Aimco OP 10Q 2022 Q2 Quarterly report

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


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

•

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

•

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

We operate Aimco and 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

(1)

Accrued capital expenditures were $29.1 million and $18.7 million as of June 30, 2022 and 2021, respectively.

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

(1)

Accrued capital expenditures were $29.1 million and $18.7 million as of June 30, 2022 and 2021, respectively.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO OP L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 1 — Organization

Apartment Investment and Management Company (“Aimco”), a Maryland corporation incorporated on January 10, 1994, is a self-administered and self-managed real estate investment trust (“REIT”). Aimco, through a wholly owned subsidiary, is the general and special limited partner of Aimco OP L.P. (“Aimco Operating Partnership”).

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

On December 15, 2020, Aimco completed the separation of its businesses (the “Separation”), creating two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp. (“AIR”) (Aimco and AIR together, as they existed prior to the Separation, “Aimco Predecessor”). Events noted in this filing as occurring before December 15, 2020, were those entered into by Aimco Predecessor.

Business

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.

We own or lease a portfolio of real estate investments focused primarily on the U.S. multifamily sector. These real estate investments include: a portfolio of 28 operating apartment communities (24 consolidated properties with 5,879 apartment homes and 4 unconsolidated operating properties), diversified by both geography and price point, in ten major U.S. markets; 1 commercial office building that is part of a land assemblage; 2 residential apartment communities, with 965 planned apartment homes, a single family rental community with 16 planned homes plus 8 accessory dwelling units, and 1 hotel, with 106 planned rooms, we are actively developing or redeveloping; land parcels held for development; and four residential apartment communities with 865 apartment homes for which we have completed the redevelopment, but have not achieved stabilization. Our real estate portfolio also includes one land parcel held for sale and two unconsolidated investments in land held for development. In addition, we hold other opportunistic and alternative investments, including our Mezzanine Investment (see Note 2 for further information); our IQHQ investment (see Note 3 for further information); and our investment in real estate technology funds.

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The Condensed Consolidated Balance Sheets of Aimco and Aimco Operating Partnership as of December 31, 2021 have been derived from their respective audited financial statements at that date, but do not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2021. Except where indicated, the footnotes refer to both Aimco and Aimco Operating Partnership.

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Principles of Consolidation

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

We consolidate a variable interest entity (“VIE”) in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

As used herein, and except where the context otherwise requires, “partnership” refers to a limited partnership or a limited liability company and “partner” refers to a partner in a limited partnership or a member of a limited liability company.

Certain reclassifications have been made to prior period amounts to conform to the current period condensed consolidated financial statement presentation with no effect on the Company’s previously reported results of operations, financial position, or cash flows.

Common Noncontrolling Interests in Aimco Operating Partnership

Common noncontrolling interests in Aimco Operating Partnership consist of common Aimco Operating Partnership Units (“OP Units”), and are reflected in Aimco’s accompanying Condensed Consolidated Balance Sheets as Common noncontrolling interests in Aimco Operating Partnership. Aimco Operating Partnership’s income or loss is allocated to the holders of common OP Units, other than Aimco, based on the weighted-average number of common OP Units (including Aimco) outstanding during the period. For all periods presented, the holders of common OP Units had a weighted-average economic ownership interest in Aimco Operating Partnership of approximately 5.0%. Substantially all of the assets and liabilities of Aimco are held by Aimco Operating Partnership.

Redeemable Noncontrolling Interests in Consolidated Real Estate Partnerships

Redeemable noncontrolling interests consists of equity interests held by a limited partner in a consolidated real estate partnership that has a finite life. During the quarter ended March 31, 2022, we acquired all the outstanding redeemable noncontrolling interests in 2 consolidated properties for $5.1 million. At the time of redemption, the carrying amount of the redeemable non-controlling interests was $4.9 million. Prior to our acquisition in the first quarter of 2022, we attributed to noncontrolling interests their share of income or loss of consolidated partnerships based on their proportionate interest in the results of operations of the partnerships, including their share of losses. Redeemable noncontrolling interests in consolidated real estate partnerships as of June 30, 2022 consists of our institutional partner’s equity interest in our Upton Joint Venture, which provides our partner with an accruing 9.7% rate of return on their investment.

If a consolidated real estate partnership includes redemption rights that are not within our control, the noncontrolling interest is included as temporary equity.

The assets of our consolidated real estate partnerships must first be used to settle the liabilities of the consolidated real estate partnerships. The consolidated real estate partnerships’ creditors do not have recourse to the general credit of Aimco Operating Partnership.

The following table presents a rollforward of our redeemable noncontrolling interests in consolidated real estate partnerships from December 31, 2021 to June 30, 2022 (in thousands):


Balance at December 31, 2021	$	33,794
Capital contributions		20,392
Redemptions		(4,911	)
Net income		2,539
Balance at June 30, 2022	$	51,814

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Mezzanine Investment

The Separation Agreement provides for AIR to transfer ownership of the subsidiaries that originated and hold the mezzanine loan, a related equity option to acquire a 30% interest in the partnership owning Parkmerced Apartments and the interest rate option, or swaption, that provides partial protection against future refinancing risk to Aimco through 2024 once required third-party consents are received. At the time of the Separation and as of the date of this filing, legal title of these subsidiaries had not yet transferred to Aimco. Until legal title of the subsidiaries is transferred, AIR is obligated to pass payments on such loan to us, and we are obligated to indemnify AIR against any costs and expenses related thereto. We have the risks and rewards of ownership of the Mezzanine Investment and have recognized an asset related to our right to receive the Mezzanine Investment from AIR.

We recognize as income the net amounts recognized by AIR on its equity investment that are due to be paid to us when collected to the extent the income is supported by the change in AIR's claim to the net assets of the underlying borrower. The income recognized primarily represents the interest accrued under the terms of the underlying mezzanine loan.

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 a $2.8 million benefit during the same period in 2021. The change is primarily due to the GAAP income taxes associated with the lease modification 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 modification income recognized in the second quarter of 2022.

Use of Estimates

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

Cash Equivalents

We classify highly liquid investments with an original maturity of three months or less as cash equivalents. We maintain cash equivalents in financial institutions in excess of insured limits. We have not experienced any losses in these accounts in the past and believe that we are not exposed to significant credit risk because our accounts are deposited with major financial institutions.

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Restricted Cash

Restricted cash consists of tenant security deposits, capital replacement reserves, insurance reserves, and cash restricted as required by our debt agreements.

