Published: 2022-08-04 00:00:00 ET

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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, 2022

OR

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

For the transition period from to

Commission File Number: 1-13232 (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 outstanding as of August 2, 2022: 152,148,729

 

 

 

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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 business into two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp. (“AIR”). The separation was effected by way of a pro rata distribution, in which stockholders of Aimco received one share of Class A common stock of AIR for every one share of Class A common stock of Aimco held as of the close of business on December 5, 2020. Apartment Income REIT, L.P. (“AIR Operating Partnership”), formerly known as “Aimco Properties, L.P.” until July 7, 2021, also completed a pro rata distribution of all of the outstanding common limited partnership units of Aimco OP L.P. (“Aimco Operating Partnership” and such units, “OP Units”) to holders of AIR Operating Partnership common limited partnership units and AIR Operating Partnership Class I High Performance partnership units as of the close of business on December 5, 2020. The transactions described in this paragraph are collectively referred to as the “Separation” and are governed by the terms of the Separation and Distribution Agreement (the “Separation Agreement”).

Aimco, through a wholly owned subsidiary, is the general partner and directly is the special limited partner of Aimco Operating Partnership. As of June 30, 2022, Aimco owned 92.6% of the legal interest in the common partnership units of Aimco Operating Partnership and 95.0% of the economic interest in Aimco Operating Partnership. The remaining 7.4% 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 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 June 30, 2022, 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.

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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, which we refer to as OP Units, 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.

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)	8
	Aimco OP L.P.:
	Condensed Consolidated Balance Sheets (Unaudited)	10
	Condensed Consolidated Statements of Operations (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 OP L.P. (Unaudited)	16
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4.	CONTROLS AND PROCEDURES	44
	PART II. OTHER INFORMATION
ITEM 1A.	RISK FACTORS	45
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45
ITEM 6.	EXHIBITS	46
Signatures		48

 

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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)

 

		June 30, 2022				December 31, 2021
ASSETS
Buildings and improvements		$	1,269,624			$	1,257,214
Land			601,757				534,285
Total real estate			1,871,381				1,791,499
Accumulated depreciation			(519,868	)			(561,115	)
Net real estate			1,351,513				1,230,384
Cash and cash equivalents			81,799				233,374
Restricted cash			12,510				11,208
Mezzanine investment			354,365				337,797
Interest rate options			51,286				25,657
Right-of-use lease assets			130,532				429,768
Receivable from lease termination			186,318				—
Other assets, net			251,089				165,913
Total assets		$	2,419,412			$	2,434,101
LIABILITIES AND EQUITY
Non-recourse property debt, net		$	801,434			$	483,137
Construction loans, net			199,715				163,570
Notes payable to AIR			147,039				534,127
Total indebtedness			1,148,188				1,180,834
Deferred tax liabilities			136,950				124,747
Lease liabilities			123,785				435,093
Accrued liabilities and other			133,653				97,400
Total liabilities			1,542,576				1,838,074
Redeemable noncontrolling interests in consolidated real estate partnerships			51,814				33,794
Commitments and contingencies (Note 4)
Equity:
Common Stock, $0.01 par value, 510,587,500 shares authorized at both June 30, 2022 and December 31, 2021, and 149,096,590 and 149,818,021 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively			1,492				1,498
Additional paid-in capital			515,065				521,842
Retained Earnings (accumulated deficit)			224,567				(22,775	)
Total Aimco equity			741,124				500,565
Noncontrolling interests in consolidated real estate partnerships			44,665				35,213
Common noncontrolling interests in Aimco Operating Partnership			39,233				26,455
Total equity			825,022				562,233
Total liabilities and equity		$	2,419,412			$	2,434,101

 

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 June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
REVENUES
Rental and other property revenues		$	50,697			$	40,418			$	100,691			$	80,222
OPERATING EXPENSES
Property operating expenses			19,708				16,403				38,929				33,345
Depreciation and amortization			34,863				20,639				57,981				41,356
General and administrative expenses			8,961				7,383				18,433				13,694
Total operating expenses			63,532				44,425				115,343				88,395
Interest expense			(41,546	)			(12,638	)			(56,147	)			(25,315	)
Mezzanine investment income, net			8,330				7,551				16,567				15,018
Realized and unrealized gains (losses) on interest rate options			20,017				(16,970	)			38,795				8,377
Realized and unrealized gains (losses) on equity investments			26,630				875				22,297				875
Gains on dispositions of real estate			94,598				—				94,465				—
Lease modification income			205,387				—				205,387				—
Other (expense) income, net			(1,413	)			2,043				(1,488	)			2,406
Income (expense) before income tax benefit			299,168				(23,146	)			305,224				(6,812	)
Income tax (expense) benefit			(45,957	)			2,760				(41,901	)			7,860
Net income (loss)			253,211				(20,386	)			263,323				1,048
Net (income) loss attributable to redeemable noncontrolling    interests in consolidated real estate partnerships			(1,069	)			(66	)			(2,539	)			86
Net (income) loss attributable to noncontrolling interests    in consolidated real estate partnerships			(346	)			(275	)			(344	)			(566	)
Net (income) loss attributable to common noncontrolling    interests in Aimco Operating Partnership			(12,659	)			1,037				(13,094	)			(44	)
Net income (loss) attributable to Aimco		$	239,137			$	(19,690	)		$	247,346			$	524
Net income (loss) attributable to Aimco per common    share – basic (Note 6)		$	1.58			$	(0.13	)		$	1.63			$	0.00
Net income (loss) attributable to Aimco per common    share – diluted (Note 6)		$	1.57			$	(0.13	)		$	1.62			$	0.00
Weighted-average common shares outstanding – basic			149,600				149,166				149,694				149,082
Weighted-average common shares outstanding – diluted			150,423				149,166				150,660				149,442

 

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 June 30, 2022 and 2021

(In thousands)

(Unaudited)

 

