartment Investment and Management Company Class A common stock ("Common Stock") outstanding as of May 3, 2023: 148,616,217

 

 

 

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EXPLANATORY NOTE

Apartment Investment and Management Company (“Aimco” or “the Company”), a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. On December 15, 2020, Aimco completed the separation of its businesses (the “Separation”), creating two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp. (“AIR”) (Aimco and AIR together, as they existed prior to the Separation, “Aimco Predecessor”). Events noted in this filing as occurring before December 15, 2020, were those entered into by Aimco Predecessor. Aimco, through a wholly-owned subsidiary, is the general partner and directly is the special limited partner of Aimco Operating Partnership. As of March 31, 2023, Aimco owned 92.5% of the legal interest in the common partnership units of Aimco Operating Partnership and 94.9% of the economic interest in Aimco Operating Partnership. The remaining 7.5% legal interest is owned by limited partners. As the sole general partner of Aimco Operating Partnership, Aimco has exclusive control of Aimco Operating Partnership’s day-to-day management.

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 Aimco Operating Partnership all proceeds from the offerings of its securities. In exchange for the contribution of such proceeds, Aimco receives additional interests in 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).

This filing combines the quarterly reports on Form 10-Q for the quarterly period ended March 31, 2023, of Aimco and 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, Aimco Operating Partnership, and their consolidated entities.

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

We operate Aimco and Aimco Operating Partnership as one enterprise; the management of Aimco directs the management and operations of Aimco Operating Partnership; and Aimco OP GP, LLC, Aimco Operating Partnership’s general partner, is managed by Aimco.

We believe it is important to understand the few differences between Aimco and Aimco Operating Partnership in the context of how Aimco and Aimco Operating Partnership operate as a consolidated company. Aimco has no assets or liabilities other than its investment in Aimco Operating Partnership. Also, Aimco is a corporation that issues publicly traded equity from time to time, whereas 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 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), Aimco Operating Partnership generates all remaining capital required by its business. These sources include 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 real estate.

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

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

 

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

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO OP 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)	4
	Condensed Consolidated Statements of Operations (Unaudited)	5
	Condensed Consolidated Statements of Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Aimco OP L.P.:
	Condensed Consolidated Balance Sheets (Unaudited)	8
	Condensed Consolidated Statements of Operations (Unaudited)	9
	Condensed Consolidated Statements of Partners’ Capital (Unaudited)	10
	Condensed Consolidated Statements of Cash Flows (Unaudited)	11
	Notes to Condensed Consolidated Financial Statements of Apartment Investment and Management Company and Aimco OP L.P. (Unaudited)	12
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	24
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
ITEM 4.	CONTROLS AND PROCEDURES	36
	PART II. OTHER INFORMATION
ITEM 1A.	RISK FACTORS	37
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	37
ITEM 6.	EXHIBITS	38
Signatures		39

 

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PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

		March 31, 2023				December 31, 2022
ASSETS
Buildings and improvements		$	1,391,963			$	1,322,381
Land			640,892				641,102
Total real estate			2,032,855				1,963,483
Accumulated depreciation			(545,604	)			(530,722	)
Net real estate			1,487,251				1,432,761
Cash and cash equivalents			166,149				206,460
Restricted cash			22,485				23,306
Mezzanine investment			158,430				158,558
Interest rate options			60,508				62,387
Unconsolidated real estate partnerships			16,470				15,789
Notes receivable			39,363				39,014
Right-of-use lease assets - finance leases			110,625				110,269
Other assets, net			127,894				132,679
Total assets		$	2,189,175			$	2,181,223
LIABILITIES AND EQUITY
Non-recourse property debt, net		$	929,291			$	929,501
Construction loans, net			155,691				118,698
Total indebtedness			1,084,982				1,048,199
Deferred tax liabilities			114,883				119,615
Lease liabilities - finance leases			116,212				114,625
Accrued liabilities and other			97,220				106,600
Total liabilities			1,413,297				1,389,039
Redeemable noncontrolling interests in consolidated real estate partnerships			167,129				166,826
Commitments and contingencies (Note 3)
Equity (510,587,500 shares authorized at both March 31, 2023 and December 31, 2022):
Common Stock, $0.01 par value, 144,718,453 and 146,524,941 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively			1,448				1,466
Additional paid-in capital			489,304				496,482
Retained earnings			41,087				49,904
Total Aimco equity			531,839				547,852
Noncontrolling interests in consolidated real estate partnerships			48,321				48,294
Common noncontrolling interests in Aimco Operating Partnership			28,589				29,212
Total equity			608,749				625,358
Total liabilities and equity		$	2,189,175			$	2,181,223

 

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

		Three Months Ended March 31,
		2023				2022
REVENUES
Rental and other property revenues		$	44,268			$	49,994
OPERATING EXPENSES
Property operating expenses			17,504				19,221
Depreciation and amortization			16,271				23,118
General and administrative expenses			8,403				9,472
Total operating expenses			42,178				51,811
Interest income			2,058				555
Interest expense			(9,725	)			(14,601	)
Mezzanine investment income (loss), net			(128	)			8,237
Realized and unrealized gains (losses) on interest rate options			(1,057	)			18,778
Realized and unrealized gains (losses) on equity investments			137				(4,332	)
Income from unconsolidated real estate partnerships			174				256
Other income (expense), net			(3,498	)			(1,020	)
Income (loss) before income tax			(9,949	)			6,056
Income tax benefit (expense)			4,196				4,056
Net income (loss)			(5,753	)			10,112
Net (income) loss attributable to redeemable noncontrolling    interests in consolidated real estate partnerships			(3,274	)			(1,470	)
Net (income) loss attributable to noncontrolling interests    in consolidated real estate partnerships			(264	)			2
Net (income) loss attributable to common noncontrolling    interests in Aimco Operating Partnership			474				(435	)
Net income (loss) attributable to Aimco		$	(8,817	)		$	8,209
Net income (loss) attributable to Aimco per common    share – basic (Note 4)		$	(0.06	)		$	0.05
Net income (loss) attributable to Aimco per common    share – diluted (Note 4)		$	(0.06	)		$	0.05
Weighted-average common shares outstanding – basic			145,827				149,790
Weighted-average common shares outstanding – diluted			145,827				150,348