Other Assets, net

Other assets were comprised of the following amounts (in thousands):


	June 30, 2022		December 31, 2021
Other investments	$	82,056	$	45,386
Assets held for sale (1)		52,566		—
Notes receivable		38,606		38,029
Unconsolidated real estate partnerships		27,149		13,025
Prepaid expenses and real estate taxes		17,953		20,516
Deferred costs, deposits, and other		17,625		22,136
Corporate fixed assets		9,067		9,855
Accounts receivable, net of allowances of $1,397 and $1,285 as of June 30, 2022 and December 31, 2021, respectively		3,108		2,469
Intangible assets, net		1,602		3,269
Due from affiliates		1,357		4,840
Deferred tax assets		—		6,388
Total other assets, net	$	251,089	$	165,913

(1) In addition to the property we sold during the period, from time to time we may market to sell certain properties that are inconsistent with our long-term investment strategy. At the end of each reporting period, we evaluate whether such properties meet the criteria to be classified as held for sale. As of June 30, 2022, assets held for sale include 1 land parcel in Fort Lauderdale, Florida and two properties located in the Seattle, Washington area.

Accounting Pronouncements Adopted in the Current Year

During the quarter ended March 31, 2022, we adopted ASU 2021-05 establishing Topic 842, Lessors - Certain Leases with Variable Lease Payments in conjunction with our ongoing operations. ASU 2021-05 requires a lessor to classify a lease with variable payments that do not depend on an index or rate as an operating lease if either a sales-type lease or direct finance lease classification would trigger a day-one loss, which was effective for us on January 1, 2022. The adoption of this standard on January 1, 2022, did not have a material impact on our condensed consolidated financial statements.

Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update No. 2020-04,“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the LIBOR or by another reference rate expected to be discontinued because of reference rate reform. The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022. In January 2021, the FASB issued Accounting Standards Update 2021-01, “Reference Rate Reform (Topic 848): Scope” (“ASU 2021-01”), which clarified the scope and application of the original guidance. We plan to adopt ASU 2020-04 and ASU 2021-01 when LIBOR is discontinued. We are currently evaluating the potential impact of adopting this guidance, but do not expect it to have a material impact on our consolidated financial statements due to the fact that we hold one month LIBOR debt instruments, which are not expected to be discontinued in 2022.

Note 3 —Significant Transactions

Acquisitions and Investments

•

During the quarter ended March 31, 2022, we entered into a short-term cancellable lease of and a purchase agreement to acquire, for $100.0 million, a 9-acre development site in the Flagler Village neighborhood of Fort Lauderdale, Florida. The site has the potential for the development of approximately 3 million square feet of mixed-use property, which could contain up to 1,500 residential units at full build-out. On June 2, 2022, we finalized the purchase of part of the site for $64.0 million. Subsequent to the closing, there was $7.2 million remaining in escrow in the seller's name and $28.8

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million in letters of credit held in escrow as reserved funds for the transaction. During the quarter ended June 30, 2022, we capitalized $2.8 million in fees as Land along with the closing. See Note 9 for further information.

•

During the quarter ended March 31, 2022, our Fort Lauderdale consolidated joint venture closed on the acquisition of 3 undeveloped land parcels located in downtown Fort Lauderdale for $49.0 million ($25.0 million at Aimco's 51% share), funded primarily by a $40.0 million land loan ($20.4 million at Aimco's share). The cost was allocated among the parcels based on third-party appraisals.

At the time of acquisition, 1 land parcel was subject to a sales agreement with closing expected on or before October 9, 2022. Based on the facts and circumstances related to the sale, we determined the land parcel met the criteria for classification as assets held for sale as of June 30, 2022. These assets are reported at a carrying value of $11.7 million, and are included within Other assets, net in our Condensed Consolidated Balance Sheets. Liabilities related to these assets held for sale of $8.0 million are included in Accrued liabilities and other in our Condensed Consolidated Balance Sheets.

•

During the quarter ended March 31, 2022, we funded the remaining $14.2 million of a total $50.0 million commitment of a passive equity investment in IQHQ Inc. (IQHQ), a privately held life sciences real estate development company. Based on certain facts and circumstances related to the investment, 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. The redemption cash was received after quarter end. Consequently, we recognized a $5.7 million gain from this redemption in our Consolidated Statements of Operations for the three and six months ended June 30, 2022, and a $16.5 million receivable in our Condensed Consolidated Balance Sheets as of June 30, 2022. Further, our remaining investment in IQHQ with a cost basis of $39.2 million was valued at an estimated fair market value of $59.7 million, and a $20.5 million unrealized gain was recognized for the quarter ended June 30, 2022.

Joint Venture Transaction

•

In May 2022, we formed two joint ventures for a ground-up project that entails the construction of 574 residential homes and 20,000 square feet of mixed-use retail and cultural space in Bethesda, Maryland. Aimco holds a 50% share of the joint ventures (the “DC joint ventures”), with a maximum total capital commitment of $18.0 million, of which $12.0 million has been funded as of June 30, 2022. We serve as co-development manager for these ventures, which are expected to begin construction in late 2023.

•

In March 2022, we formed a joint venture for the construction of approximately 1 million square feet of mixed-use development in the Edgewater neighborhood of Miami, Florida. Aimco holds a 20% share of the joint venture (the “Edgewater joint venture"), which includes our initial contribution of an eighth of an acre of land that we purchased for $1.7 million in January 2022. Our total capital commitment for this venture is $8.0 million. We will serve as the development manager for this venture, which is expected to begin construction in 2023.

Dispositions

•

In April 2022, we closed on the sale of 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. Pathfinder Village was a stabilized property previously reported within our Operating segment.

Lease Arrangements

•

In June 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. See Note 9 for further information.

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Note 4 — Commitments and Contingencies

Commitments

In connection with our development, redevelopment, and other capital additions activities, we have entered into various construction-related contracts, and have made commitments to complete development and redevelopment of certain real estate, pursuant to financing or other arrangements. As of June 30, 2022, our commitments related to these capital activities totaled approximately $188.4 million, most of which we expect to incur during the next 24 months.

As described in Note 3, we are under contract to acquire, for $36.0 million, the two remaining land parcels of a 9-acre development site in Fort Lauderdale. As of June 30, 2022, we reserved $7.2 million which was held in escrow in the seller’s name. As of June 30, 2022, our remaining commitment is $28.8 million, which we expect to incur over the next twelve months.