		Common Stock																				Noncontrolling Interests in				Common Noncontrolling Interests in
		Shares Issued				Amount				Additional Paid- in Capital				Retained Earnings (accumulated Deficit)				Total Aimco Equity				Consolidated Real Estate Partnerships				Aimco Operating Partnership				Total Equity
Balances at March 31, 2021			149,208			$	1,491			$	516,051			$	3,375			$	520,917			$	31,884			$	28,551			$	581,352
Net loss attributable to Aimco			—				—				—				(19,690	)			(19,690	)			—				—				(19,690	)
Net income attributable to noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				275				—				275
Net loss attributable to common noncontrolling interests in Aimco Operating Partnership			—				—				—				—				—				—				(1,037	)			(1,037	)
Redemption of OP Units			440				4				909				—				913				—				(917	)			(4	)
Share-based compensation expense			—				—				580				—				580				—				58				638
Distribution to noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				(295	)			—				(295	)
Other, net			15				1				—				—				1				(17	)			(1	)			(17	)
Balances at June 30, 2021			149,663			$	1,496			$	517,540			$	(16,315	)		$	502,721			$	31,847			$	26,654			$	561,222
Balances at March 31, 2022			149,690			$	1,497			$	523,455			$	(14,571	)		$	510,381			$	44,629			$	26,975			$	581,985
Net income attributable to Aimco			—				—				—				239,137				239,137				—				—				239,137
Net income attributable to noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				346				—				346
Net income attributable to common noncontrolling interests in Aimco Operating Partnership			—				—								—				—				—				12,659				12,659
Redemption of OP Units			16				—				581								581				—				(591	)			(10	)
Share-based compensation expense			—				—				1,417				—				1,417				—				191				1,608
Distribution to noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				(310	)			—				(310	)
Purchase of noncontrolling interests in consolidated real estate partnerships			—				—				(7,244	)			—				(7,244	)			—				—				(7,244	)
Common stock repurchased			(540	)			(5	)			(3,097	)			—				(3,102	)			—				—				(3,102	)
Other, net			(69	)			—				(47	)			1				(46	)			—				(1	)			(47	)
Balances at June 30, 2022			149,097			$	1,492			$	515,065			$	224,567			$	741,124			$	44,665			$	39,233			$	825,022

 

 

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, 2022 and 2021

(In thousands)

(Unaudited)

 

		Common Stock																				Noncontrolling Interests in				Common Noncontrolling Interests in
		Shares Issued				Amount				Additional Paid- in Capital				Retained Earnings (accumulated Deficit)				Total Aimco Equity				Consolidated Real Estate Partnerships				Aimco Operating Partnership				Total Equity
Balances at December 31, 2020			149,036			$	1,490			$	515,127			$	(16,839	)		$	499,778			$	31,877			$	27,436			$	559,091
Net income attributable to Aimco			—				—				—				524				524				—				—				524
Net income attributable to noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				566				—				566
Net income attributable to common noncontrolling interests in Aimco Operating Partnership			—				—				—				—				—				—				44				44
Redemption of OP Units			440				4				898				—				902				—				(942	)			(40	)
Share-based compensation expense			—				—				751				—				751				—				116				867
Distribution to noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				(582	)			—				(582	)
Other common stock issuances			232				2				1,069				—				1,071				—				—				1,071
Other, net			(45	)			—				(305	)			—				(305	)			(14	)			—				(319	)
Balances at June 30, 2021			149,663			$	1,496			$	517,540			$	(16,315	)		$	502,721			$	31,847			$	26,654			$	561,222
Balances at December 31, 2021			149,818			$	1,498			$	521,842			$	(22,775	)		$	500,565			$	35,213			$	26,455			$	562,233
Net income attributable to Aimco			—				—				—				247,346				247,346				—				—				247,346
Net income attributable to noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				344				—				344
Net income attributable to common noncontrolling interests in Aimco Operating Partnership			—				—				—				—				—				—				13,094				13,094
Redemption of OP Units			39				—				1,535				—				1,535				—				(1,678	)			(143	)
Share-based compensation expense			—				—				2,780				—				2,780				—				1,257				4,037
Distribution to noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				(605	)			—				(605	)
Contributions from noncontrolling interests in consolidated real estate partnerships			—				—				—				—				—				9,718				—				9,718
Purchase of noncontrolling interests in consolidated real estate partnerships			—				—				(7,244	)			—				(7,244	)			—				—				(7,244	)
Common stock repurchased			(742	)			(7	)			(4,412	)			—				(4,419	)			—				—				(4,419	)
Other Common Stock issuances			106				1				851				—				852				—				—				852
Redemption of redeemable noncontrolling interests in consolidated real estate partnerships			—				—				(183	)			—				(183	)			—				—				(183	)
Other, net			(124	)			—				(104	)			(4	)			(108	)			(5	)			105				(8	)
Balances at June 30, 2022			149,097			$	1,492			$	515,065			$	224,567			$	741,124			$	44,665			$	39,233			$	825,022

 

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)

 

	Six Months Ended June 30,
	2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	263,323			$	1,048
Adjustments to reconcile net income to net cash provided by    operating activities:
Depreciation and amortization		57,981				41,356
Income from unconsolidated real estate partnerships		(300	)			(508	)
Unrealized gains on interest rate options		(30,760	)			(8,377	)
Income tax expense (benefit)		41,901				(7,860	)
Amortization of debt issuance costs and other		1,421				609
Mezzanine investment, net		(16,567	)			(15,018	)
Realized gain on interest rate option		(8,036	)			—
Loss on extinguishment of debt, net		27,482				—
Lease modification income		(205,387	)			—
Gain on equity investment redemption		(5,658	)			—
Gain on disposition of real estate		(94,465	)			—
Share-based compensation		4,513				1,814
Changes in operating assets and operating liabilities:
Other assets, net		(14,437	)			(11,160	)
Net cash received from lease incentive		7,895				—
Accrued liabilities and other		(3,528	)			14,562
Total adjustments		(237,945	)			15,418
Net cash provided by operating activities		25,378				16,466
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate		(100,758	)			(18,215	)
Capital expenditures (1)		(124,813	)			(82,352	)
Proceeds from disposition of real estate		126,769				—
Investment in IQHQ		(14,227	)			—
Investment in unconsolidated real estate partnerships		(12,244	)			—
Other investing activities		(116	)			(1,484	)
Net cash used in investing activities		(125,389	)			(102,051	)