 

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended March 31, 2023 and 2022

(In thousands, except per share data)

(Unaudited)

		Common Stock
		Shares Issued				Amount				Additional Paid- in Capital				Retained Earnings (Accumulated Deficit)				Total Aimco Equity				Noncontrolling Interests in Consolidated Real Estate Partnerships				Common Noncontrolling Interests in Aimco Operating Partnership				Total Equity
Balances at December 31, 2021			149,818			$	1,498			$	521,842			$	(22,775	)		$	500,565			$	35,213			$	26,455			$	562,233
Net income (loss)			—				—				—				8,209				8,209				(2	)			435				8,642
Redemption of OP Units			23				—				954				—				954				—				(1,087	)			(133	)
Share-based compensation expense			—				—				1,363				—				1,363				—				1,066				2,429
Contributions from noncontrolling interests			—				—				—				—				—				9,718				—				9,718
Distributions to noncontrolling interests			—				—				—				—				—				(295	)			—				(295	)
Redemption of redeemable noncontrolling interests in consolidated real estate partnerships			—				—				(183	)			—				(183	)			—				—				(183	)
Common stock repurchased			(202	)			(2	)			(1,315	)			—				(1,317	)			—				—				(1,317	)
Other common stock issuances			106				1				851				—				852				—				—				852
Other, net			(55	)			—				(57	)			(5	)			(62	)			(5	)			106				39
Balances at March 31, 2022			149,690			$	1,497			$	523,455			$	(14,571	)		$	510,381			$	44,629			$	26,975			$	581,985
Balances at December 31, 2022			146,525			$	1,466			$	496,482			$	49,904			$	547,852			$	48,294			$	29,212			$	625,358
Net income (loss)			—				—				—				(8,817	)			(8,817	)			264				(474	)			(9,027	)
Redemption of OP Units			—				—				4,293				—				4,293				—				(4,547	)			(254	)
Share-based compensation expense			—				—				1,696				—				1,696				—				3,126				4,822
Contributions from noncontrolling interests			—				—				—				—				—				50				—				50
Distributions to noncontrolling interests			—				—				—				—				—				(287	)			—				(287	)
Common stock repurchased			(2,019	)			(20	)			(14,701	)			—				(14,721	)			—				—				(14,721	)
Other common stock issuances			247				2				1,538				—				1,540				—				1,272				2,812
Other, net			(35	)			—				(4	)			—				(4	)			—				—				(4	)
Balances at March 31, 2023			144,718			$	1,448			$	489,304			$	41,087			$	531,839			$	48,321			$	28,589			$	608,749

 

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

	Three Months Ended March 31,
	2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(5,753	)		$	10,112
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		16,271				23,118
Mezzanine investment (income) loss, net		128				(8,237	)
Realized and unrealized (gains) losses on interest rate options		1,057				(18,778	)
Realized and unrealized (gains) losses on equity investments		(137	)			4,332
Income from unconsolidated real estate partnerships		(174	)			(256	)
Income tax expense (benefit)		(4,196	)			(4,056	)
Amortization of debt issuance costs and other		808				814
Share-based compensation		4,519				2,667
Changes in operating assets and operating liabilities:
Other assets, net		2,238				2,420
Accrued liabilities and other		(9,162	)			(5,625	)
Total adjustments		11,352				(3,601	)
Net cash provided by operating activities		5,599				6,511
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate		—				(47,492	)
Capital expenditures (1)		(64,814	)			(49,656	)
Investment in IQHQ		—				(14,227	)
Other investing activities		1,580				(73	)
Net cash used in investing activities		(63,234	)			(111,448	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt		—				40,000
Proceeds from construction loans		35,491				15,625
Principal repayments on non-recourse property debt		(779	)			(2,101	)
Payments on finance leases		(796	)			(24,516	)
Common stock repurchased		(14,522	)			(1,317	)
Distributions to redeemable noncontrolling interests		(3,095	)			—
Contributions from noncontrolling interests		50				9,718
Distributions to noncontrolling interests		(287	)			—
Contributions from redeemable noncontrolling interests		124				6,879
Redemption of OP units		(254	)			—
Redemption of redeemable noncontrolling interests		—				(5,094	)
Other financing activities		571				(1,216	)
Net cash provided by (used in) financing activities		16,503				37,978
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(41,132	)			(66,959	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD		229,766				244,582
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	188,634			$	177,623

(1) Accrued capital expenditures were $43.8 million and $40.4 million as of March 31, 2023 and 2022, respectively.