As described in Note 3, we have a commitment to fund a total of $26.0 million for our Edgewater joint venture and DC joint ventures formed during 2022. As of June 30, 2022, our remaining commitments are $12.0 million, which we expect to incur over the next twelve months.

As of June 30, 2022, we have unfunded commitments in the amount of $2.9 million related to four investments in privately held entities that develop technology related to the real estate industry. The timing of these funding commitments is uncertain.

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

Legal Matters

From time to time, we may be a party to certain legal proceedings, incidental to the normal course of business. While the outcome of the legal proceedings cannot be predicted with certainty, we believe there are no legal proceedings pending that would have a material effect upon our financial condition or results of operations.

Note 5 — Agreements and Transactions With AIR

In conjunction with the Separation in December 2020, we entered into the following agreements with AIR that have significant operational and financial impacts to us.

Master Services Agreement

We entered into a Master Services Agreement with AIR whereby AIR provides us with customary administrative and support services. We are obligated to pay AIR the fully burdened costs in performing those services. We may terminate any or all services on 60 days’ prior written notice, and AIR may terminate individual services at any time after December 31, 2023. During the three and six months ended June 30, 2022, we incurred administrative and support fees of $0.5 million and $0.9 million, respectively, compared to $0.4 million and $0.8 million during the three and six months ended June 30, 2021, respectively. These administrative support fees are included in General and administrative expenses in our Condensed Consolidated Statements of Operations.

Property Management Agreements

We have entered into several Property Management Agreements with AIR, pursuant to which AIR provides us with certain property management, property accounting and related services for the majority of our operating properties. We pay AIR a property management fee for these services equal to 3% of each respective property’s revenue collected and such other fees as may be mutually agreed upon for various other services. The initial term of each Property Management Agreement is one year, with automatic one-year renewal periods, unless either party elects to terminate upon delivery of 60 days’ prior written notice to

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the other party before the end of the term. Neither party is obligated to pay to the other party a termination fee or other penalty upon such termination.

During the three and six months ended June 30, 2022, we recognized property management and property accounting fees of $1.5 million and $2.9 million, respectively, compared to $1.3 million and $2.6 million during the three and six months ended June 30, 2021, respectively. These property management and property accounting fees are included in Property operating expenses in our Condensed Consolidated Statements of Operations.

Master Leasing Agreement

The Master Leasing Agreement, as amended on June 14, 2022, governs the current and any future leasing arrangements between us, as lessee, and AIR, as lessor. Under the amendments to the Master Leasing Agreement, AIR's purchase option to acquire completed development and redevelopment properties was replaced with a right of first offer on development and redevelopment assets that have achieved stabilization after our acquisition of the asset and that we choose to bring to market within one year following stabilization. Additionally, it provides that each time the parties thereto wish to execute a new lease for a particular property, such parties will cause their applicable affiliates to execute a stand-alone lease.

Notes Payable to AIR

In June 2022, we entered into an agreement providing for early repayment of the Notes Payable to AIR relative to the original maturity date of such notes. The notes bore interest at 5.2% with accrued interest payable on the first calendar day of each quarter. For the three and six months ended June 30, 2022, we recognized interest expense related to the Notes Payable to AIR of $6.4 million and $13.3 million, respectively, compared to $6.9 million and $13.9 million during the three and six months ended June 30, 2021, respectively. Additionally, during the quarter ended June 30, 2022, we made a principal payment of $387.1 million, and recognized $17.9 million of associated spread maintenance costs, $12.9 million of which were paid as of June 30, 2022. In July 2022, we made the remaining principal and spread maintenance payments.

Other

In June 2022, for $7.2 million, we acquired from AIR the common noncontrolling interest in the entity that indirectly holds a portfolio of assets that secured the Notes Payable to AIR.

Due to and from AIR

As of June 30, 2022, we have amounts due to and from AIR of $16.2 million and $1.1 million, respectively. As of December 31, 2021 we had amounts due to and from AIR of $15.7 million and $4.8 million, respectively. The amounts due to AIR primarily consist of invoices paid on our behalf and accrued interest on our Notes Payable to AIR. The amounts due from AIR primarily consist of net cash flows generated by our operating properties.

Terry Considine Service Agreement/AIR Reimbursement

As contemplated by the Separation and by Aimco and AIR, Terry Considine, an Aimco board member and our former Chief Executive Officer, has specific responsibilities to us as a non-executive employee during 2022 to support the establishment and growth of our business, reporting directly to our board of directors (the "Board"). These responsibilities, separate from Mr. Considine’s services as a board member, include: (i) short and long-term strategic direction and advice; (ii) transition and executive support to officers; and (iii) advice and consultation with respect to strategic growth and acquisition activities. The independent directors of the Board set Mr. Considine’s 2022 target total compensation (including base compensation, short-term incentive, and long-term incentive) for these responsibilities at $1.8 million, to be paid in equity. Mr. Considine does not receive any additional compensation for serving on the Board.

Additionally, we are obligated for all base salary, short-term incentive amounts and long-term incentive amounts payable to Mr. Considine for the calendar year 2022 under the terms of his employment agreement with AIR that are in excess of $1.0 million, collectively. As of June 30, 2022, we estimate the total 2022 reimbursement to AIR, pursuant to this arrangement, will be $4.0 million.

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We estimate compensation associated with these arrangements to total $5.8 million for 2022. For the three and six months ended June 30, 2022, we recognized $1.5 million and $2.9 million of expense related to the arrangements, respectively, compared to $1.5 million and $2.9 million during the three and six months ended June 30, 2021, respectively. This expense is included in General and administrative expenses in our Condensed Consolidated Statements of Operations.

Note 6 — Earnings and Dividends per Share and per Unit

Aimco and Aimco Operating Partnership calculate basic earnings per share of common stock and basic earnings per common unit based on the weighted-average number of shares of common stock and common partnership units outstanding. We calculate diluted earnings per share of common stock and diluted earnings per common unit taking into consideration dilutive shares of common stock and common partnership unit equivalents and dilutive convertible securities outstanding during the period.

Each of our executives and AIR’s executives received one share of Aimco stock and one share of AIR stock at the Separation date for unvested shares. We include AIR’s executives’ rights to receive Aimco shares upon vesting in our dilutive calculations.