 

 

 

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

(Unaudited)

 

	Six Months Ended June 30,
	2022				2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt		614,720				—
Proceeds from construction loans		33,607				120,123
Payments of deferred loan costs		(6,620	)			(6,178	)
Principal repayments on non-recourse property debt		(283,826	)			(20,331	)
Principal repayments on Notes Payable to AIR		(387,088	)			—
Purchase of interest rate options		(451	)			(5,772	)
Proceeds from interest rate option		13,660				—
Payments on finance leases		(25,366	)			(5,133	)
Payments of prepayment premiums		(21,395	)			—
Common stock repurchased		(4,419	)			—
Redemption of noncontrolling interest in real estate partnership		(7,244	)			—
Distributions to noncontrolling interests in real estate partnerships		(605	)			—
Contributions from noncontrolling interests in consolidated      real estate partnerships		9,718				—
Contributions from redeemable noncontrolling interests in consolidated      real estate partnerships		20,392				—
Redemption of common and preferred OP units		(133	)			—
Redemption of redeemable noncontrolling interests in consolidated      real estate partnerships		(5,094	)			—
Other financing activities		(118	)			(626	)
Net cash provided by (used in) financing activities		(50,262	)			82,083
NET DECREASE IN CASH, CASH EQUIVALENTS,    AND RESTRICTED CASH		(150,273	)			(3,502	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT    BEGINNING OF PERIOD		244,582				298,735
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT    END OF PERIOD	$	94,309			$	295,233

 

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

		June 30, 2022				December 31, 2021
ASSETS
Buildings and improvements		$	1,269,624			$	1,257,214
Land			601,757				534,285
Total real estate			1,871,381				1,791,499
Accumulated depreciation			(519,868	)			(561,115	)
Net real estate			1,351,513				1,230,384
Cash and cash equivalents			81,799				233,374
Restricted cash			12,510				11,208
Mezzanine investment			354,365				337,797
Interest rate options			51,286				25,657
Right-of-use lease assets			130,532				429,768
Receivable from lease termination			186,318				—
Other assets, net			251,089				165,913
Total assets		$	2,419,412			$	2,434,101
LIABILITIES AND EQUITY
Non-recourse property debt, net		$	801,434			$	483,137
Construction loans, net			199,715				163,570
Notes payable to AIR			147,039				534,127
Total indebtedness			1,148,188				1,180,834
Deferred tax liabilities			136,950				124,747
Lease liabilities			123,785				435,093
Accrued liabilities and other			133,653				97,400
Total liabilities			1,542,576				1,838,074
Redeemable noncontrolling interests in consolidated real estate partnerships			51,814				33,794
Commitments and contingencies (Note 4)
Partners’ capital:
General Partner and Special Limited Partner			741,124				500,565
Limited Partners			39,233				26,455
Partners’ capital attributable to Aimco Operating Partnership			780,357				527,020
Noncontrolling interests in consolidated real estate partnerships			44,665				35,213
Total partners’ capital			825,022				562,233
Total liabilities and partners’ capital		$	2,419,412			$	2,434,101

 

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 June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
REVENUES
Rental and other property revenues		$	50,697			$	40,418			$	100,691			$	80,222
OPERATING EXPENSES
Property operating expenses			19,708				16,403				38,929				33,345
Depreciation and amortization			34,863				20,639				57,981				41,356
General and administrative expenses			8,961				7,383				18,433				13,694
Total operating expenses			63,532				44,425				115,343				88,395
Interest expense			(41,546	)			(12,638	)			(56,147	)			(25,315	)
Mezzanine investment income, net			8,330				7,551				16,567				15,018
Realized and unrealized gains (losses) on interest rate options			20,017				(16,970	)			38,795				8,377
Realized and unrealized gains (losses) on equity investments			26,630				875				22,297				875
Gains on dispositions of real estate			94,598				—				94,465				—
Lease modification income			205,387				—				205,387				—
Other (expense) income, net			(1,413	)			2,043				(1,488	)			2,406
Income (loss) before income tax benefit			299,168				(23,146	)			305,224				(6,812	)
Income tax (expense) benefit			(45,957	)			2,760				(41,901	)			7,860
Net income (loss)			253,211				(20,386	)			263,323				1,048
Net (income) loss attributable to redeemable noncontrolling    interests in consolidated real estate partnerships			(1,069	)			(66	)			(2,539	)			86
Net (income) loss attributable to noncontrolling interests    in consolidated real estate partnerships			(346	)			(275	)			(344	)			(566	)
Net income (loss) attributable to Aimco Operating      Partnership		$	251,796			$	(20,727	)		$	260,440			$	568
Net income (loss) attributable to Aimco Operating      Partnership per common unit – basic (Note 6)		$	1.58			$	(0.13	)		$	1.63			$	0.00
Net income (loss) attributable to Aimco Operating      Partnership per common unit – diluted (Note 6)		$	1.57			$	(0.13	)		$	1.62			$	0.00
Weighted-average common units outstanding – basic			157,525				157,134				157,621				157,093
Weighted-average common units outstanding – diluted			158,447				157,134				158,666				157,453

 

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 June 30, 2022 and 2021

(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 March 31, 2021		$	520,917			$	28,551			$	549,468			$	31,884			$	581,352
Net loss attributable to Aimco Operating Partnership			(19,690	)			(1,037	)			(20,727	)			—				(20,727	)
Net income attributable to noncontrolling interests in consolidated real estate partnerships			—				—				—				275				275
Redemption of OP Units			913				(917	)			(4	)			—				(4	)
Share-based compensation expense			580				58				638				—				638
Distribution to noncontrolling interests in consolidated real estate partnerships			—				—				—				(295	)			(295	)
Other, net			1				(1	)			—				(17	)			(17	)
Balances at June 30, 2021		$	502,721			$	26,654			$	529,375			$	31,847			$	561,222
Balances at March 31, 2022		$	510,381			$	26,975			$	537,356			$	44,629			$	581,985
Net income attributable to Aimco Operating Partnership			239,137				12,659				251,796				—				251,796
Net income attributable to noncontrolling interests in consolidated real estate partnerships			—				—				—				346				346
Redemption of OP Units			581				(590	)			(9	)			—				(9	)
Share-based compensation expense			1,417				191				1,608				—				1,608
Distribution to noncontrolling interests in consolidated real estate partnerships			—				—				—				(310	)			(310	)
Purchase of noncontrolling interests in consolidated real estate partnerships			(7,244	)							(7,244	)							(7,244	)
Repurchases of OP Units held by Aimco			(3,102	)			—				(3,102	)			—				(3,102	)
Other, net			(46	)			(2	)			(48	)			—				(48	)
Balances at June 30, 2022		$	741,124			$	39,233			$	780,357			$	44,665			$	825,022