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

		March 31, 2023				December 31, 2022
ASSETS
Buildings and improvements		$	1,391,963			$	1,322,381
Land			640,892				641,102
Total real estate			2,032,855				1,963,483
Accumulated depreciation			(545,604	)			(530,722	)
Net real estate			1,487,251				1,432,761
Cash and cash equivalents			166,149				206,460
Restricted cash			22,485				23,306
Mezzanine investment			158,430				158,558
Interest rate options			60,508				62,387
Unconsolidated real estate partnerships			16,470				15,789
Notes receivable			39,363				39,014
Right-of-use lease assets - finance leases			110,625				110,269
Other assets, net			127,894				132,679
Total assets		$	2,189,175			$	2,181,223
LIABILITIES AND EQUITY
Non-recourse property debt, net		$	929,291			$	929,501
Construction loans, net			155,691				118,698
Total indebtedness			1,084,982				1,048,199
Deferred tax liabilities			114,883				119,615
Lease liabilities - finance leases			116,212				114,625
Accrued liabilities and other			97,220				106,600
Total liabilities			1,413,297				1,389,039
Redeemable noncontrolling interests in consolidated real estate partnerships			167,129				166,826
Commitments and contingencies (Note 3)
Partners’ capital:
General Partner and Special Limited Partner			531,839				547,852
Limited Partners			28,589				29,212
Partners’ capital attributable to Aimco Operating Partnership			560,428				577,064
Noncontrolling interests in consolidated real estate partnerships			48,321				48,294
Total partners’ capital			608,749				625,358
Total liabilities and partners’ capital		$	2,189,175			$	2,181,223

 

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

 

		Three Months Ended March 31,
		2023				2022
REVENUES
Rental and other property revenues		$	44,268			$	49,994
OPERATING EXPENSES
Property operating expenses			17,504				19,221
Depreciation and amortization			16,271				23,118
General and administrative expenses			8,403				9,472
Total operating expenses			42,178				51,811
Interest income			2,058				555
Interest expense			(9,725	)			(14,601	)
Mezzanine investment income (loss), net			(128	)			8,237
Realized and unrealized gains (losses) on interest rate options			(1,057	)			18,778
Realized and unrealized gains (losses) on equity investments			137				(4,332	)
Income from unconsolidated real estate partnerships			174				256
Other income (expense), net			(3,498	)			(1,020	)
Income (loss) before income tax			(9,949	)			6,056
Income tax benefit (expense)			4,196				4,056
Net income (loss)			(5,753	)			10,112
Net (income) loss attributable to redeemable noncontrolling    interests in consolidated real estate partnerships			(3,274	)			(1,470	)
Net (income) loss attributable to noncontrolling interests    in consolidated real estate partnerships			(264	)			2
Net income (loss) attributable to Aimco Operating      Partnership		$	(9,291	)		$	8,644
Net income (loss) attributable to Aimco Operating      Partnership per common unit – basic (Note 4)		$	(0.06	)		$	0.05
Net income (loss) attributable to Aimco Operating      Partnership per common unit – diluted (Note 4)		$	(0.06	)		$	0.05
Weighted-average common units outstanding – basic			153,631				157,718
Weighted-average common units outstanding – diluted			153,631				158,485

 

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Three Months Ended March 31, 2023 and 2022

(In thousands)

(Unaudited)

 

		General Partner and Special Limited Partner				Limited Partners				Partners’ Capital Attributable to Aimco Operating Partnership				Noncontrolling Interests in Consolidated Real Estate Partnerships				Total Partners’ Capital
Balances at December 31, 2021			500,565				26,455				527,020				35,213				562,233
Net income (loss)			8,209				435				8,644				(2	)			8,642
Redemption of OP Units			954				(1,087	)			(133	)			—				(133	)
Share-based compensation expense			1,363				1,066				2,429				—				2,429
Contributions from noncontrolling interests			—				—				—				9,718				9,718
Distributions to noncontrolling interests			—				—				—				(295	)			(295	)
Redemption of redeemable noncontrolling interests in consolidated real estate partnerships			(183	)			—				(183	)			—				(183	)
Repurchases of OP Units held by Aimco			(1,317	)			—				(1,317	)			—				(1,317	)
Other OP Unit issuances			852				—				852				—				852
Other, net			(62	)			106				44				(5	)			39
Balances at March 31, 2022		$	510,381			$	26,975			$	537,356			$	44,629			$	581,985
Balances at December 31, 2022		$	547,852			$	29,212			$	577,064			$	48,294			$	625,358
Net income (loss)			(8,817	)			(474	)			(9,291	)			264				(9,027	)
Redemption of OP Units			4,293				(4,547	)			(254	)			—				(254	)
Share-based compensation expense			1,696				3,126				4,822				—				4,822
Contributions from noncontrolling interests			—				—				—				50				50
Distributions to noncontrolling interests			—				—				—				(287	)			(287	)
Repurchases of OP Units held by Aimco			(14,721	)			—				(14,721	)			—				(14,721	)
Other OP Unit issuances			1,540				1,272				2,812				—				2,812
Other, net			(4	)			—				(4	)			—				(4	)
Balances at March 31, 2023		$	531,839			$	28,589			$	560,428			$	48,321			$	608,749

 

