What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-07 · 333 added, 671 removed, 639 unchanged (61% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 30, 2022

March 31, 2023

December 31, 2022

7 unchanged sentences

Interest rate options

Right-of-use lease assets

Unconsolidated real estate partnerships

Notes receivable

Right-of-use lease assets - finance leases

Other assets, net

2 unchanged sentences

Construction loans, net

Notes payable to AIR

Total indebtedness

Deferred tax liabilities

Lease liabilities

Lease liabilities - finance leases

Accrued liabilities and other

2 unchanged sentences

Commitments and contingencies (Note 3)

Common Stock, $ 0.01 par value, 510,587,500 shares authorized at both September 30, 2022 and December 31, 2021, and 149,124,466 and 149,818,021 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Equity ( 510,587,500 shares authorized at both March 31, 2023 and December 31, 2022):

Common Stock, $ 0.01 par value, 144,718,453 and 146,524,941 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Retained Earnings (accumulated deficit)

Retained earnings

Total Aimco equity

6 unchanged sentences

(In thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Rental and other property revenues

4 unchanged sentences

Total operating expenses

Interest income

Interest expense

Mezzanine investment income, net

Mezzanine investment income (loss), net

Realized and unrealized gains (losses) on interest rate options

Realized and unrealized gains (losses) on equity investments

Gains on dispositions of real estate

Lease modification income

Income from unconsolidated real estate partnerships

Other income (expense), net

20 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended September 30, 2022 and 2021

(In thousands)

Noncontrolling

Retained Earnings (Accumulated Deficit)

Balances at June 30, 2021

Net income (loss)

Redemption of OP Units

Share-based compensation expense

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Balances at September 30, 2021

Balances at June 30, 2022

Net income (loss)

Redemption of OP Units

Share-based compensation expense

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Purchase of noncontrolling interests in consolidated real estate partnerships

Common stock repurchased

Cash Dividends

Balances at September 30, 2022

See notes to condensed consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Nine Months Ended September 30, 2022 and 2021

(In thousands)

Noncontrolling

For the Three Months Ended March 31, 2023 and 2022

(In thousands, except per share data)

Retained Earnings (Accumulated Deficit)

Noncontrolling Interests in Consolidated

Common Noncontrolling Interests in Aimco

Balances at December 31, 2021

4 unchanged sentences

Distributions to noncontrolling interests

Redemption of redeemable noncontrolling interests in consolidated real estate partnerships

Common stock repurchased

Other common stock issuances

Balances at September 30, 2021

Balances at March 31, 2022

Balances at December 31, 2022

2 unchanged sentences

Share-based compensation expense

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Purchase of noncontrolling interests in consolidated real estate partnerships

Distributions to noncontrolling interests

Common stock repurchased

Other common stock issuances

Redemption of redeemable noncontrolling interests in consolidated real estate partnerships

Cash Dividends

Balances at September 30, 2022

Balances at March 31, 2023

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

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

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

Mezzanine investment (income) loss, net

Realized and unrealized (gains) losses on interest rate options

Realized and unrealized (gains) losses on equity investments

Income from unconsolidated real estate partnerships

Realized and unrealized gains on interest rate options

Income tax expense (benefit)

Amortization of debt issuance costs and other

Mezzanine investment, net

Loss on extinguishment of debt, net

Lease modification income

Realized and unrealized gains (losses) on equity investments

Gain on disposition of real estate

Share-based compensation

1 unchanged sentence

Other assets, net

Net cash received from development property lease terminations

Accrued liabilities and other

4 unchanged sentences

Capital expenditures (1)

Proceeds from disposition of real estate

Investment in IQHQ

Redemption of IQHQ investment

Investment in unconsolidated real estate partnerships

Other investing activities

3 unchanged sentences

Proceeds from construction loans

Payments of deferred loan costs

Principal repayments on non-recourse property debt

Principal repayments on construction loans

Principal repayments on Notes Payable to AIR

Purchase of interest rate options

Proceeds from interest rate option

Payments on finance leases

Payments of prepayment premiums

Common stock repurchased

Dividend paid on common stock

Distributions to noncontrolling interests

Distributions to redeemable noncontrolling interests

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Contributions from redeemable noncontrolling interests

Redemption of common and preferred OP units

Redemption of noncontrolling interests

Redemption of OP units

Redemption of redeemable noncontrolling interests

4 unchanged sentences

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

(1) Accrued capital expenditures were $ 31.4 million and $ 19.4 million as of September 30, 2022 and 2021, respectively.