Our common stock and common partnership unit equivalents include options to purchase shares of common stock, which, if exercised, would result in Aimco’s issuance of additional shares of common stock and Aimco Operating Partnership’s issuance to Aimco of additional common partnership units equal to the number of shares of common stock purchased under the options. These equivalents also include unvested performance-based restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of common stock and common partnership units outstanding equal to the number of the shares that vest. Common partnership unit equivalents also include unvested long-term incentive partnership units. We include in the denominator securities with dilutive effect in calculating diluted earnings per share and per unit during these periods.

Our time-based restricted stock awards receive non-forfeitable dividends similar to shares of common stock and common partnership units prior to vesting, and our Performance-Based LTIP I units and Performance-Based LTIP II units receive non-forfeitable distributions based on specified percentages of the distributions paid to common partnership units prior to vesting and conversion. The unvested restricted shares and units related to these awards are participating securities. We include the effect of participating securities in basic and diluted earnings per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method. Participating securities are included in the computation of diluted earnings per share for the three and six months ended June 30, 2022 and 2021, because their effects are dilutive.

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Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings per share and per unit for the three and six months ended June 30, 2022 and 2021, are as follows (in thousands, except per share and per unit data):


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Earnings per share
Numerator:
Net income (loss) attributable to Aimco	$	239,137		$	(19,690	)	$	247,346		$	524
Net income allocated to Aimco participating securities		(3,284	)		—			(3,410	)		—
Net income (loss) attributable to Aimco common stockholders	$	235,853		$	(19,690	)	$	243,936		$	524

Denominator - shares:
Basic weighted-average common stock outstanding		149,600			149,166			149,694			149,082
Diluted share equivalents outstanding		823			—			966			360
Diluted weighted-average common stock outstanding		150,423			149,166			150,660			149,442

Earnings (loss) per share - basic	$	1.58		$	(0.13	)	$	1.63		$	0.00
Earnings (loss) per share - diluted	$	1.57		$	(0.13	)	$	1.62		$	0.00

Earnings per unit
Numerator:
Net income (loss) attributable to Aimco Operating Partnership	$	251,796		$	(20,727	)	$	260,440		$	568
Net income allocated to Aimco Operating Partnership participating securities		(3,423	)		—			(3,551	)		—
Net income (loss) attributable to Aimco Operating Partnership's common unitholders	$	248,373		$	(20,727	)	$	256,889		$	568

Denominator - units
Basic weighted-average common partnership units outstanding		157,525			157,134			157,621			157,093
Diluted partnership unit equivalents outstanding		922			-			1,045			360
Diluted weighted-average common partnership units outstanding		158,447			157,134			158,666			157,453

Earnings (loss) per unit - basic	$	1.58		$	(0.13	)	$	1.63		$	0.00
Earnings (loss) per unit - diluted	$	1.57		$	(0.13	)	$	1.62		$	0.00

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.

On a recurring basis, we measure at fair value our interest rate options, which are presented in Other assets, net in our Condensed Consolidated Balance Sheets. Our interest rate options are classified within Level 2 of the GAAP fair value hierarchy, and we estimate their fair value using pricing models that rely on observable market information, including contractual terms, market prices, and interest rate yield curves. The fair value adjustment is included in earnings in Unrealized gains on interest rate options in our Condensed Consolidated Statements of Operations. Changes in fair value are reflected as a non-cash transaction in adjustments to arrive at cash flows from operations, and any upfront premium is reflected in Purchase of interest rate options in our Condensed Consolidated Statements of Cash Flows.

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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	$	0	$	51,178	$	0	$	25,449	$	0	$	25,449	$	0
Investment in real estate technology funds (1)	$	5,867		0		0		0	$	9,613		0		0		0

(1)

Investments measured at fair value using NAV as a practical expedient are not classified in the fair value hierarchy.

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.

The following table summarizes the carrying value and fair value of our non-recourse property debt, construction loans, and Notes Payable to AIR as of June 30, 2022, and December 31, 2021, (in thousands):


	As of June 30, 2022				As of December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Non-recourse property debt	$	809,055	$	786,094	$	484,883	$	498,960
Construction loans		203,396		203,396		168,376		168,376
Notes Payable to AIR		147,039		147,039		534,127		534,127
Total	$	1,159,490	$	1,136,529	$	1,187,386	$	1,201,463

Note 8 — Variable Interest Entities

We evaluate our investments in limited partnerships and similar entities in accordance with applicable consolidation guidance to determine whether each such entity is a VIE. The accounting standards for the consolidation of VIEs require qualitative assessments to determine whether we are the primary beneficiary. The primary beneficiary analysis is based on power and economics. We conclude that we are the primary beneficiary and consolidate the VIE if we have both: (i) the power to direct the activities of the VIE that most significantly influence the VIE's economic performance, and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Significant judgments and assumptions related to these determinations include, but are not limited to, estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

We consolidate Aimco Operating Partnership, a VIE of which Aimco is the primary beneficiary. Aimco, through Aimco Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Substantially all of the assets and liabilities of Aimco are that of Aimco Operating Partnership.

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Aimco Operating Partnership is the primary beneficiary, and therefore consolidates our 8 VIEs that own interests in real estate. In addition, we have 9 unconsolidated VIEs for which we are not the primary beneficiary because we are not their primary decision maker. The nine unconsolidated VIEs include four unconsolidated real estate partnerships that hold 4 apartment communities in San Diego, California, the Mezzanine Investment, our passive equity investment in IQHQ, our investment in the Edgewater joint venture, and our investments in the DC joint ventures.

Details of our consolidated and unconsolidated VIEs, excluding those of Aimco Operating Partnership, are summarized in the table below as of June 30, 2022, and December 31, 2021, (in thousands, except for VIE count):


	June 30, 2022				December 31, 2021
	Consolidated		Unconsolidated		Consolidated		Unconsolidated
Count of VIEs	8		9		9		6
Assets
Real estate, net	$	205,053	$	0	$	564,909	$	0
Mezzanine investment		0		354,365		0		337,797
Right-of-use lease assets		96,254		0		429,768		0
Receivable from lease termination		186,318		0		0		0
Unconsolidated real estate partnerships		0		27,149		0		13,005
Other assets, net		28,548		59,686		43,715		35,773
Liabilities
Deferred tax liabilities		0		0		124,747		0
Accrued liabilities and other		56,606		0		30,519		0
Construction loans, net		133,985		0		163,570		0
Lease liabilities		95,399		0		435,093		0

Consolidated Real Estate Partnerships

As of June 30, 2022, we acquired all of the outstanding redeemable non-controlling interests in an entity reported as a consolidated VIE as of December 31, 2021. The changes in consolidated VIE assets and liabilities from December 31, 2021 to June 30, 2022 in the table above are primarily due to the impact of: (i) the declassification of the entity described above as a VIE; (ii) the recognition of a receivable from lease termination of $186.3 million due to lease modifications; and (iii) the derecognition of right-of-use lease assets and lease liabilities of $326.1 million and $337.3 million, respectively, due to the lease modifications described in Note 3.