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

	Three Months Ended March 31,
	2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(5,753	)		$	10,112
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		16,271				23,118
Mezzanine investment (income) loss, net		128				(8,237	)
Realized and unrealized (gains) losses on interest rate options		1,057				(18,778	)
Realized and unrealized (gains) losses on equity investments		(137	)			4,332
Income from unconsolidated real estate partnerships		(174	)			(256	)
Income tax expense (benefit)		(4,196	)			(4,056	)
Amortization of debt issuance costs and other		808				814
Share-based compensation		4,519				2,667
Changes in operating assets and operating liabilities:
Other assets, net		2,238				2,420
Accrued liabilities and other		(9,162	)			(5,625	)
Total adjustments		11,352				(3,601	)
Net cash provided by operating activities		5,599				6,511
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate		—				(47,492	)
Capital expenditures (1)		(64,814	)			(49,656	)
Investment in IQHQ		—				(14,227	)
Other investing activities		1,580				(73	)
Net cash used in investing activities		(63,234	)			(111,448	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt		—				40,000
Proceeds from construction loans		35,491				15,625
Principal repayments on non-recourse property debt		(779	)			(2,101	)
Payments on finance leases		(796	)			(24,516	)
Common stock repurchased		(14,522	)			(1,317	)
Distributions to redeemable noncontrolling interests		(3,095	)			—
Contributions from noncontrolling interests		50				9,718
Distributions to noncontrolling interests		(287	)			—
Contributions from redeemable noncontrolling interests		124				6,879
Redemption of OP units		(254	)			—
Redemption of redeemable noncontrolling interests		—				(5,094	)
Other financing activities		571				(1,216	)
Net cash provided by (used in) financing activities		16,503				37,978
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(41,132	)			(66,959	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD		229,766				244,582
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	188,634			$	177,623

(1) Accrued capital expenditures were $43.8 million and $40.4 million as of March 31, 2023 and 2022, respectively.

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO OP L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(Unaudited)

 

 

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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 on Form 10-Q contains or may contain information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding: adverse economic and geopolitical conditions, including as a result of the COVID-19 pandemic, which negatively impact our operations, including on our ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, developments, and redevelopments; including our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our development and redevelopment 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.

These forward-looking statements are based on management’s judgment as of this date, which is subject to risks and uncertainties that could cause actual results to differ materially from our expectations, including, but not limited to: the effects and duration of the COVID-19 pandemic, geopolitical events which may adversely affect the markets in which our securities trade, and other macroeconomic conditions, including, among other things, supply chain challenges, rising interest rates and inflation, all of which heightens the impact of the other risks and factors described herein, and the impact on entities in which we hold a partial interest, including our indirect interest in the partnership that owns Parkmerced Apartments; real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing and effects of acquisitions, dispositions, developments and redevelopments; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; supply chain disruptions, particularly with respect to raw materials such as lumber, steel, and concrete; financing risks, including the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently owned by us; and such other risks and uncertainties described from time to time in our filings with the Securities and Exchange Commission (“SEC”).

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

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

Readers should also carefully review the section entitled “Risk Factors” described in Item 1A of Apartment Investment and Management Company’s and Aimco OP L.P.’s combined Annual Report on Form 10-K for the year ended December 31, 2022, and subsequent documents we file from time to time with the SEC.

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 OP L.P. (which we refer to as Aimco Operating Partnership) and their consolidated subsidiaries, collectively.

Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States ("GAAP"). These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading.

 

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Executive Overview

Our mission is to make real estate investments, primarily focused on the multifamily sector within targeted U.S. markets, where outcomes are enhanced through our human capital and substantial value is created for investors, teammates, and the communities in which we operate.

Our value proposition includes our:

Our primary goal is outsized risk adjusted returns and accelerating growth for our shareholders. We are focused on providing superior total-return performance to shareholders, primarily through capital appreciation driven by accretive investment and active portfolio management over multi-year periods. We plan to reinvest earnings to facilitate growth and, therefore, do not presently intend to pay a regular quarterly cash dividend.

Our financial objectives are to create value and produce superior, project-level, risk-adjusted returns on equity as measured by the investment period Internal Rate of Return (“IRR”) and the project-level Multiple on Invested Capital (“MOIC”). We measure broader performance based on Net Asset Value (“NAV”) growth over time.

Our capital allocation strategy is designed to leverage our investment platform and optimize risk-adjusted returns for our shareholders.

Aimco targets a balanced allocation, which includes investments in “Value Add” and “Opportunistic” multifamily real estate, primarily located in Southeast Florida, the Washington D.C. Metro Area and Colorado's Front Range, plus investment in a geographically diversified portfolio of "Core" and "Core-Plus" apartment communities.

In addition, we currently hold select alternative assets, consisting primarily of indirect, real estate related debt and equity investments. We plan to significantly reduce our allocation to these investments over time.

We have policies in place that support our stated strategy, guide our investment allocations, and manage risk, including to hold at all times a sizeable portion of our net equity in stabilized cash-flowing assets and to require cash or committed credit necessary for completion of development and redevelopment projects prior to their commencement.

 

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Given our stated strategy, it is expected that at any point in time the value-creation process will be ongoing at numerous of our investments. Over time, we expect our enterprise to produce superior returns on equity on a risk-adjusted basis and it is our plan to do so by:

We have corporate headquarters in Denver, Colorado and Washington D.C. Our investment platform is managed by experienced professionals based in three regions, where we will focus our new investment activity: Southeast Florida, the Washington D.C. Metro Area and Colorado's Front Range. By regionalizing this platform, we are able to leverage the in-depth local market knowledge of each regional leader, creating a comparative advantage when sourcing, evaluating, and executing investment opportunities.

Our dedicated team will source and execute development and redevelopment projects, and various other direct investment strategies. Our development and redevelopment portfolio currently includes projects in construction and lease-up. In addition, our team has secured significant, high-quality, future development opportunities, including total potential of more than 14 million square feet, located in high-growth markets. Generally, we seek direct investment opportunities in locations where barriers to entry are high, target customers can be clearly defined and where we have a comparative advantage over others in the market.