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

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

September 30, 2022

March 31, 2023

December 31, 2022

7 unchanged sentences

Interest rate options

Right-of-use lease assets

Unconsolidated real estate partnerships

Notes receivable

Right-of-use lease assets - finance leases

Other assets, net

2 unchanged sentences

Construction loans, net

Notes payable to AIR

Total indebtedness

Deferred tax liabilities

Lease liabilities

Lease liabilities - finance leases

Accrued liabilities and other

14 unchanged sentences

(In thousands, except per unit data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Rental and other property revenues

4 unchanged sentences

Total operating expenses

Interest income

Interest expense

Mezzanine investment income, net

Mezzanine investment income (loss), net

Realized and unrealized gains (losses) on interest rate options

Realized and unrealized gains (losses) on equity investments

Gains on dispositions of real estate

Lease modification income

Income from unconsolidated real estate partnerships

Other income (expense), net

17 unchanged sentences

AIMCO OP L.P.

CONDENSED CONSOLIDATED STATE MENTS OF PARTNERS’

For the three months ended September 30, 2022 and 2021

CONDENSED CONSOLIDATED S TATEMENTS OF PARTNERS’

For the Three Months Ended March 31, 2023 and 2022

(In thousands)

8 unchanged sentences

Partners’

Balances at June 30, 2021

Balances at December 31, 2021

Net income (loss)

3 unchanged sentences

Distributions to noncontrolling interests

Balances at September 30, 2021

Balances at June 30, 2022

Net income (loss)

Redemption of OP Units

Share-based compensation expense

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Purchase of noncontrolling interests in consolidated real estate partnerships

Redemption of redeemable noncontrolling interests in consolidated real estate partnerships

Repurchases of OP Units held by Aimco

Cash Dividends

Balances at September 30, 2022

See notes to condensed consolidated financial statements.

AIMCO OP L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’

For the nine months ended September 30, 2022 and 2021

(In thousands)

General Partner

Limited Partner

Partners’

Attributable to

Aimco Operating

Noncontrolling

in Consolidated Real

Estate Partnerships

Partners’

Balances at December 31, 2020

Net income (loss)

Redemption of OP Units

Other common stock issuances

Share-based compensation expense

Contribution from noncontrolling interests

Distributions to noncontrolling interests

Balances at September 30, 2021

Other OP Unit issuances

Balances at March 31, 2022

Balances at December 31, 2022

2 unchanged sentences

Share-based compensation expense

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Purchase of noncontrolling interests in consolidated real estate partnerships

Distributions to noncontrolling interests

Repurchases of OP Units held by Aimco

Other OP Unit issuances

Redemption of redeemable noncontrolling interests in consolidated real estate partnerships

Cash dividends

Balances at September 30, 2022

Balances at March 31, 2023

See notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

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

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

Mezzanine investment (income) loss, net

Realized and unrealized (gains) losses on interest rate options

Realized and unrealized (gains) losses on equity investments

Income from unconsolidated real estate partnerships

Realized and unrealized gains on interest rate options

Income tax expense (benefit)

Amortization of debt issuance costs and other

Mezzanine investment, net

Loss on extinguishment of debt, net

Lease modification income

Realized and unrealized gains (losses) on equity investments

Gain on disposition of real estate

Share-based compensation

1 unchanged sentence

Other assets, net

Net cash received from development property lease terminations

Accrued liabilities and other

4 unchanged sentences

Capital expenditures (1)

Proceeds from disposition of real estate

Investment in IQHQ

Redemption of IQHQ investment

Investment in unconsolidated real estate partnerships

Other investing activities

3 unchanged sentences

Proceeds from construction loans

Payments of deferred loan costs

Principal repayments on non-recourse property debt

Principal repayments on construction loans

Principal repayments on Notes Payable to AIR

Purchase of interest rate options

Proceeds from interest rate option

Payments on finance leases

Payments of prepayment premiums

Common stock repurchased

Dividend paid on common stock

Distributions to noncontrolling interests

Distributions to redeemable noncontrolling interests

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Contributions from redeemable noncontrolling interests

Redemption of common and preferred OP units

Redemption of noncontrolling interests

Redemption of OP units

Redemption of redeemable noncontrolling interests

4 unchanged sentences

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

(1) Accrued capital expenditures were $ 31.4 million and $ 19.4 million as of September 30, 2022 and 2021, respectively.

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

See notes to condensed consolidated financial statements.

2 unchanged sentences

NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS

September 30, 2022

March 31, 2023

Note 1 —

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”).

On December 15, 2020, Aimco completed the separation of its businesses (the “Separation”), creating two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp.

(“AIR”) (Aimco and AIR together, as they existed prior to the Separation, “Aimco Predecessor”).

Events noted in this filing as occurring before December 15, 2020, were those entered into by Aimco Predecessor.

Aimco, through a wholly owned subsidiary, is the general and special limited partner of Aimco OP L.P.

4 unchanged sentences

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.