As of June 30, 2022, one of our consolidated VIEs had an outstanding construction loan. In conjunction with this loan, we made customary guarantees. In certain situations, the loan's lenders may have recourse to our general credit. As of June 30, 2022, we estimate our maximum exposure equals the $134.0 million outstanding loan balance. Other consolidated VIEs' creditors do not have recourse to our general credit.

Unconsolidated Real Estate Partnerships

We own an interest in 4 unconsolidated real estate partnerships that hold 4 apartment communities in San Diego, California. We also own investments in the Edgewater joint venture to develop a 2.8-acre site in Miami's Edgewater neighborhood, and the DC joint ventures to develop a ground-up and mixed-use retail and cultural space in Bethesda, Maryland. The joint ventures were formed during the six months ended June 30, 2022. See Note 3 for further information.

Our investment balances of $27.1 million and $13.0 million as of June 30, 2022 and December 31, 2021, respectively, represented our maximum exposure to loss in these unconsolidated VIEs.

Mezzanine Investment

AIR owns an interest in a partnership that owns Parkmerced Apartments, of which it is not the primary beneficiary, and under the terms of the Separation Agreement, AIR is obligated to transfer ownership of the subsidiaries that hold this interest to us upon receipt of required third-party consents. Our investment balances of $354.4 million and $337.8 million as of June 30, 2022 and December 31, 2021, respectively, represent our indirect interest in notes receivable through our agreement with AIR and our maximum exposure to loss in this VIE.

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Note 9 — Lease Arrangements

Aimco as Lessor

The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and commercial tenants primarily for utility reimbursements and other services.

For the three and six months ended June 30, 2022 and 2021, our total lease income was comprised of the following amounts for all residential and commercial property leases (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Fixed lease income	$	46,851	$	37,554	$	92,982	$	74,343
Variable lease income		3,673		2,760		7,409		5,714
Total lease income	$	50,524	$	40,314	$	100,391	$	80,057

Aimco as Lessee

Lease Arrangements with AIR

We, as lessee, and AIR, as lessor, have entered into leases on properties currently under construction or in lease-up. These lease arrangements are governed by separate Master Lease Agreements and the Master Leasing Agreement.

In June 2022, we as lessee and AIR as lessor, entered into a lease termination agreement with respect to the 4 leases entered into on January 1, 2021. This agreement terminates the 4 finance leases on September 1, 2022. Upon termination, both parties shall be released of any and all liabilities and obligations under each respective lease other than those liabilities and obligations, if any, that expressly survive termination. On September 1, 2022 we will relinquish control of the leasehold improvements on these four leased properties as well as the underlying land. In exchange, AIR will transfer a total of $200.0 million in consideration to us as termination payments. On June 28, 2022, AIR made a $10.0 million non-refundable termination deposit with the remaining $190.0 million to be paid by AIR on September 1, 2022, both termination payments are accounted for as lease incentives. Based on the present value of the termination payments, net of remaining lease payments, we reduced the lease liability to 0 and recorded a receivable from lease termination of $186.3 million in our Condensed Consolidated Balance Sheets at June 30, 2022.

Because the termination agreement modified the expiration date of each lease to September 1, 2022, we accelerated depreciation on the associated leasehold improvements using lease terms ending September 1, 2022. We recorded $13.9 million of additional depreciation expense in our Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022. The remaining $66.1 million of depreciation expense will be recognized in the third quarter. In addition, we reduced the associated right-of-use lease assets to 0 and recognized lease modification income of $205.4 million, which is included in our Condensed Consolidated Statements of Operations for the periods ended June 30, 2022.

Ground Leases

We are lessee to two 99-year ground leases for the land underlying the development site at Upton Place, a mixed-use development project which will create 689 apartment homes and approximately 100,000 square feet of commercial space in upper-northwest Washington, D.C. These ground leases are classified as finance leases.

Other Finance Lease Arrangements

As described in Note 3, during the quarter ended March 31, 2022, we, as lessee, entered into certain finance lease arrangements concurrent with a contract to acquire a development site in Fort Lauderdale. At lease inception, $20.0 million in deposits were placed in the seller’s name, which subsequently reduced the finance lease liability. The related interest is capitalized as part of the finance right-of-use lease assets.

In June 2022, we purchased a part of the aforementioned development site in Fort Lauderdale for $64.0 million. As a result of the purchase, we derecognized the associated right-of-use lease assets and lease liabilities, and recorded the difference to land. As of June 30, 2022, the remaining right-of-use lease assets and lease liabilities associated with the other parts totaled $34.8 million and $26.3 million, respectively. See Note 3 for further information.

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Together, as of June 30, 2022 and December 31, 2021, these finance leases had weighted-average remaining terms of 74.8 years and 38.5 years, respectively, and weighted-average discount rates of 5.5% and 5.4%, respectively.

As of June 30, 2022, finance lease right-of-use lease assets and liabilities totaled $130.5 million and $123.8 million, respectively. As of December 31, 2021, finance right-of-use lease assets and liabilities totaled $429.8 million and $435.1 million, respectively.

For the three and six months ended June 30, 2022, amortization related to finance leases was $3.4 million and $6.7 million, respectively, net of amounts capitalized, compared to $2.1 million and $3.4 million for the three and six months ended June 30, 2021, respectively.

For the three and six months ended June 30, 2022, we capitalized $1.8 million and $4.8 million, respectively, of lease costs associated with active development and redevelopment projects on certain of the underlying property and ground lease assets, compared to $5.8 million and $12.7 million, respectively, for three and six months ended June 30, 2021.

Operating Lease Arrangements

We have operating leases primarily for corporate office space. As of June 30, 2022 and December 31, 2021, our operating leases had weighted-average remaining terms of 7.1 years and 7.4 years, respectively. As of June 30, 2022 and December 31, 2021, the leases had weighted-average discount rates of 3.1%, and 3.1%, respectively.