 

 

 

 

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the six months ended June 30, 2022 and 2021

(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, 2020		$	499,778			$	27,436			$	527,214			$	31,877			$	559,091
Net income attributable to Aimco Operating Partnership			524				44				568				—				568
Net income attributable to noncontrolling interests in consolidated real estate partnerships			—				—				—				566				566
Redemption of OP Units			902				(942	)			(40	)			—				(40	)
Other common stock issuances			1,071				—				1,071								1,071
Share-based compensation expense			751				116				867				—				867
Distribution to noncontrolling interests in consolidated real estate partnerships			—				—				—				(582	)			(582	)
Other, net			(305	)			—				(305	)			(14	)			(319	)
Balances at June 30, 2021		$	502,721			$	26,654			$	529,375			$	31,847			$	561,222
Balances at December 31, 2021		$	500,565			$	26,455			$	527,020			$	35,213			$	562,233
Net income attributable to Aimco Operating Partnership			247,346				13,094				260,440				—				260,440
Net income attributable to noncontrolling interests in consolidated real estate partnerships			—				—				—				344				344
Redemption of OP Units			1,534				(1,677	)			(143	)			—				(143	)
Share-based compensation expense			2,780				1,257				4,037				—				4,037
Distribution to noncontrolling interests in consolidated real estate partnerships			—				—				—				(605	)			(605	)
Contributions from noncontrolling interests in consolidated real estate partnerships			—				—				—				9,718				9,718
Purchase of noncontrolling interests in consolidated real estate partnerships			(7,244	)							(7,244	)							(7,244	)
Repurchases of OP Units held by Aimco			(4,419	)			—				(4,419	)			—				(4,419	)
Other OP Unit issuances			852				109				961				—				961
Redemption of redeemable noncontrolling interests in consolidated real estate partnerships			(183	)							(183	)			—				(183	)
Other, net			(107	)			(5	)			(112	)			(5	)			(117	)
Balances at June 30, 2022		$	741,124			$	39,233			$	780,357			$	44,665			$	825,022

 

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

	Six Months Ended June 30,
	2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	263,323			$	1,048
Adjustments to reconcile net income to net cash provided by    operating activities:
Depreciation and amortization		57,981				41,356
Income from unconsolidated real estate partnerships		(300	)			(508	)
Unrealized gains on interest rate options		(30,760	)			(8,377	)
Income tax expense (benefit)		41,901				(7,860	)
Amortization of debt issuance costs and other		1,421				609
Mezzanine investment, net		(16,567	)			(15,018	)
Realized gain on interest rate option		(8,036	)			—
Loss on extinguishment of debt, net		27,482				—
Lease modification income		(205,387	)			—
Gain on equity investment redemption		(5,658	)			—
Gain on disposition of real estate		(94,465	)			—
Share-based compensation		4,513				1,814
Changes in operating assets and operating liabilities:
Other assets, net		(14,437	)			(11,160	)
Net cash received from lease incentive		7,895				—
Accrued liabilities and other		(3,528	)			14,562
Total adjustments		(237,945	)			15,418
Net cash provided by operating activities		25,378				16,466
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate		(100,758	)			(18,215	)
Capital expenditures (1)		(124,813	)			(82,352	)
Proceeds from disposition of real estate		126,769				—
Investment in IQHQ		(14,227	)			—
Investment in unconsolidated real estate partnerships		(12,244	)			—
Other investing activities		(116	)			(1,484	)
Net cash used in investing activities		(125,389	)			(102,051	)

 

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

(Unaudited)

 

	Six Months Ended June 30,
	2022				2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt		614,720				—
Proceeds from construction loans		33,607				120,123
Payments of deferred loan costs		(6,620	)			(6,178	)
Principal repayments on non-recourse property debt		(283,826	)			(20,331	)
Principal repayments on Notes Payable to AIR		(387,088	)			—
Purchase of interest rate options		(451	)			(5,772	)
Proceeds from interest rate option		13,660				—
Payments on finance leases		(25,366	)			(5,133	)
Payments of prepayment premiums		(21,395	)			—
Redemption of OP Units		(4,419	)			—
Redemption of noncontrolling interest in real estate partnership		(7,244	)			—
Distributions to noncontrolling interests in real estate partnerships		(605	)			—
Contributions from noncontrolling interests in consolidated      real estate partnerships		9,718				—
Contributions from redeemable noncontrolling interests in consolidated      real estate partnerships		20,392				—
Redemption of common and preferred OP units		(133	)			—
Redemption of redeemable noncontrolling interests in consolidated      real estate partnerships		(5,094	)			—
Other financing activities		(118	)			(626	)
Net cash provided by (used in) financing activities		(50,262	)			82,083
NET DECREASE IN CASH, CASH EQUIVALENTS,    AND RESTRICTED CASH		(150,273	)			(3,502	)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT    BEGINNING OF PERIOD		244,582				298,735
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT    END OF PERIOD	$	94,309			$	295,233

 

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO OP L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

 

 

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Note 7 — Fair Value Measurements

Recurring Fair Value Measurements

In 2020, we paid an upfront premium of $12.1 million for the option to enter into a $1.5 billion notional amount interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against exposure to rising interest rates between now and October 2024. We receive a cash settlement in the future if the prevailing interest rate is higher than the 1.68% five-year swap strike price. The amount of future cash settlement is capped 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, nor would we have any requirement to make a payment.