Our entire portfolio of operating properties includes 26 apartment communities (22 consolidated properties and four unconsolidated properties) with average rents in line with local market averages (generally defined as B class). We also own one commercial office building that is part of an assemblage with an adjacent apartment building. The target composition of our stabilized portfolio will continue to include primarily B multifamily assets, spread across a geographically diversified portfolio, with a bias toward long established residential neighborhoods that rank highly in regard to schools, employment fundamentals and state and regional governance. Core-Plus opportunities offer the opportunity for incremental capital investment while maintaining stabilized cashflow to accelerate income growth and improve asset values.

We currently hold select alternative investments, the majority of which originated with Aimco Predecessor and, over time, plan to significantly reduce capital allocated to these investments. Our current allocation to alternative investments includes: our indirect interest in the Mezzanine Investment to the Parkmerced partnership, which owns 3,165 apartment homes and future development rights in San Francisco, California, and our passive equity investments in IQHQ, Inc. ("IQHQ"), a privately-held life sciences real estate development company, and in property technology funds consisting of entities that develop technology related to the real estate industry.

At all times, we will guard our liquidity by maintaining sufficient cash and committed credit.

From time-to-time, we will allocate capital to financial assets designed to mitigate risks elsewhere in the Aimco enterprise. Existing examples include our option to acquire an interest rate swap designed to protect against repricing risk on our maturing liabilities and the use of interest rate caps to provide protection against increases in interest rates on in-place loans.

We expect to capitalize our activities through a combination of non-recourse property debt, construction loans, third-party equity, and the recycling of Aimco equity, including retained earnings. We plan to limit the use of recourse leverage, with a strong preference towards non-recourse property-level debt in order to limit risk to the Aimco enterprise. When warranted, we plan to seek equity capital from joint venture partners to improve our cost of capital, further leverage Aimco equity, reduce exposure to a single investment and, in certain cases, for strategic benefits.

The results from the execution of our business plan during the three months ended March 31, 2023 are further described below.

 

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Financial Results and Recent Highlights

 

Value Add, Opportunistic & Alternative Investments

Development and Redevelopment

We generally seek development and redevelopment opportunities where barriers to entry are high, target customers can be clearly defined, and where we have a comparative advantage over others in the market. We will focus our new investment activity in Southeast Florida, the Washington D.C. Metro Area and Colorado's Front Range. Our Value Add and Opportunistic investments may also target portfolio acquisitions, operational turnarounds, and re-entitlements.

We currently have five active development and redevelopment projects, located in four U.S. markets, in varying phases of construction and lease-up. These projects remain on track, as measured by budget, lease-up metrics, and current market valuations. Additionally, we have a pipeline of future value-add opportunities totaling approximately 14 million gross square feet of development in our target markets of Southeast Florida, the Washington D.C. Metro, and Colorado's Front Range. During the three months ended March 31, 2023, we invested $64.8 million in development and redevelopment activities.

Updates include:

 

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Alternative Investments

Our current alternative investments are primarily those investments originated by Aimco Predecessor and include a Mezzanine Investment to the Parkmerced partnership secured by a stabilized multifamily property with an option to participate in future multifamily development, as well as three passive equity investments. Over time, we plan to significantly reduce capital allocated to these investments.

Updates for our alternative investments include:

Investment Activity

We are focused on development and redevelopment, primarily funded through construction loans and joint venture equity.

Updates include:

 

Operating Property Results

We own a diversified portfolio of stabilized apartment communities located in eight major U.S. markets with average rents in line with local market averages. We also own a commercial office building that is part of an assemblage with an adjacent apartment building.

Highlights for the three months ended March 31, 2023 include:

 

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Balance Sheet and Financing Activity

We are highly focused on maintaining a strong balance sheet, including having at all times ample liquidity. As of March 31, 2023, we had access to $338.6 million in liquidity, including $166.1 million of cash on hand, $22.5 million of restricted cash, and the capacity to borrow up to $150.0 million on our revolving credit facility. Refer to the Liquidity and Capital Resources section for additional information regarding our leverage.

Financial Results of Operations

We have three segments: (i) Development and Redevelopment, (ii) Operating, and (iii) Other.

Our Development and Redevelopment segment includes properties that are under construction or have not achieved stabilization, as well as land assemblages that are being held for future development. Our Operating segment includes 21 residential apartment communities that have achieved stabilized levels of operations as of January 1, 2022 and maintained it throughout the current year and comparable period. We aggregate all our apartment communities that have reached stabilization into our Operating segment. Our Other segment consists of properties currently owned that are not included in our Development and Redevelopment or Operating segments.

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.

Results of Operations for the three months ended March 31, 2023, compared to the same period in 2022

Net income attributable to Aimco common stockholders decreased by $17.0 million for the three months ended March 31, 2023, compared to the same period in 2022, as described more fully below.

Property Results

As of March 31, 2023, our Development and Redevelopment segment included 12 properties, five of which were properties that were under construction, while the remaining were land held for development. Our Operating segment included 21 communities with 5,600 apartment homes, and our Other segment included 1001 Brickell Bay Drive, our only office building and St. George Villas. During the three months ended March 31, 2023, we reclassified one residential apartment community from the Other segment to the Operating segment because it reached stabilization. Prior period segment information has been recast based upon our current segment population, and is consistent with how our CODM evaluates the business. The recast conforms with our reportable segment classification as of March 31, 2023.