As of September 30, 2022, Aimco owned 92.7 % of the legal interest in the common partnership units of Aimco Operating Partnership and 95.0 % of the economic interest in Aimco Operating Partnership.

As of March 31, 2023, Aimco owned 92.5 % of the legal interest in the common partnership units of Aimco Operating Partnership and 94.9 % of the economic interest in Aimco Operating Partnership.

The remaining 7.5 % legal interest is owned by limited partners.

The common partnership units of Aimco Operating Partnership are referred to as "OP Units".

As the sole general partner of Aimco Operating Partnership, Aimco has exclusive control of Aimco Operating Partnership’s day-to-day management.

4 unchanged sentences

one commercial office building that is part of a land assemblage;

two residential apartment communities, with 965 planned apartment homes, a single family rental community with 16 planned homes plus eight accessory dwelling units, and one hotel, with 106 planned rooms, we are actively developing or redeveloping;

three residential apartment communities, with 1,185 planned apartment homes, a single family rental community with 16 planned homes plus eight accessory dwelling units, and one hotel, with 106 rooms, we are actively developing or redeveloping;

land parcels held for development.

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 );

Our real estate portfolio also includes two unconsolidated investments in land held for development.

In addition, we hold other alternative investments, including our Mezzanine Investment (see Note 2 for further information );

our IQHQ investment;

and our investment in real estate technology funds.

6 unchanged sentences

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 nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The Condensed Consolidated Balance Sheets of Aimco and Aimco Operating Partnership as of December 31, 2022 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.

12 unchanged sentences

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.

Common noncontrolling interests in Aimco Operating Partnership consist of OP Units held by third parties, 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 OP Units, other than Aimco, based on the weighted-average number of OP Units (including Aimco) outstanding during the period.

For the periods ended March 31, 2023 and 2022, the holders of OP Units had a weighted-average economic ownership interest in Aimco Operating Partnership of approximately 5.1 % , and 5.0 %, respectively.

Substantially all of the assets and liabilities of Aimco are held by Ai mco Operating Partnership.

Redeemable Noncontrolling Interests in Consolidated Real Estate Partnerships

1 unchanged sentence

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 these 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.

In July 2022, we closed a $ 102.0 million preferred equity financing with an institutional investor, providing for a fixed 8 % annual rate of return payable monthly.

In February 2022, we acquired all of the outstanding redeemable noncontrolling interests in two consolidated properties for $ 5.1 million.

At the time of redemption, the carrying amount of the redeemable non-controlling interests was $ 4.9 million.

Redeemable noncontrolling interests in consolidated real estate partnerships as of September 30, 2022 consists of the $ 102.0 million preferred equity noted above and our partner's equity interest in the Upton Joint Venture, which provides for an accruing 9.7 % rate of return on their investment.

These investment interests are presented as Redeemable noncontrolling interests in consolidated real estate partnerships in our Condensed Consolidated Balance Sheet as of September 30, 2022.

The following table shows changes in our redeemable noncontrolling interests in consolidated real estate partnerships from December 31, 2021 to September 30, 2022 (in thousands):

Redeemable noncontrolling interests in consolidated real estate partnerships as of March 31, 2023, consists of the following:

(i) a $ 102.0 million preferred equity interest in an entity that owns a portfolio of operating apartment communities and (ii) equity interests in two separate consolidated joint ventures (in which we hold preferred equity interests in one and common equity interests in the other) that are actively developing residential apartment communities.

Capital contributions, distributions, and net income attributable to redeemable noncontrolling interests in consolidated real estate partnerships are determined in accordance with the relevant partnership agreements.

These interests are presented as Redeemable noncontrolling interests in consolidated real estate partnerships in our Condensed Consolidated Balance Sheet as of March 31, 2023.

The following table shows changes in our redeemable noncontrolling interests in consolidated real estate partnerships from December 31, 2022 to March 31, 2023 (in thousands):

Balance at December 31, 2022

1 unchanged sentence

Distributions

Balance at September 30, 2022

Balance at March 31, 2023

Mezzanine Investment

2 unchanged sentences

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, 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 received on such loan to us, and we are obligated to indemnify AIR against any costs and expenses related thereto.

Ownership of the subsidiaries that originated and hold the Mezzanine Investment was retained by AIR following the Separation.

The Separation Agreement with AIR provides for AIR to transfer ownership of the subsidiaries that originated and hold the Mezzanine Investment, 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 Separation and as of the date of this filing, legal title of these subsidiaries had not yet transferred to us.

Until legal title of the subsidiaries is transferred, AIR is obligated to pass payments received on the Mezzanine Investment 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.

The loan and the underlying real estate are 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 conclude that a portion of the Mezzanine Investment is not recoverable, we will recognize an impairment .