In 2021, we paid an upfront premium of $5.5 million for the option to enter into a $500.0 million notional amount interest rate swap at a future date. During the six months ended June 30, 2022, we monetized our $500.0 million notional amount swaption for $13.7 million, and recognized a gain of $8.0 million, net of transaction costs.

From time to time we purchase interest rate swaps, caps, and other instruments to provide protection against increases in interest rates on our floating rate debt. The fair value of these instruments are noted in the table below.

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As of June 30, 2022, we have investments of $5.9 million in property technology funds consisting of entities that develop technology related to the real estate industry. These investments are measured at net asset value (“NAV”) as a practical expedient. See Note 4 for further information.

The following table summarizes fair value for our interest rate options and our investments in real estate technology funds as of June 30, 2022, and December 31, 2021, (in thousands):

		As of June 30, 2022																As of December 31, 2021
		Total				Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3
Interest rate options		$	51,178			$	—			$	51,178			$	—			$	25,449			$	—			$	25,449			$	—
Investment in real estate technology funds (1)		$	5,867				—				—				—			$	9,613				—				—				—

Nonrecurring Fair Value Measurements

As of June 30, 2022, assets measured at fair value on a nonrecurring basis in our Condensed Consolidated Balance Sheets consisted of our investment in IQHQ. IQHQ was initially reported at cost. During the quarter ended June 30, 2022, 22% of our original investment with a cost basis of $10.8 million was redeemed for $16.5 million. As a result, our remaining shares in IQHQ after the partial redemption were re-valued on a stepped up basis to fair value at the same per share value as the cash redemption per share value. These observable inputs are classified as Level 1 within the GAAP fair value hierarchy. As of June 30, 2022, the fair value of our investment in IQHQ measured on a nonrecurring basis was $59.7 million.

Fair Value Disclosures

We believe that the carrying value of the consolidated amounts of cash and cash equivalents, restricted cash, accounts receivable and payables approximated their fair value as of June 30, 2022, and December 31, 2021, due to their relatively short-term nature and high probability of realization. We estimate the fair value of our non-recourse property debt, construction loans, and Notes Payable to AIR 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, debt service coverage ratios, and loan to value ratios. We classify the fair value of our non-recourse property debt and construction loans within Level 2 of the GAAP fair value hierarchy based on the significance of certain of the unobservable inputs used to estimate their fair value.

 

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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: the ongoing relationship between Aimco and AIR (the “Separate Entities”) following the Separation; 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, 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 of the coronavirus pandemic on Aimco’s business and on the global and U.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the 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 and rising interest rates, all of which heightens the impact of the other risks and factors described herein, and the impact on entities in which Aimco holds a partial interest, including its indirect interest in the partnership that owns Parkmerced Apartments, and the impact of coronavirus related governmental lockdowns on Aimco’s residents, commercial tenants, and operations; 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 real estate presently or previously owned by Aimco; the relationship between Aimco and Separate Entities after the Separation; the ability and willingness of the Separate Entities and their subsidiaries to meet and/or perform their obligations under the contractual arrangements that were entered into among the parties in connection with the Separation and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve some or all the benefits that we expect to achieve from the Separation; 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, 2021, 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.

Executive Overview

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

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Our value proposition includes our national platform organized around four regional and two satellite offices, consisting of a cohesive, talented, and tenured team and our proven investment process; a diversified portfolio, consisting of high-performing in-process value-add investments, a deep and growing pipeline, alternative investments, and stabilized assets; and our capital redeployment plan of reallocating our equity to higher returning investments and prudent recycling of capital. 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 has been designed to leverage our investment platform and optimize risk-adjusted returns for our shareholders.

Overall, we target a growth-oriented capital allocation, primarily weighted toward direct investment in “Value Add” and “Opportunistic” multifamily real estate.

From time to time, we will allocate a defined portion of our capital into alternative investments including passive debt and equity investments (both direct and indirect). We may also utilize our established platform and existing relationships to generate fees through service offerings.

We have policies in place that support our strategy, guide our investment allocations, and manage risk, including to hold at all times a sizeable portion of its net equity in a diversified portfolio of “Core” and “Core-Plus” assets and before starting a project, require cash or committed credit necessary for completion.

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 the Aimco 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 Bethesda, Maryland. Our investment platform is managed by experienced professionals based in four regions: West Coast, Central and Mountain West, Mid-Atlantic and Northeast, and Southeast. 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.

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Our dedicated team will source and execute development and redevelopment projects, and various other direct investment strategies, across our national platform. The Aimco Development and Redevelopment portfolio currently includes $1.0 billion of projects in construction and lease-up, located across five major U.S. markets. In addition, we currently have over $2.5 billion worth of pipeline opportunities under our control and have the opportunity to add to our investment pipeline based on strategic relationships and through sourcing by regional investment teams. 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 current allocation to alternative investments includes: our indirect interest mezzanine loan 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.

We expect to allocate a portion of our capital to passive debt and equity investments, both directly and at the entity level. These prove attractive when warranted by risk adjusted returns, when we have special knowledge or expertise relevant to the particular investment or when the opportunity exists for positive asymmetric outcomes whether through strategic partnerships or otherwise. In addition, from time to time, we will use our established platform and existing relationships to generate fees through service offerings to third-party real estate investors, owners, and capital allocators.

Our entire portfolio of operating properties includes 28 apartment communities (24 consolidated properties and four unconsolidated properties) located in ten major U.S. markets and 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 nationally diversified portfolio and 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.

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 and six months ended June 30, 2022 are further described below.

Financial Results and Recent Highlights

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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. Our Value Add and Opportunistic investments may also target portfolio acquisitions, operational turnarounds, and re-entitlements.