We use proportionate property net operating income to assess the operating performance of our segments. Proportionate property net operating income is defined as our share of rental and other property revenues, less direct property operating expenses, but

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

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Proportionate Property Net Operating Income

The results of our segments for the three months ended March 31, 2023 and 2022, as presented below, are based on segment classifications as of March 31, 2023:

	Three Months Ended March 31,
(in thousands)	2023				2022				$ Change				% Change
Rental and other property revenues, before utility reimbursements:
Development and Redevelopment	$	2,201			$	48			$	2,153				100.0	%
Operating		36,672				32,930				3,742				11.4	%
Other		3,694				4,354				(660	)			(15.2	%)
Total		42,567				37,332				5,235				14.0	%
Property operating expenses, net of utility reimbursements:
Development and Redevelopment		2,025				209				1,816				100.0	%
Operating		11,186				10,396				790				7.6	%
Other		1,192				1,439				(247	)			(17.2	%)
Total		14,403				12,044				2,359				19.6	%
Proportionate property net operating income:
Development and Redevelopment		176				(161	)			337				(100.0	%)
Operating		25,486				22,534				2,952				13.1	%
Other		2,502				2,915				(413	)			(14.2	%)
Total	$	28,164			$	25,288			$	2,876				11.4	%

For the three months ended March 31, 2023, compared to the same period in 2022:

Non-Segment Real Estate Operations

Operating income amounts not attributed to our segments include property management costs, casualty losses, and, if applicable, 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.

Depreciation and Amortization

For the three months ended March 31, 2023, compared to the same period in 2022, Depreciation and amortization decreased by $6.8 million, or 29.6%, due primarily to the disposition of three properties and the termination of leases of four properties and related relinquishment of the associated leasehold improvements during the year ended December 31, 2022.

General and Administrative Expenses

For the three months ended March 31, 2023, compared to the same period in 2022, General and administrative expenses decreased by $1.1 million, or 11.3%, due primarily to a decrease in expenses for consulting services per the Separation Agreement with AIR, which concluded at December 31, 2022.

Interest Income

For the three months ended March 31, 2023, compared to the same period in 2022, interest income increased by $1.5 million, or 100%, due primarily to interest earned on invested cash.

Interest Expense

For the three months ended March 31, 2023, compared to the same period in 2022, interest expense decreased by $4.9 million, or 33.4%, due primarily to a decrease related to the prepayment of the notes payable due to AIR, partially offset by an increase related to the refinancing of certain property debt during the year ended December 31, 2022.

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Mezzanine Investment Income (Loss), Net

For the three months ended March 31, 2023, we recognized $0.1 million of loss in connection with the Mezzanine Investment, compared to $8.2 million of income for the three months ended March 31, 2022, respectively. During the year ended December 31, 2022, we recorded a non-cash impairment and as a result, we have ceased recognition of income on the Mezzanine Investment.

Realized and Unrealized Gains (Losses) on Interest Rate Options

We are required to adjust our interest rate options to fair value on a quarterly basis. As a result of the mark-to-market adjustments, we recorded unrealized losses of $1.9 million and unrealized gains of $18.8 million for the three months ended March 31, 2023 and 2022, respectively. In addition, we realized gains of $0.8 million for the three months ended March 31, 2023.

Realized and Unrealized Gains (Losses) on Equity Investments

We measure our investment in stock based on its market price at period end and our investments in property technology funds at NAV as a practical expedient. As a result of changes in the values of these investments, we recorded unrealized gains of $0.1 million for the three months ended March 31, 2023, compared to unrealized losses of $4.3 million for the three months ended March 31, 2022.

Other Income (Expense), Net

Other income (expense), net, includes costs associated with our risk management activities, partnership administration expenses, fee income, and certain non-recurring items. For the three months ended March 31, 2023, compared to the same period in 2022, other expenses, net increased by $2.5 million, or 100.0%, primarily due to the incremental expense associated with pre-existing long-term incentive partnership units recorded upon the resignation of one of our board members.

Income Tax Benefit (Expense)

Certain aspects of our operations, including our development and redevelopment activities, are conducted through taxable REIT subsidiaries, or TRS entities. Additionally, our TRS entities hold investments in one of our apartment communities and 1001 Brickell Bay Drive.

Our income tax benefit calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities. Income taxes, as well as changes in valuation allowance and incremental deferred tax items in conjunction with intercompany asset transfers and internal restructurings (if applicable), are included in Income tax benefit (expense) in our Condensed Consolidated Statements of Operations.

Consolidated GAAP income or loss subject to tax consists of pretax income or loss of our taxable entities and gains retained by the REIT. For the three months ended March 31, 2023, we had consolidated net losses subject to tax of $4.9 million, compared to net losses subject to tax of $14.8 million for the same period in 2022.

For the three months ended March 31, 2023, we recognized income tax benefit of $4.2 million, compared to income tax benefit of $4.1 million for the same period in 2022. The change is due primarily to the tax effect of depreciation associated with properties owned by, and activities of, our TRS entities, as well as a reduction to the effective state tax rate expected to apply to the reversal of our existing deferred items.

Critical Accounting Policies and Estimates

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

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 Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2022. 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.

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Non-GAAP Measures

We use EBITDAre and Adjusted EBITDAre in managing our business and in evaluating our financial condition and operating performance. These key financial indicators are non-GAAP measures and are defined and described below. We provide reconciliations of the non-GAAP financial measures to the most comparable financial measure computed in accordance with GAAP.

Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization for Real Estate ("EBITDAre")

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:

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 net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests, and realized and unrealized (gains) losses on interest rate options, which we believe 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. Additionally, we exclude interest income recognized on our Mezzanine Investment that was accrued but not paid.

The reconciliation of net loss to EBITDAre and Adjusted EBITDAre for the three months ended March 31, 2023 and 2022, is as follows (in thousands):

		Three Months Ended March 31,
		2023				2022
Net income (loss)		$	(5,753	)		$	10,112
Adjustments:
Interest expense			9,725				14,601
Income tax (benefit) expense			(4,196	)			(4,056	)
Depreciation and amortization			16,271				23,118
Adjustment related to EBITDAre of unconsolidated partnerships			223				257
EBITDAre		$	16,270			$	44,032
Net (income) loss attributable to redeemable noncontrolling    interests in consolidated real estate partnerships			(3,274	)			(1,470	)
Net (income) loss attributable to noncontrolling interests    in consolidated real estate partnerships			(264	)			2
EBITDAre adjustments attributable to noncontrolling interests			(16	)			(11	)
Mezzanine investment (income) loss, net			128				(8,237	)
Realized and unrealized (gains) losses on interest rate options			1,057				(18,778	)
Adjusted EBITDAre		$	13,901			$	15,538

 

 

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Liquidity and Capital Resources

Liquidity

Liquidity is the ability to meet present and future financial obligations. Our primary sources of liquidity are cash flows from operations and borrowing capacity under our loan agreements.

As of March 31, 2023, our available liquidity was $338.6 million, which consisted of:

We have commitments for approximately $133.2 million and remaining planned spend of $142.7 million on development and redevelopment projects, with $268.4 million undrawn on our construction loans as of March 31, 2023. The initial allocation to our joint ventures have remaining unfunded commitments of $9.5 million. We also have unfunded commitments in the amount of $2.3 million related to four investments in entities that develop technology related to the real estate industry. Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, and future investments. Additionally, our third-party property managers may enter into commitments on our behalf to purchase goods and services in connection with the operation of our apartment communities and our office building. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to historical levels.

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 the next twelve months.

In the event that our cash and cash equivalents, revolving secured credit facility, and cash provided by operating activities are not sufficient to cover our liquidity needs, we have the means to generate additional liquidity, such as from additional property financing activity and proceeds from apartment community sales. We expect to meet our long-term liquidity requirements, including debt maturities, development and redevelopment spending, and future investment activity, primarily through property financing activity, cash generated from operations, and the recycling of our equity. Our revolving secured credit facility matures in December 2023, prior to consideration of its two one-year extension options.

Leverage and Capital Resources

The availability and cost 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. Any adverse changes in the lending environment could negatively affect our liquidity. We have taken steps to mitigate a portion of our short-term refunding risk. However, if property or development financing options become unavailable, we may consider alternative sources of liquidity, such as reductions in capital spending or apartment community dispositions.

As of March 31, 2023, approximately 83% of our outstanding non-recourse property debt had a fixed interest rate and approximately 17% had a variable interest rate. In addition, the weighted-average rate on our non-recourse debt was 5.3%, and the average remaining term to maturity was 6.9 years. At March 31, 2023, substantially all of our outstanding non-recourse property debt was either fixed or hedged. Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates.

While our primary source of leverage is property-level debt and construction loans, we also have a secured $150.0 million credit facility with a syndicate of financial institutions. As of March 31, 2023, we had no outstanding borrowings under our revolving secured credit facility. Under our revolving secured credit facility, we have agreed to maintain a fixed charge coverage ratio of 1.25X minimum tangible net worth of $625.0 million, and maximum leverage of 60.0% as defined in the credit agreement. We are currently in compliance and expect to remain in compliance with these covenants during the next twelve months.

 

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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 three months ended March 31, 2023, net cash provided by operating activities was $5.6 million. Our operating cash flow is primarily affected by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment communities and general and administrative costs. Cash provided by operating activities for the three months ended March 31, 2023, decreased by $0.9 million compared to the same period ended in 2022, due primarily to lower net operating income associated with apartment communities sold in the latter part of 2022 and timing of balance sheet position changes, partially offset by decreased interest payments.

Investing Activities

For the three months ended March 31, 2023, net cash used in investing activities of $63.2 million consisted primarily of capital expenditures of $64.8 million. Net cash used in investing activities for the three months ended March 31, 2023, decreased by $48.2 million compared to the same period ended in 2022, due primarily to decreased real estate acquisitions and funding of our passive equity investment in IQHQ, partially offset by increased capital expenditures. We have generally funded capital additions with available cash and cash provided by operating activities and construction loans.

Financing Activities

For the three months ended March 31, 2023, net cash provided by financing activities of $16.5 million consisted primarily of proceeds from construction loans, partially offset by repurchases of Common Stock and distributions to noncontrolling interests. Net cash provided by financing activities for the three months ended March 31, 2023, decreased by $21.5 million compared to the same period ended in 2022, due primarily to decreased proceeds from non-recourse property debt and increased common stock repurchased, as well as changes in activity with noncontrolling interests, partially offset by decreased payments on finance leases and increased proceeds from construction loans.

Future Capital Needs

We expect to fund any future acquisitions, development and redevelopment, and other capital spending principally with operating cash flows, short-term borrowings, and debt and equity financing. 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 the next twelve months.