On a periodic basis, we evaluate our Mezzanine Investment for impairment.

We assess whether there are any indicators that imply the value of our investment may be impaired.

These include assessments of both the underlying property performance and general market conditions in place.

An investment is considered impaired if we determine that its fair value is less than the net carrying value of the investment on an other-than-temporary basis.

Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors.

We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary.

These factors include the loan’s maturity date, our intent and ability to retain our investment in the entity, and the financial condition and long-term prospects of the entity.

Prior to recording a non-cash impairment charge during the three months ended December 31, 2022, we recognized as income the net amounts earned on the Mezzanine Investment by AIR on its equity investment that were due to be paid to us when collected to the extent the income was supported by the change in the counterparty’s claim to the net assets of the underlying borrower.

The income recognized primarily represented the interest accrued under the terms of the underlying Mezzanine Investment.

In February 2023, we entered into an agreement to sell our Mezzanine Investment for $ 167.5 million.

The initial $ 5.0 million deposit received from the purchaser became nonrefundable in April 2023 when various conditions, including transfer consents, were cleared.

The sale is expected to close during the three months ended June 30, 2023.

Income Tax Benefit (Expense)

1 unchanged sentence

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.

Our income tax benefit (expense) calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities.

Income taxes, as well as changes in valuation allowance and incremental deferred tax items in conjunction with intercompany asset transfers and internal restructurings (if applicable), are included in Income tax benefit (expense) in our Condensed Consolidated Statements of Operations .

Consolidated GAAP income or loss subject to tax consists of pretax income or loss of our taxable entities and gains retained by the REIT.

For the three and nine months ended September 30, 2022 , we had consolidated net loss and income subject to tax of $ 75.6 million and $ 91.0 million, respectively.

For the three and nine months ended September 30, 2021 , we had consolidated net losses subject to tax of $ 7.9 million and $ 26.4 million, respectively.

For the three months ended September 30, 2022, we recognized income tax benefit of $ 17.6 million compared to a $ 2.0 million benefit during the same period in 2021.

The change is primarily due to the GAAP income taxes associated with the lease modification depreciation expense recognized in the third quarter of 2022.

For the nine months ended September 30, 2022, we recognized income tax expense of $ 24.3 million compared to a $ 9.9 million benefit during the same period in 2021 .

The change is primarily due to the GAAP income taxes associated with the net lease modification income recognized in 2022.

For the three months ended March 31, 2023, we had a net loss subject to tax of $ 4.9 million, compared to a net loss subject to tax of $ 14.8 million for the same period in 2022.

For the three months ended March 31, 2023, we recognized an income tax benefit of $ 4.2 million, compared to an income tax benefit of $ 4.1 million during the same period in 2022.

T he change is due primarily to the tax effect of depreciation associated with properties owned by, and activities of, our TRS entities, as well as a reduction to the effective state tax rate expected to apply to the reversal of our existing deferred items.

Use of Estimates

9 unchanged sentences

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

September 30, 2022

March 31, 2023

December 31, 2022

Other investments

Notes receivable

Unconsolidated real estate partnerships

Assets held for sale (1)

Deferred costs, deposits, and other

Prepaid expenses and real estate taxes

Intangible assets, net

Corporate fixed assets

Accounts receivable, net of allowances of $ 1,406 and $ 1,285 as of September 30, 2022 and December 31, 2021, respectively

Accounts receivable, net of allowances of $ 850 and $ 1,206 as of March 31, 2023 and December 31, 2022, respectively

Deferred tax assets

Intangible assets, net

Due from affiliates

Due from third-party property manager

Total other assets, net

(1) In addition to the properties 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 September 30, 2022 , assets held for sale include one land parcel in Fort Lauderdale, Florida, which is expected to be sold during the fourth quarter of 2022.

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 .

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.

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.

In March 2020, the FASB issued Accounting Standards Update ("ASU") 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 co nsolidated 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

In February 2022, we entered into a short-term cancellable lease of and a purchase agreement to acquire, for $ 100.0 million, a nine -acre development site in the Flagler Village neighborhood of Fort Lauderdale, Florida.

The site has the potential for the development of approximately three million square feet of mixed-use property, which could contain up to 1,500 residential units at full build-out.

As of September 30, 2022, we had completed the $ 100.0 million purchase and recognized an additional $ 5.9 million of capitalized costs to Land in our Condensed Consolidated Balance Sheets.

In January 2022, our Fort Lauderdale consolidated joint venture closed on the acquisition of three undeveloped land parcels located in downtown Fort Lauderdale, Florida 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, one land parcel was subject to a sales agreement with closing expected during the fourth quarter of 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 September 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 $ 8.1 m illion are included in Accrued liabilities and other in our Condensed Consolidated Balance Sheets .