We currently have eight active development and redevelopment projects, located across five 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. During the three and six months ended June 30, 2022, we invested $62.5 million and $128.2 million respectively, in development and redevelopment activities. Updates include:

Alternative Investments

Aimco makes alternative investments where it has special knowledge or expertise relevant to the venture and opportunity exists for positive asymmetric outcomes. Aimco's current alternative investments include a mezzanine loan secured by a stabilized multifamily property with an option to participate in future multi-family development as well as three passive equity investments. Updates include:

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Investment Activity

Aimco is focused on development and redevelopment, funded through our joint ventures. Aimco will also consider opportunistic investments in related activities. Updates include:

 

Operating Property Results

Aimco owns a diversified portfolio of stabilized apartment communities located in ten 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 June 30, 2022 include:

Balance Sheet and Financing Activity

We are highly focused on maintaining a strong balance sheet, including having at all times ample liquidity. As of June 30, 2022, we had access to $215.5 million in liquidity, including $81.8 million of cash on hand, $12.5 million of restricted cash, and the capacity to borrow up to $121.2 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 consists of properties that are under construction or have not achieved stabilization, as well as land assemblages that are being held for development adjacent to The Hamilton community and other land purchases. Our Operating segment includes 21 residential apartment communities that have achieved stabilized level of operations as of January 1, 2021 and maintained it throughout the current year and comparable period. We aggregate all our

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apartment communities that have reached stabilization into our Operating segment. Our Other segment consists of properties 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.

Three and Six Months Ended June 30, 2022 compared with the Three and Six Months Ended June 30, 2021

Net income increased by $258.8 million and by $246.8 million during the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021, as described more fully below.

Property Results

As of June 30, 2022, our Development and Redevelopment segment included four properties that were under construction and four properties in lease-up. Our Operating segment included 21 communities with 5,582 apartment homes, and our Other segment included our recent Eldridge Townhomes acquisition, and one office building.

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 10 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.

Proportionate Property Net Operating Income

The results of our segments for the three months ended June 30, 2022 and 2021, as presented below, are based on segment classifications as of June 30, 2022:

	Three Months Ended June 30,
(in thousands)	2022				2021				$ Change				% Change
Rental and other property revenues, before utility reimbursements:
Development and Redevelopment	$	8,899			$	2,489			$	6,410				257.5	%
Operating		33,122				29,782				3,340				11.2	%
Other		4,333				3,138				1,195				38.1	%
Total		46,354				35,409				10,945				30.9	%
Property operating expenses, net of utility reimbursements:
Development and Redevelopment		3,212				2,101				1,111				52.9	%
Operating		10,435				9,954				481				4.8	%
Other		1,267				1,090				177				16.2	%
Total		14,914				13,145				1,769				13.5	%
Proportionate property net operating income:
Development and Redevelopment		5,687				388				5,299				1,365.7	%
Operating		22,687				19,828				2,859				14.4	%
Other		3,066				2,048				1,018				49.7	%
Total	$	31,440			$	22,264			$	9,176				41.2	%

For the three months ended June 30, 2022, compared to the same period in 2021:

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The results of our segments for the six months ended June 30, 2022 and 2021, as presented below, are based on segment classifications as of June 30, 2022:

	Six Months Ended June 30,								Historical Change
(in thousands)	2022				2021				$				%
Rental and other property revenues, before utility reimbursements:
Development and Redevelopment	$	15,831			$	4,746			$	11,085				100.0	%
Operating		65,361				59,051				6,310				10.7	%
Other		9,378				6,324				3,054				48.3	%
Total		90,570				70,121				20,449				29.2	%
Property operating expenses, net of utility reimbursements:
Development and Redevelopment		5,728				3,968				1,760				100.0	%
Operating		20,697				20,160				537				2.7	%
Other		2,822				2,127				695				32.7	%
Total		29,247				26,255				2,992				11.4	%
Proportionate property net operating income:
Development and Redevelopment		10,103				778				9,325				100.0	%
Operating		44,664				38,891				5,773				14.8	%
Other		6,556				4,197				2,359				56.2	%
Total	$	61,323			$	43,866			$	17,457				39.8	%

For the six months ended June 30, 2022, compared to the same period in 2021:

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 and six months ended June 30, 2022, depreciation and amortization expense increased by $14.2 million, or 68.9%, and $16.6 million, or 40.2%, respectively, when compared to the same periods in 2021, primarily due to additional assets being placed into service.

General and Administrative Expenses

For the three months ended June 30, 2022, general and administrative expenses increased by $1.6 million, or 21.4% compared to the three months ended June 30, 2021. For the six months ended June 30, 2022, general and administrative expenses increased by $4.7 million, or 34.6% compared to the six months ended June 30, 2021. General and administrative expenses incurred for the three and six months ended June 30, 2021 were prior to the full build out of our platform and are not representative of what we believe our anticipated expenses will be going forward. Additionally, for the three and six months ended June 30, 2022 and 2021, general and administrative expenses included $1.0 million and $2.0 million of expenses, respectively, to be reimbursed to AIR, per agreement upon separation, for consulting services with respect to strategic growth, direction, and advice. This agreement will conclude at year end.

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Interest Expense

For the three and six months ended June 30, 2022, compared to the same periods in 2021, interest expense increased by $28.9 million, or 228.7%, and increased by $30.8 million, or 121.8%, respectively, due primarily to $26.4 million of spread maintenance costs related to early payoff of the Notes Payable to AIR and refinance of certain property debt.

Mezzanine Investment Income, Net

On November 26, 2019, Aimco Predecessor made a five-year, $275.0 million mezzanine loan to the partnership owning the “Parkmerced Apartments” located in southwest San Francisco (the “Mezzanine Investment”). The loan bears interest at a 10% annual rate, accruing if not paid from property operations. Ownership of the subsidiaries that originated and hold the mezzanine loan was retained by AIR following the Separation. The Separation Agreement provides for AIR to transfer ownership of the subsidiaries that originated and hold the mezzanine loan, once required third-party consents to transfer are received. Until legal title of the subsidiaries is transferred, AIR is obligated to pass payments on the mezzanine loan to us.

As of June 30, 2022 and December 31, 2021, the total receivable, including accrued and unpaid interest, was $354.4 million and $337.8 million, respectively. During the three and six months ended June 30, 2022, we recognized $8.3 million and $16.6 million, respectively, of income in connection with the mezzanine loan, compared to $7.6 million and $15.0 million during the three and six months ended June 30, 2021, respectively.