 

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our chief market risks are refunding risk, that is the availability of property debt or other cash sources to refund maturing property debt, and repricing risk, that is the possibility of increases in base interest rates and credit risk spreads. We primarily use long-dated, fixed-rate, non-recourse property debt on stabilized properties in order to avoid the refunding and repricing risks of short-term borrowings.

We use working capital primarily to fund short-term uses. We make limited use of derivative financial instruments and we do not use them for trading or other speculative purposes.

As of March 31, 2023, on a consolidated basis, we had approximately $164.2 million of variable-rate property-level debt outstanding and $144.7 million of variable rate construction loans. The impact of rising interest rates is mitigated by our use of interest rate caps, which as of March 31, 2023, provided protection for our variable interest rate debt. Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates. We estimate that an increase in our variable rate indices of 100 basis points with constant credit risk spreads, would increase interest expense by $0.5 million on an annual basis. We estimate that a decrease in our variable rate indices of 100 basis points with constant credit risk spreads, would reduce interest expense by $0.5 million on an annual basis.

As of March 31, 2023, we held interest rate swaps and caps with $2.0 billion notional value. These instruments were acquired for $17.7 million and at March 31, 2023 were valued at $60.4 million.

As of March 31, 2023, we had $188.6 million in cash and cash equivalents and restricted cash, a portion of which earns interest at variable rates.

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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 were 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 quarter ended March 31, 2023, that has materially affected, or is reasonably likely to materially affect, Aimco’s internal control over financial reporting.

Aimco Operating Partnership

Disclosure Controls and Procedures

Aimco Operating Partnership’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of both Aimco and Aimco OP GP, LLC, Aimco Operating Partnership’s general partner, has evaluated the effectiveness of 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 Financial Officer of Aimco OP GP, LLC have concluded that, as of the end of such period, Aimco Operating Partnership’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no change in 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 quarter ended March 31, 2023, that has materially affected, or is reasonably likely to materially affect, 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, there have been no material changes from the risk factors in Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2022. We may disclose changes to such factors or disclose additional factors from time to time in our filings with the SEC.

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

Aimco

Unregistered Sales of Equity Securities

From time to time, we may issue shares of our 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 OP Unit. We may also issue shares of our Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended March 31, 2023, no shares of Common Stock were issued in exchange for OP Units in such transactions.

Repurchases of Equity Securities

Our Board has, from time to time, authorized us to repurchase shares of our outstanding Common Stock. As of March 31, 2023, we were authorized to repurchase up to 10.3 million shares of our outstanding Common Stock, subject to certain customary limitations, which may be made from time to time in the open market or in privately negotiated transactions. This authorization has no expiration date.

During the three months ended March 31, 2023, we repurchased 2,018,689 shares at a weighted-average price of $7.27 per share.

Aimco Operating Partnership

There is no public market for OP Units, and we have no intention of listing OP Units on any securities exchange. In addition, Aimco Operating Partnership’s Partnership Agreement restricts the transferability of OP Units.

On May 3, 2023, there were 160,671,571 OP Units and equivalents outstanding (of which 148,616,217 were held by us), that were held by 2,099 unitholders of record.

Unregistered Sales of Equity Securities

Aimco Operating Partnership did not issue any unregistered OP Units during the three months ended March 31, 2023.

Repurchases of Equity Securities

Aimco Operating Partnership’s Partnership Agreement generally provides that after holding OP Units for one year, limited partners other than Aimco have the right to redeem their OP Units for cash or, at our election, shares of our Common Stock on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended March 31, 2023, no OP Units were redeemed in exchange for shares of Common Stock, and approximately 34,000 OP Units were redeemed in exchange for cash at an average price per unit of $7.42.

Dividend and Distribution Payments

As a REIT, Aimco is required to distribute annually to holders of shares of its Common Stock at least 90.0% 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. Aimco’s Board determines and declares Aimco's dividends. In making a dividend determination, Aimco’s Board considers a variety of factors, including REIT distribution requirements; current market conditions; liquidity needs; and other uses of cash, such as deleveraging and accretive investment activities.

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ITEM 6. EXHIBITS

The following exhibits are filed with this report:

EXHIBIT NO.		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 April 27, 2023, is incorporated herein by this reference).
3.3		Articles Supplementary of Apartment Investment Management Company (Exhibit 3.1 to Aimco’s Current Report on Form 8-K, dated December 15, 2020, is incorporated herein by this reference)
10.1		Amended and Restated Agreement of Limited Partnership of Aimco OP L.P., effective as of December 14, 2020 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 15, 2020, 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 – 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 – 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 – Aimco Operating Partnership

 

EXHIBIT NO.		DESCRIPTION
101		The following materials from Aimco’s and Aimco Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of equity and partners’ capital; (iv) condensed consolidated statements of cash flows; and (v) notes to condensed consolidated financial statements.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

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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/ H. Lynn C. Stanfield
		H. Lynn C. Stanfield
		Executive Vice President and Chief Financial Officer
	By:	/s/ Kellie E. Dreyer
		Kellie E. Dreyer
		Senior Vice President and Chief Accounting Officer

 

	AIMCO OP L.P.
	By:	Aimco OP GP, LLC, its General Partner
	By:	/s/ H. Lynn C. Stanfield
		H. Lynn C. Stanfield
		Executive Vice President and Chief Financial Officer
	By:	/s/ Kellie E. Dreyer
		Kellie E. Dreyer
		Senior Vice President and Chief Accounting Officer

 

Date: May 4, 2023

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