In February 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.

In June 2022, 22 % of our original investment with a cost basis of $ 10.8 million was redeemed for $ 16.5 million.

Consequently, we recognized a $ 5.7 million gain from this redemption, and the redemption cash was received in July 2022.

Further at that time, 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 .

Joint Venture Transactions

In May 2022, we formed two joint ventures for a ground up project on the development of a phased multifamily community totaling 574 units in Bethesda, Maryland.

We hold a 50 % share of the joint ventures (the “DC joint ventures”), with a maximum total initial capital commitment of $ 21.6 million, of which $ 13.4 milli on has been funded as of September 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 one million square feet of mixed-use development in the Edgewater neighborhood of Miami, Florida.

We hold 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 and cash of $ 0.3 million.

Our total capital commitment for this venture i s $ 8.0 million.

We will serve as the development manager for this project, which is expected to begin construction in 2023.

In July, we sold Cedar Rim, a 104 -unit apartment community located in Renton, Washington, for $ 53.0 million.

Cedar Rim was previously reported as held for sale.

In August, we sold 2900 on First, a 135 -unit apartment community with 14,000 square feet of retail located in Seattle, Washington for $ 69.0 million.

2900 on First was previously reported as held for sale.

In May 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 of $ 94.6 million.

Pathfinder Village was a stabilized property previously reported within our Operating segment.

Lease Arrangements

In September 2022, we as lessee, received final payment from AIR, pursuant to the lease termination agreement entered into in June 2022.

The leases with respect to four properties were terminated, and we relinquished control of these properties.

See Note 9 for further information .

, which provides optional expedients to debt, derivatives, and other contracts that refer to LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The original ASU was effective as of its issuance date and provided temporary relief through December 31, 2022, which was extended through December 31, 2024 by ASU 2022-06, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848" .

The UK Financial Conduct Authority has an intended cessation date of the overnight 1-, 3-, 6-, and 12-month tenors of USD LIBOR of June 30, 2023.

We are currently evaluating the potential impact of the standard and may apply the optional expedients when LIBOR is discontinued, but do not expect it to have a material impact on our consolidated financial statements.

Note 3 —

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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 September 30, 2022, our commitments related to these capital activities totaled appr oximately $ 152.1 million, most of which we expect to incur during the next 24 months.

As described in Note 3 , we have joint venture commitments to fun d a total of $ 29.6 million for our Edgewater joint venture and DC joint ventures formed during 2022.

As of September 30, 2022 , we had $ 14.2 million of remaining commitments.

We expect to fund the remaining commitments over the next twelve months.

As of September 30, 2022, we have remaining commitments of $ 2.7 mi llion related to four investments in privately held entities that develop technology related to the real estate industry.

The timing of funding is uncertain.

We enter into certain commitments for future purchases of goods and services in connection with the operations of our apartment communities.

We expect to fund most of these commitments over the next 24 months.

As of March 31, 2023, we had entered into construction-related contracts for $ 133.2 million, with $ 268.4 million undrawn on our construction loans.

As of March 31, 2023, we have remaining commitments of $ 9.5 million related to our unconsolidated joint ventures, which we expect to fund over the next twelve months.

In addition, we have remaining commitments of $ 2.3 million related to our investments in property technology funds invested in entities that develop technology related to the real estate industry.

The timing of the remaining funding of these commitments is uncertain.

We also 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.

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Note 4 —

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

Under the Master Services Agreement with AIR, 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 nine months ended September 30, 2022, we incurred administrative and supp ort fees of $ 0.6 million and $ 1.5 million, respectively, compared to $ 0.7 million and $ 1.8 million during the three and nine months ended September 30, 2021, respectively.

These administrative support fees are included in General and administrative expenses in our Condensed Consolidated Statements of Operations .

Property Management Agreements

Under the Property Management Agreements with AIR, 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 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 the other party before the end of the term.

Neither party is obligated to pay a termination fee or other penalty upon such termination.

During the three and nine months ended September 30, 2022, we incurred property management and property accounting fees of $ 1.4 million and $ 4.1 million , respectively, compared to $ 1.3 million and $ 3.8 million during the three and nine months ended September 30, 2021, respectively.

These 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 and that we choose to bring to market within one year thereafter.

Each time the parties wish to execute a new lease for a particular property, they will execute a stand-alone lease.

In September 2022, we received final payment from AIR, pursuant to the lease termination agreement entered into in June 2022.

The leases with respect to four properties were terminated, and we relinquished control of the associated properties.

See Note 9 for further information.

Notes Payable to AIR

In July 2022, we completed the prepayment of the $ 534.1 million of Notes Payable to AIR.