We record operating lease expense on a straight-line basis over the lease term. Total operating lease expense for the three and six months ended June 30, 2022 was $0.2 million and $0.3 million, respectively, compared to $0.3 million and $0.5 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2022 and December 31, 2021, operating lease right-of-use lease assets of $4.7 million and $5.1 million, respectively, are included in Other assets, net in our Condensed Consolidated Balance Sheets. As of June 30, 2022 and December 31, 2021, operating lease liabilities of $12.0 million and $12.7 million, respectively, are included in Accrued liabilities and other in our Condensed Consolidated Balance Sheets.

For finance and operating leases, when the rate implicit in the lease cannot be determined, we estimate the value of our lease liabilities using discount rates equivalent to the rates we would pay on a secured borrowing with terms similar to the leases. We determine if an arrangement is or contains a lease at inception. We have lease agreements with lease and non-lease components, and have elected to not separate these components for all classes of underlying assets. Leases with an initial term of 12 months or less are not recorded in our Condensed Consolidated Balance Sheets.

Office Space Sublease

We have a sublease arrangement to provide space within our corporate office for fixed rents, which commenced on January 1, 2021 and expires on May 31, 2029.

Annual Future Minimum Lease Payments

Combined minimum annual lease payments under operating and finance leases, and sublease income that offsets our operating lease rent, are as follows (in thousands):


	Sublease Income and Lease Modification Income		Operating Lease Future Minimum Rent			Financing Leases Future Minimum Payments
Remainder of 2022	$	188,593	$	816		$	1,046
2023		1,403		1,922			2,479
2024		1,413		1,935			3,479
2025		1,423		1,930			32,659
2026		1,433		1,960			4,335
Thereafter		3,526		4,847			1,155,087
Total	$	197,791		13,410			1,199,085
Less: Discount				(1,402	)		(1,075,300	)
Total lease liabilities			$	12,008		$	123,785

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Note 10 — Business Segments

We have 3 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 held for development. 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 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.

Our chief operating decision maker (“CODM”) uses cash flow, construction timeline to completion, and actual versus budgeted results to evaluate our properties in our Development and Redevelopment segment. Our CODM uses proportionate property net operating income to assess the operating performance of our Operating segment. Proportionate property net operating income is defined as our share of rental and other property revenues, excluding reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. In our Condensed Consolidated Statements of Operations, utility reimbursements are included in Rental and other property revenues, in accordance with GAAP.

As of June 30, 2022, our Development and Redevelopment segment consists of 14 properties: 2 residential apartment communities with 965 planned apartment homes, a single family rental community with 16 planned homes plus 8 accessory dwelling units, and 1 hotel, with 106 planned rooms, we are actively developing or redeveloping; 4 residential apartment communities with 865 apartment homes for which we have completed the redevelopment, but have not achieved stabilization; and, land parcels held for development. Our Operating segment includes 21 consolidated apartment communities with 5,582 apartment homes. Our Other segment includes our recent Eldridge Townhomes acquisition, stabilized but not owned for the comparable reporting period, and 1001 Brickell Bay Drive, our only office building.

The following tables present the results of operations of consolidated properties with our segments reported on a proportionate basis for the three months ended June 30, 2022 and 2021 (in thousands):


	Development and Redevelopment		Operating		Other		Proportionate and Other Adjustments(1)		Corporate and Amounts Not Allocated to Segments			Consolidated
Three Months Ended June 30, 2022:
Rental and other property revenues	$	8,899	$	33,122	$	4,333	$	1,867	$	2,476		$	50,697
Property operating expenses		3,212		10,435		1,267		1,846		2,948			19,708
Other operating expenses not allocated to segments (2)		—		—		—		—		43,824			43,824
Total operating expenses		3,212		10,435		1,267		1,846		46,772			63,532
Proportionate property net operating income (loss)		5,687		22,687		3,066		21		(44,296	)		(12,835	)
Other items included in income before income tax (3)		—		—		—		—		312,003			312,003
Income (loss) before income tax	$	5,687	$	22,687	$	3,066	$	21	$	267,707		$	299,168


	Development and Redevelopment		Operating		Other		Proportionate and Other Adjustments(1)		Corporate and Amounts Not Allocated to Segments			Consolidated
Three Months Ended June 30, 2021:
Rental and other property revenues	$	2,489	$	29,782	$	3,138	$	1,255	$	3,754		$	40,418
Property operating expenses		2,101		9,954		1,090		1,239		2,019			16,403
Other operating expenses not allocated to segments (2)		—		—		—		—		28,022			28,022
Total operating expenses		2,101		9,954		1,090		1,239		30,041			44,425
Proportionate property net operating income (loss)		388		19,828		2,048		16		(26,287	)		(4,007	)
Other items included in income before income tax (3)		—		—		—		—		(19,139	)		(19,139	)
Income (loss) before income tax	$	388	$	19,828	$	2,048	$	16	$	(45,426	)	$	(23,146	)

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The following tables present the results of operations of consolidated properties with our segments reported on a proportionate basis for the six months ended June 30, 2022 and 2021 (in thousands):


	Development and Redevelopment		Operating		Other		Proportionate and Other Adjustments(1)		Corporate and Amounts Not Allocated to Segments			Consolidated
Six Months Ended June 30, 2022:
Rental and other property revenues	$	15,831	$	65,361	$	9,378	$	3,797	$	6,324		$	100,691
Property operating expenses		5,728		20,697		2,822		3,750		5,932			38,929
Other operating expenses not allocated to segments (2)		—		—		—		—		76,414			76,414
Total operating expenses		5,728		20,697		2,822		3,750		82,346			115,343
Proportionate property net operating income (loss)		10,103		44,664		6,556		47		(76,022	)		(14,652	)
Other items included in income before income tax (3)		—		—		—		—		319,876			319,876
Income (loss) before income tax	$	10,103	$	44,664	$	6,556	$	47	$	243,854		$	305,224


	Development and Redevelopment		Operating		Other		Proportionate and Other Adjustments(1)		Corporate and Amounts Not Allocated to Segments			Consolidated
Six Months Ended June 30, 2021:
Rental and other property revenues	$	4,746	$	59,051	$	6,324	$	2,712	$	7,389		$	80,222
Property operating expenses		3,968		20,160		2,127		2,680		4,410			33,345
Other operating expenses not allocated to segments (2)		—		—		—		—		55,050			55,050
Total operating expenses		3,968		20,160		2,127		2,680		59,460			88,395
Proportionate property net operating income (loss)		778		38,891		4,197		32		(52,071	)		(8,173	)
Other items included in income before income tax (3)		—		—		—		—		1,361			1,361
Income (loss) before income tax	$	778	$	38,891	$	4,197	$	32	$	(50,710	)	$	(6,812	)

(1)

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

(2)

Other operating expenses not allocated to segments consist of depreciation and amortization, general and administrative expense, and miscellaneous other expenses.