The loan is subject to certain risks, including, but not limited to, those resulting from the lingering disruption due to the COVID-19 pandemic and associated response, and any similar events that might occur in the future, which may result in all or a portion of the loan not being repaid. In the event we determine that a portion of the related Mezzanine Investment is not recoverable, we will recognize an impairment. With the neighboring San Francisco State University returning to full in-person learning this fall, we now expect increasing demand for the local apartments that serve as collateral for our loan.

Realized and Unrealized Gains (Losses) on Interest Rate Options

During the six months ended June 30, 2022, we monetized our $500.0 million notional amount interest rate swaption for $13.7 million and recognized a realized a gain of $8.0 million.

We adjust our interest rate options to fair value on a quarterly basis. As a result of the mark-to-market adjustment, we recorded unrealized gains of $11.9 million and $30.7 million, respectively, during the three and six months ended June 30, 2022, compared to an unrealized loss of $17.0 million and an unrealized gain of $8.4 million during the three and six months ended June 30, 2021, respectively.

Realized and Unrealized Gains (Losses) on Equity Investments

During the three and six months ended June 30, 2022, 22% of our original investment in IQHQ was redeemed for $16.5 million and we recognized a realized gain of $5.7 million. Our remaining investment in IQHQ was valued at a stepped up basis at the same per share value as the cash redemption, and we recognized a $20.5 million unrealized gain.

We measure our investments in property technology funds at NAV as a practical expedient. As a result of changes in NAV, we recorded an unrealized gain of $0.5 million and an unrealized loss of $3.9 million, respectively, during the three and six months ended June 30, 2022, compared to unrealized gains of $0.9 million during the three and six months ended June 30, 2021.

Gains on Dispositions of Real Estate

During the three and six months ended June 30, 2022, we sold our Pathfinder Village property located in Fremont, California, for a gross sales price of $127.0 million and recognized a gain from the sale of $94.6 million.

Lease Modification Income

For the three and six months ended June 30, 2022, we as lessee and AIR as lessor, entered into a lease termination agreement pursuant to which AIR is required to pay us a termination payment on September 1, 2022, and upon receipt of such payment, the existing leases with respect to four properties will terminate. The total lease modification income recognized in the quarter was $205.4 million.

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Other Income (Expense), Net

Other income (expense), net, includes costs associated with our risk management activities, partnership administration expenses, valuation changes associated with equity investments, fee income, and certain non-recurring items. Other income (expense), net, for the three months ended June 30, 2022 decreased by $3.5 million, or 169.2%, compared to the three months ended June 30, 2021. For the six months ended June 30, 2022 decreased by $3.9 million, or 161.8%.

Income Tax Benefit

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 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 and six months ended June 30, 2022, we had consolidated net income subject to tax of $181.4 million and $166.6 million, respectively. For the three and six months ended June 30, 2021, we had consolidated net losses subject to tax of $9.0 million and $18.5 million, respectively.

For the three months ended June 30, 2022, we recognized income tax expense of $46.0 million compared to an income tax benefit $2.8 million during the same period in 2021. The change is primarily due to the GAAP income taxes associated with the lease termination income recognized in the second quarter of 2022.

For the six months ended June 30, 2022, we recognized income tax expense of $41.9 million compared to a $7.9 million benefit during the same period in 2021. The change is primarily due to the GAAP income taxes associated with the lease termination income recognized in the second quarter of 2022.

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 Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2021. 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

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.

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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 attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests, and unrealized gain 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 income to EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2022 and 2021, is as follows (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Net income (loss) attributable to Aimco		$	253,211			$	(20,386	)		$	263,323			$	1,048
Adjustments:
Interest expense			41,546				12,638				56,147				25,315
Income tax expense (benefit)			45,957				(2,760	)			41,901				(7,860	)
Gain on dispositions of real estate			(94,598	)			—				(94,465	)			—
Lease modification income			(205,387	)			—				(205,387	)			—
Depreciation and amortization			34,863				20,639				57,981				41,356
Adjustment related to EBITDAre of unconsolidated partnerships			259				215				516				430
EBITDAre		$	75,851			$	10,346			$	120,016			$	60,289
Net (income) loss attributable to redeemable noncontrolling interests in consolidated real estate partnerships			(1,069	)			(66	)			(2,539	)			86
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships			(346	)			(275	)			(344	)			(566	)
EBITDAre adjustments attributable to noncontrolling interests			(221	)			38				(232	)			(232	)
Mezzanine investment income, net (1)			(8,330	)			(7,551	)			(16,567	)			(15,018	)
Unrealized (gains) losses on interest rate options			(20,017	)			16,970				(38,795	)			(8,377	)
Unrealized (gains) losses on IQHQ investment			(20,501	)			—				(20,501	)			—
Adjusted EBITDAre		$	25,367			$	19,462			$	41,038			$	36,182
(1) Includes the portion of accrued and unpaid income recognized during the year

 

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.

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As of June 30, 2022, our available liquidity was $215.5 million, which consisted of:

We have commitments for, and expect to spend, approximately $188.4 million on development and redevelopment projects underway, with $231.3 million undrawn on our construction loans as of June 30, 2022 and limited partner equity commitments of $2.3 million. We are under contract to acquire, for $36.0 million, the two remaining land parcels of the nine-acre development site in Fort Lauderdale. Our Edgewater joint venture and DC joint ventures have remaining commitments of $12.0 million and we also have unfunded commitments in the amount of $2.9 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. Currently, financing is readily available. Any adverse changes in the lending environment could negatively affect our liquidity. We have taken steps to mitigate a portion of our repricing 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 June 30, 2022, 70% of our leverage consisted of property-level, non-recourse debt. Approximately 96% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates, and inflation. As of June 30, 2022, the weighted-average interest rate on our property-level debt was 4.4%, and the remaining term to maturity was 8.4 years.

While our primary source of leverage is property-level debt, we also have a secured $150.0 million credit facility with a syndicate of financial institutions, the Notes Payable to AIR, and construction loans. As of June 30, 2022, we had no outstanding borrowings under our revolving secured credit facility. We had a $28.8 million letter of credit outstanding related to a contract to purchase a nine-acre development site in Fort Lauderdale; consequently, we had capacity to borrow up to $121.2 million under our 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.