As a result of the prepayment, we incurred $ 17.4 million of spread maintenance costs, which were fully accrued as of June 30, 2022.

For the three and nine months ended September 30, 2022 , we recognized interest expense on the Notes Payable to AIR of $ 0.4 million and $ 13.7 million, respectively, compared to $ 6.9 million and $ 20.8 million for the three and nine months ended September 30, 2021, respectively.

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 previously secured the Notes Payable to AIR.

Due to and from AIR

As of September 30, 2022, we have amounts due to and from AIR of $ 6.7 m illion and $ 1.0 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 other reimbursements owed 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 $ 2.1 million, to be paid in equity.

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 September 30, 2022, we estimate the total 2022 reimbursement to AIR, pursuant to this arrangement, will b e $ 4.5 m illion.

We estimate compensation associated with these arrangements to tota l $ 6.6 million for 2022.

For the three and nine months ended September 30, 2022, we recognized $ 1.7 million and $ 4.6 million of expense related to the arrangements, respectively, compared to $ 1.2 million and $ 4.1 million for the three and nine months ended September 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 unvested share of Aimco stock and one unvested share of AIR stock at the Separation date for each unvested share they held at that date.

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.

Earnings per Share and per Unit

Aimco and Aimco Operating Partnership calculate basic earnings per share and basic earnings per unit based on the weighted-average number of shares of Common Stock and OP Units outstanding.

We calculate diluted earnings per share and diluted earnings per unit taking into consideration dilutive shares of Common Stock and OP Unit equivalents and dilutive convertible securities outstanding during the period.

Aimco's Common Stock and OP Unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in our issuance of additional shares of Common Stock and Aimco Operating Partnership’s issuance to us of additional OP Units equal to the number of shares of Common Stock purchased under the options.

These equivalents also include unvested market-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 OP Units outstanding equal to the number of the shares that vest.

OP 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.

Aimco's time-based restricted stock awards receive non-forfeitable dividends similar to shares of Common Stock and OP Units prior to vesting, and our market-based long-term incentive partnership units receive non-forfeitable distributions based on specified percentages of the distributions paid to OP 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 nine months ended September 30, 2022 and 2021, because their effects are dilutive.

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Participating securities are not included in the computation of diluted earnings per share and unit for the three months ended March 31, 2023, because the effect of their inclusion would be antidilutive.

However, participating securities were included in the computation of diluted earnings per share and unit for the three months ended March 31, 2022, because the effect of their inclusion was dilutive.

Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings per share and per unit for the three months ended March 31, 2023 and 2022, are as follows (in thousands, except per share and per unit data):

Three Months Ended March 31,

Earnings per share

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Denominator - units

Basic weighted-average common partnership units outstanding

Basic weighted-average OP Units outstanding

Diluted partnership unit equivalents outstanding

Diluted weighted-average common partnership units outstanding

Diluted weighted-average OP Units outstanding

Earnings (loss) per unit - basic

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Note 5 —

Fair Value Measurements

Fair Value Measure ments and Disclosures

Recurring Fair Value Measurements

From time to time we purchase interest rate swaps, caps, and other instruments to provide protection against increases in interest rates on our variable rate debt.

As of September 30, 2022, we held interest rate swaps and caps with $ 1.7 billion notional value that provide protection through the fourth quarter of 2024.

These instruments were acquired for $ 15.7 million.

The fair value of these instruments is noted in the table below.

During the nine months ended September 30, 2022 , we monetized an interest rate swap and a portion of an interest rate cap for $ 15.5 million and recognized gains of $ 9.8 million, net of transaction costs.

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 .

As of March 31, 2023, we held interest rate swaps and caps with $ 2.0 billion notional value.

These instruments were acquired for $ 17.7 million, and the fair value of these instruments is noted in the table below.

On a recurring basis, we measure at fair value our interest rate options.

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 .

The fair value adjustment is included in earnings in Realized and unrealized gains (losses) 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 .

As of September 30, 2022, we have investments of $ 3.9 million in property technology funds consisting of entities that develop technology for the real estate industry.

As of March 31, 2023 and December 31, 2022, we have an investment in stock of $ 2.3 million and $ 1.2 million, respectively, classified within Level 1 of the GAAP fair value hierarchy.

In addition, as of March 31, 2023 and December 31, 2022, we have investments in property technology funds of $ 2.3 million and $ 3.1 million, respectively, in 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 September 30, 2022, and December 31, 2021 (in thousands):

As of September 30, 2022

The following table summarizes the fair value for our interest rate options and our investments in real estate technology funds as of March 31, 2023 , and December 31, 2022, (in thousands):

As of March 31, 2023

As of December 31, 2022

Interest rate options

Investment in real estate technology funds (1)

Investment in stock

Investments in real estate technology funds (1)

(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 September 30, 2022, assets measured at fair value on a nonrecurring basis shown in our Condensed Consolidated Balance Sheets consisted of our investment in IQHQ.