(3)

Other items included in Income before income tax benefit consist primarily of interest expense, gain on our interest rate options, gain on sale of Real Estate, lease modification income and mezzanine investment income, net.

Net real estate and non-recourse property debt, net, of our segments as of June 30, 2022 and December 31, 2021, were as follows (in thousands):


	Development and Redevelopment			Operating			Other			Corporate(1)		Total
As of June 30, 2022:
Buildings and improvements	$	403,803		$	668,510		$	197,311		$	—	$	1,269,624
Land		189,222			259,033			153,502			—		601,757
Total real estate		593,025			927,543			350,813			—		1,871,381
Accumulated depreciation		(18,081	)		(450,643	)		(51,144	)		—		(519,868	)
Net real estate		574,944			476,900			299,669			—		1,351,513

Non-recourse property debt and construction loans, net	$	231,090		$	743,596		$	26,463		$	—	$	1,001,149

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	Development and Redevelopment			Operating			Other			Corporate(1)			Total
As of December 31, 2021:
Buildings and improvements	$	277,041		$	675,269		$	196,853		$	108,051		$	1,257,214
Land		82,325			259,033			153,501			39,426		$	534,285
Total real estate		359,366			934,302			350,354			147,477			1,791,499
Accumulated depreciation		(2,252	)		(444,324	)		(41,841	)		(72,698	)		(561,115	)
Net real estate	$	357,114		$	489,978		$	308,513		$	74,779		$	1,230,384

Non-recourse property debt, net	$	163,570		$	428,308		$	—		$	54,829		$	646,707

(1)

During the six months ended June 30, 2022, certain properties were sold or reclassified as Held for Sale, and therefore are not included in our segment balance sheets, as of June 30, 2022. We added a new Corporate segment to this table for presentation purposes to display these assets and the associated debt as of December 31, 2021.

In addition to the amounts disclosed in the tables above, as of June 30, 2022 the Development and Redevelopment segment right-of-use lease assets and lease liabilities aggregated to $130.5 million and $123.8 million, respectively, and as of December 31, 2021, aggregated to $429.8 million and $435.1 million, respectively. As of June 30, 2022, right-of-use lease assets and lease liabilities primarily relate to our investments in Upton Place and Oak Shore. As described in Note 9, we entered into termination agreements to cancel our leases on North Tower of Flamingo Point, 707 Leahy, The Fremont, and Prism on September 1, 2022. Consequently, during the period ended June 30, 2022, we wrote off $326.1 million and $337.3 million right-of-use lease assets and lease liability, respectively. Additionally, we purchased a land parcel for $64.0 million and terminated the certain lease component on Flagler Village and derecognized associated right-of-use lease assets and lease liabilities of $60.5 million and $46.7 million, respectively.

Note 11 – Financing Activities

In May 2022, we entered into 14 long term, fixed rate, non-recourse property loans that totaled $574.7 million. This non-recourse debt has a weighted-average term of 9.4 years and a weighted-average interest rate of 4.63%. Total debt issuance costs of approximately $5.4 million have been deferred. In addition, we incurred $7.4 million in prepayment costs associated with the extinguishment of six loans.

In June 2022, we entered into a construction loan for up to $23.0 million in financing to fund the Oak Shore project. The loan has a term of 36 months with an option to extend for two additional one year periods, and an interest rate based on the One-Month Term SOFR plus a spread of 4.41%, subject to a minimum all-in interest rate of 5.56%.

In June 2022, we entered into an agreement for the modification and early repayment of our Notes Payable to AIR. During the quarter ended June 30, 2022, we made a principal payment of $387.1 million, and recognized $17.9 million of associated spread maintenance costs, $12.9 million of which were paid as of June 30, 2022. See Note 5 for further information.

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 gain of $8.0 million, which is included in Realized and unrealized gains (losses) on interest rate options in our Condensed Consolidated Statements of Operations for the periods ended June 30, 2022.

Note 12 – Subsequent Events

Subsequent to June 30, 2022, we purchased the remaining two land parcels of our Flagler Village neighborhood development site in Fort Lauderdale, Florida for $20.0 and $16.0 million.

In July 2022, we sold our Cedar Rim Apartments property located in King County, Washington for $53.0 million. Cedar Rim was classified as a held for sale asset in the second quarter of 2022.

In July 2022, we closed a preferred equity financing arrangement with an institutional equity investor for $102.0 million, accruing at a fixed 8.0% interest rate, related to a portfolio of stabilized assets.

In July 2022, we made the remaining principal and spread maintenance payments on our Notes Payable to AIR of $147.0 and $5.0 million.

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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.

•

Platform: We have a talented leadership team with an average Aimco tenure of over 10 years and nearly 20 years of diverse real estate industry experience combined with a disciplined and proven investment process.

•

Portfolio: We benefit from a deep and growing investment pipeline with $1.0 billion of development and redevelopment projects currently underway, over $2.5 billion of future opportunities under Aimco-control and more being explored. We add to this alternative investment strategies and a diversified portfolio of stabilized real estate to provide risk management and produce predictable cash flow.

•

Growth Plan: We have more than $500.0 million of equity targeted for redeployment into high returning activities over the next 4-5 years offering investors a high performing, high return vehicle with expected annualized returns on equity from 12-16% once optimal capital allocation is achieved.

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:

•

Benefiting from a national platform while leveraging local and regional expertise

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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•

Managing and investing in value-add and opportunistic real estate

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.

•

Managing and investing in other alternative investments

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.

•

Owning a portfolio of stabilized core and core plus real estate

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.

•

Maintaining sufficient liquidity and utilizing safe financial leverage

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

•

Net income per share attributable to Aimco, on a fully dilutive basis, was $1.57 for the three months ended June 30, 2022, compared to a loss of ($0.13) for the three months ended June 30, 2021, due primarily to the recognition of income resulting from the agreement to terminate the AIR leases and gains related to the sale of Pathfinder Village. Net income per share attributable to Aimco, on a fully dilutive basis was $1.65 for the six months ended June 30, 2022, compared to net income per share of $0.00 for the six months ended June 30, 2021.