As of June 30, 2022, 13% of our leverage consisted of the Notes Payable to AIR, with a fixed interest rate of 5.2% and a term to maturity of 1.6 years. An additional 18% consisted of our variable-rate non-recourse construction loans. As previously disclosed, in July 2022, we paid off the Notes Payable to AIR in full.

Changes in Cash, Cash Equivalents, and Restricted Cash

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

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Operating Activities

For the six months ended June 30, 2022, net cash provided by operating activities was $25.4 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 six months ended June 30, 2022 increased by $8.9 million compared to the same period ended in 2021 due to timing of balance sheet position changes.

Investing Activities

For the six months ended June 30, 2022, our net cash used in investing activities of $125.4 million consisted primarily of capital expenditures and $100.8 million of cash used to acquire undeveloped land parcels in Fort Lauderdale, Florida, offset by $126.8 million of proceeds received from the disposition of our property located in Freemont, California.

Total capital additions were $124.8 million and $100.2 million during the six months ended June 30, 2022 and 2021, respectively, primarily used for construction costs on our development properties. We have generally funded capital additions with available cash and cash provided by operating activities and construction loans.

Also, during the six months ended June 30, 2022, we funded the remaining $14.2 million of our total commitment of $50.0 of a passive equity investment in IQHQ, a life sciences developer.

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.

Financing Activities

Net cash used by financing activities for the six months ended June 30, 2022 increased by $132.3 million compared to the six months ended June 30, 2021 due primarily to $283.8 million in payoffs of non-recourse property debt, a $387.1 million paydown of Notes Payable to AIR, and a reduction in construction loan proceeds of $86.5 million year over year offset by a $614.7 million increase in proceeds received from non-recourse property debt issuances.

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.

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, including the Notes Payable to AIR, and repricing risk, that is the possibility of increases in base interest rates and credit risk spreads. We use long-dated, fixed-rate, non-recourse property debt 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 June 30, 2022, on a consolidated basis, we had approximately $31.9 million of variable-rate property-level debt outstanding in addition to two variable rate construction loans that totaled $203.4 million. We estimate that a change in floating rates of 100 basis points with constant credit risk spreads would reduce or increase interest expense by approximately $2.4 million.

In 2020, we paid an upfront premium of $12.1 million for the option to enter into a $1.5 billion notional amount interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against exposure to rising interest rates between now and October 2024.

During the quarter ended March 31, 2021, we paid an upfront premium of $0.3 million for interest rate caps for the entire amounts on our Flamingo and The Hamilton construction loans. These interest rate caps provide protection if one month LIBOR exceeds 3.0% during the initial term of the loans.

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During the quarter ended June 30, 2022, we paid an upfront premium of $0.4 million for an interest rate cap on our Oak Shore construction loan. The interest rate cap provides protection if one month term SOFR exceeds 3.5% during the initial term of the loan.

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 June 30, 2022, 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 June 30, 2022, 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, 2021.

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, 2022, Aimco issued approximately 16,000 shares of common stock in exchange for OP Units in these transactions. Such shares were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.

Repurchases of Equity Securities

Aimco’s Board has, from time to time, authorized Aimco to repurchase shares of its outstanding common stock. As of December 31, 2021, 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. In January 2022, we repurchased 202,400 shares of Aimco Class A common stock at a weighted-average price of $6.49 per share. During the quarter ended June 30, 2022, we repurchased an additional 539,764 shares at a weighted-average price of $5.73 per share. As of June 30, 2022, up to 9.7 million shares remained available under the share repurchase authorization. On July 27, 2022, Aimco's Board replaced all prior share repurchase authorizations with a new authorization to repurchase up to 15.0 million shares of Aimco's 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.

Aimco Operating Partnership

Unregistered Sales of Equity Securities

Aimco Operating Partnership did not issue any unregistered OP Units during the three months ended June 30, 2022.

Repurchases of Equity Securities

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, 2022, approximately 16,000 common OP Units were redeemed in exchange for shares of Common Stock. During the same period, approximately 1,000 common OP Units were redeemed in exchange for cash at an average price of $7.15.

Dividend and Distribution Payments

As a REIT, Aimco is required to distribute annually to holders 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 its 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. On July 27, 2022, the Aimco Board declared a special cash dividend of $0.02 per share, payable on September 30, 2022, to shareholders of record on September 14, 2022.

 

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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 3.2 to Aimco’s Current Report on Form 8-K, dated December 15, 2020, 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)
10.2		Amendment to Master Leasing Agreement by and between Apartment Income REIT L.P. and Aimco Development Company, LLC, dated as of May 19, 2022 (Exhibit 1.1 to Aimco's Current Report on Form 8-K, dated as of May 25, 2022, is incorporated herein by this reference)
10.3		Termination of Master Lease Agreements, dated as of June 17, 2022, by and among (i) MCZ/Centrum Flamingo II, L.L.C., AIMCO 50 Rogers Street, L.L.C., AIMCO Leahy Square Apartments, LLC, and Aimco Fitzsimons 3A Lessor, LLC; (ii) Flamingo North Lessee, LLC, Prism Lessee, LLC, 707 Leahy Lessee, LLC, and Fremont Lessee LLC; (iii) Aimco OP L.P.; and (iv) Apartment Income REIT, L.P. (Exhibit 1.1 to Aimco's Current Report on Form 8-K, dated June 14, 2022, is incorporated herein by this reference)
10.4		Amendment to Mezzanine Note Agreement and Notes, dated as of June 17, 2022, by and among Aimco JO Intermediate Holdings, LLC, Apartment Income REIT, L.P. (f/k/a AIMCO Properties, L.P.) and AIR/Bethesda Holdings, Inc. (f/k/a AIMCO/Bethesda Holdings, Inc.) (Exhibit 1.2 to Aimco's Current Report on Form 8-K, dated June 14, 2022, is incorporated herein by this reference)
10.5		Amendment to Master Leasing Agreement by and between Apartment Income REIT, L.P. and Aimco Development Company, LLC, dated as of June 14, 2022, (Exhibit 1.3 to Aimco's Current Report on Form 8-K, dated June 14, 2022, 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

 

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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 June 30, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of 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

 

	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

 

Date: August 4, 2022

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