IQHQ was initially reported at cost.

In June 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 September 30, 2022 , the fair value of our investment in IQHQ measured on a nonrecurring basis remained at $ 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 September 30, 2022, and December 31, 2021 , due to their relatively short-term nature and high probability of realization.

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 March 31, 2023, and December 31, 2022, due to their relatively short-term nature and high probability of realization.

We estimate the fair value of our debt using an income and market approach, including comparison of the contractual terms to observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, 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.

As of July 2022, we had prepaid the $ 534.1 million of Notes Payable to AIR.

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 September 30, 2022, and December 31, 2021, (in thousands):

As of September 30, 2022

We classify the fair value of our non-recourse property debt and construction loans within Level 2 of the GAAP valuation 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, and construction loans as of March 31, 2023, and December 31, 2022, (in thousands):

As of March 31, 2023

As of December 31, 2022

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Construction loans

Notes Payable to AIR

Note 6 —

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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.

Aimco Operating Partnership is the primary beneficiary, and therefore consolidates our four VIEs that own interests in real estate.

In addition, we have nine 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 four 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 September 30, 2022, and December 31, 2021, (in thousands, except for VIE count):

September 30, 2022

December 31, 2021

We consolidate Aimco Operating Partnership, a VIE of which we are the primary beneficiary.

Through Aimco Operating Partnership, we consolidate all VIEs for which we are the primary beneficiary.

Substantially all of our assets and liabilities are those of Aimco Operating Partnership.

Aimco Operating Partnership is the primary beneficiary, and therefore consolidates its five VIEs that own interests in real estate.

Assets of our consolidated VIEs must first be used to settle the liabilities of those VIEs.

The consolidated VIEs' creditors do not have recourse to the general credit of Aimco Operating Partnership.

In addition, we have eight unconsolidated VIEs for which we are not the primary beneficiary because we are not their primary decision maker.

The eight unconsolidated VIEs include four unconsolidated real estate partnerships that hold four apartment communities in San Diego, California, the Mezzanine Investment, our passive equity investment in IQHQ, and our two unconsolidated investments in land held for development in Miami, Florida and Bethesda, Maryland.

Our maximum exposure to loss because of our involvement with the unconsolidated VIEs is limited to the carrying value of their assets.

The details of our consolidated and unconsolidated VIEs, excluding those of Aimco Operating Partnership, are summarized in the table below as of March 31, 2023, and December 31, 2022, (in thousands, except for VIE count):

As of March 31, 2023

As of December 31, 2022

Unconsolidated

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Other assets, net

Deferred tax liabilities

Accrued liabilities and other

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Lease liabilities

Consolidated Real Estate Partnerships

The changes in consolidated VIE assets and liabilities from December 31, 2021 to September 30, 2022 in the table above are primarily due to the impact of:

(i) In September 2022, we as lessee received final payment from AIR as lessor, pursuant to the lease termination agreement entered into in June 2022.

The leases with respect to four properties were terminated, and we relinquished control of the associated leasehold improvements and underlying land of these four properties.

Consequently, we derecognized $ 86.6 million real estate assets and a $ 138.4 million construction loan was paid off and derecognized as well.

In addition, we derecognized 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 9.

(ii) In February 2022, we acquired all of the outstanding redeemable non-controlling interests in an entity reported as a consolidated VIE as of December 31, 2021.

Unconsolidated Real Estate Partnerships

We own an interest in four unconsolidated real estate partnerships that hold four apartment communities in San Diego, California.

We also own investments in the Edgewater joint venture formed in March 2022 to develop a 2.8-acre site in Miami's Edgewater neighborhood, and the DC joint ventures formed in May 2022 to develop a ground-up phased multifamily community in Bethesda, Maryland.

See Note 3 for further information.

Our investment balances of $ 29.0 million and $ 13.0 million as of September 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 $ 362.8 million and $ 337.8 million as of September 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.

Note 7 —

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We receive variable payments from our residents and commercial tenants primarily for utility reimbursements and other services.

For the three and nine months ended September 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 September 30,

Nine Months Ended

September 30,

For the three months ended March 31, 2023 and 2022, our total lease income was comprised of the following amounts for all residential and commercial property leases (in thousands):

Three Months Ended March 31,

Fixed lease income

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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 four leases entered into on January 1, 2021 that pertained to our North Tower of Flamingo Point, 707 Leahy, The Fremont, and Prism properties .

This agreement terminated the four finance leases on September 1, 2022.

Upon termination, both parties were released of any and all liabilities and obligations under each respective lease other than those liabilities and obligations, if any, that expressly survived termination.