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•

For the three months ended June 30, 2022, revenue and net operating income from our Operating Properties were up 11.2% and 14.4%, respectively, year over year, with occupancy of 97.7%, up 20 basis points year over year.

•

We reached an agreement with AIR to terminate four leases on September 1, 2022 that will result in more than $100 million of realized value creation (net of costs) for Aimco shareholders and eliminate $469 million of obligations related to the four leased properties.

•

In July 2022, we completed the early repayment of the $534 million of Notes Payable to AIR, originally scheduled to mature in January 2024 and carrying an annual rate of 5.2% with proceeds from property level financings, the sale of Pathfinder Village, and the placement of preferred equity secured by a portfolio of stabilized properties.

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:

•

As previously announced, following the successful development and lease-up of 707 Leahy in Redwood City, California, Prism in Cambridge, Massachusetts, Flamingo Point North Tower in Miami Beach, Florida, and The Fremont on the Anschutz Medical Campus in Aurora, Colorado, Aimco and AIR have agreed to cancel our leasehold interest in each property on or before September 1, 2022. In return for the termination of the leases, we will receive $200 million, resulting in value creation, net of costs, of approximately $100 million, which will be realized about 18 months sooner than originally anticipated.

•

At The Hamilton in Miami, Florida, we now expect to welcome the first residents into redesigned and fully renovated units in August, 2022. As of July 31, 2022, 61 units were leased or pre-leased at rental rates more than 20% ahead of underwriting.

•

Construction continues on schedule and on budget at Upton Place in Northwest Washington, D.C., the Benson Hotel and Faculty Club on the Anschutz Medical Campus in Aurora, Colorado and at our single-family home development project, Oak Shore, in Corte Madera, California.

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:

•

The borrower on our $354.4 million mezzanine loan, which is secured by the Parkmerced stabilized multifamily property plus phases two through nine of the site's future development opportunity, remains current on its first mortgage obligations. The neighboring San Francisco State University is expected to return to full in-person learning this fall, with hybrid options, increasing the demand for the apartments that serve as collateral for the Aimco loan. Due to the relative size of our investment and alternative accretive uses of capital, we recently initiated a marketing effort to explore potential opportunities to monetize all or a portion of our investment.

•

We redeemed 22% of our passive equity investment in IQHQ Inc., a life sciences developer. In July, we received proceeds of $16.5 million from the sale resulting in a greater than 50% internal rate of return over the hold period for this portion of our investment. Aimco retained 2.4 million shares worth $59.7 million and the opportunity to collaborate with IQHQ on future development opportunities that include a multifamily component.

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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:

•

In May, we executed joint venture agreements to act as a co-GP on the development of a phased multifamily community in Bethesda, Maryland. The project is fully entitled and includes approvals for over 2,200 units in six phases. We plan to participate in the first two multifamily phases totaling 574 units with an expected Aimco investment of $18.3 million, we also have rights to increase our investment and to choose to participate in future phases of development.

•

In June, July, and August, we closed on the purchase of three development parcels we contracted to acquire, for $100 million, in February 2022. The nine-acre site is located in the rapidly growing Flagler Village neighborhood of Fort Lauderdale, Florida, and allows for approximately three million square feet of phased, mixed-use development, which could contain up to 1,500 residential units, more than 300 hotel keys, and more than 100,000 square feet of retail space at full build-out. We intend to execute the planned development activity through joint venture financing.

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:

•

Revenue in the second quarter of 2022 was $33.1 million, up 11.2% year over year, resulting from a $203 increase in average monthly revenue per apartment home to $2,039, and a 20-basis point increase in Average Daily Occupancy to 97.7%.

•

Expenses the second quarter of 2022 were $10.4 million, up 4.8% year over year.

•

Net operating income in the second quarter of 2022 was $22.7 million, up 14.4% year-over-year.

•

1001 Brickell Bay Drive, a waterfront office building in Miami, Florida, is owned as part of a larger assemblage with substantial development potential. In the first half of 2022, we executed leases on over 60,000 square feet of office space, at rates per square foot 20% higher than leases executed in the first half of 2021. At the end of the second quarter 2022, the building was 85% occupied, up from 73% at the same time last year.

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

•

excluding utility reimbursements, for the consolidated communities. In our Condensed Consolidated Statements of Operations, utility reimbursements are included in rental and other property revenues, in accordance with GAAP;

•

excluding the results of four apartment communities with an aggregate 142 apartment homes that we neither manage nor consolidate, notes receivable, our investment in IQHQ and the Mezzanine Investment; and

•

excluding property management costs and casualty gains or losses, reported in consolidated amounts, in our assessment of segment performance.

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:

•

Development and Redevelopment proportionate property net operating income increased by $5.3 million due primarily to the delivery and lease up of units at newly constructed or redeveloped apartment communities. Development and Redevelopment proportionate property net operating income will decrease in the third quarter due to the termination of the four leases.

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•

Operating proportionate property net operating income increased by $2.9 million, or 14.4%. The increase was attributable primarily to a $3.3 million, or 11.2% increase in rental and other property revenues due to higher average revenues of $203 per apartment home, and a 20-basis point increase in occupancy.

•

Other proportionate property net operating income increased by $1.0 million, or 49.7%.

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:

•

Development and Redevelopment proportionate property net operating income increased by $9.3 million, due primarily to the delivery and lease up of units at newly constructed or redeveloped apartment communities. Development and Redevelopment proportionate property net operating income will decrease in the third quarter due to the termination of the four leases.

•

Operating proportionate property net operating income increased by $5.8 million, or 14.8%. The increase was attributable primarily to a $6.3 million, or 10.7% increase in rental and other property revenues due to higher average rental rates of $185 per apartment home, and a 50-basis point increase in occupancy.

•

Other proportionate property net operating income increased by $2.4 million, or 56.2%.

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

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.

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:

•

gains and losses on the dispositions of depreciated property;

•

impairment write-downs of depreciated property;

•

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

•

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

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:

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$81.8 million in cash and cash equivalents; and

•

$12.5 million of restricted cash, including amounts related to tenant security deposits and escrows held by lenders for capital additions, property taxes, and insurance; and

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$121.2 million of available capacity to borrow under our revolving secured credit facility.

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.

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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Aimco OP 10-Q2022 Q2 Quarterly report

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