On September 1, 2022, we relinquished control of the leasehold improvements on these four properties as well as the underlying land.

In exchange, AIR remitted a total o f $ 200.0 m illion in consideration to us as termination payments.

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 that ended September 1, 2022.

We recorded $ 69.9 million and $ 85.7 million of total d epreciation expense for the three and nine months ended September 30, 2022, respectively.

In addition, we recognized Lease modification income of $ 1.6 million and $ 207.0 million, which is included in our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022, respectively.

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 , in February 2022, we, as lessee, entered into certain finance lease arrangements concurrent with a purchase agreement to acquire a development site in the Flagler Village neighborhood of Fort Lauderdale, Florida.

As of September 30, 2022, we had completed the $ 100.0 million purchase and recognized an additional $ 5.9 million of capitalized costs to Land in our Condensed Consolidated Balance Sheets.

See Note 3 for additional information.

As of September 30, 2022 and December 31, 2021, our finance leases had weighted-average remaining terms of 93.9 years and 38.5 years, respectively, and weighted-average discount rates of 6.0 % and 5.4 %, respectively.

As of September 30, 2022 , finance lease right-of-use lease assets and liabilities totaled $ 95.5 million and $ 98.5 million, respectively.

As of December 31, 2021 , finance right-of-use lease assets and liabilitie s totaled $ 429.8 million and $ 435.1 million, r espectively.

For the three and nine months ended September 30, 2022, amortization related to finance leases was $ 0.0 million and $ 6.7 million, respectively, net of amounts capitalized, compared to $ 2.1 million and $ 5.5 million for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2022, we capitalized $ 1.7 million and $ 6.5 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 $ 18.5 m illion, respectively, for three and nine months ended September 30, 2021.

Finance Lease Arrangements

We are lessee to finance leases for the land underlying the development sites at Upton Place, Strathmore Square, and a 15 -acre plot of land in Marin County, California.

As of March 31, 2023 and December 31, 2022, our finance leases had weighted-average remaining terms of 93.5 years and 94.2 years, respectively, and weighted-average discount rates of 6.1 % and 6.1 %, respectively.

For the three months ended March 31, 2023, amortization related to our finance leases was $ 0.0 million, net of amounts capitalized, compared to $ 3.2 million for the three months ended March 31, 2022.

In addition, we capitalized $ 2.1 million of lease costs associated with active development and redevelopment projects on certain of the underlying property and ground lease assets, compared to $ 2.8 million for the three months ended March 31, 2022.

Operating Lease Arrangements

We have operating leases primarily for corporate office space.

As of September 30, 2022 and December 31, 2021, our operating leases had weighted-average remaining terms of 6.6 years and 7.4 years, respectively.

As of September 30, 2022 and December 31, 2021, the leases had weighted-average discount rates of 3.1 % , an d 3.1 %, re spectively.

Substantially all of the payments under our office leases are fixed.

As of March 31, 2023 and December 31, 2022, our operating leases had weighted-average remaining terms of 6.0 years and 6.25 years, respectively, and weighted-average discount rates of 3.5 % , and 3.4 %, re spectively.

We record operating lease expense on a straight-line basis over the lease term.

Total operating lease expense for the three and nine months ended September 30, 2022 wa s $ 0.2 million and $ 0.5 million, respectively, compared to $ 0.2 million and $ 0.5 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022 and December 31, 2021, operating lease right-of-use lease assets of $ 4.6 million and $ 5.1 million, respectively, are included in O ther assets, net in our Condensed Consolidated Balance Sheets .

As of September 30, 2022 and December 31, 2021, operating lease liabilities of $ 11.6 million and $ 12.7 m illion, respectively, are included in A ccrued liabilities and other in our Condensed Consolidated Balance Sheets .

Total operating lease expense for the three months ended March 31, 2023 and 2022 was $ 0.4 million and $ 0.4 million, respectively .

As of March 31, 2023 and December 31, 2022, operating lease right-of-use lease assets of $ 6.4 million and $ 6.7 million, respectively, are included in Other assets, net in our Condensed Consolidated Balance Sheets .

As of March 31, 2023 and December 31, 2022, operating lease liabilities of $ 12.5 million and $ 12.8 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.

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Leases with an initial term of 12 months or less are not recorded in our Condensed Consolidated Balance Sheets .

Leases with initial terms greater than 12 months are recorded as operating or finance leases 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 .

For the three months ended March 31, 2023 and 2022, we recognized sublease income of $ 0.4 million and $ 0.4 million, respectively.

Annual Future Minimum Lease Payments

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

Combined minimum annual lease payments under operating and finance leases, a nd 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

Finance Leases Future Minimum Payments

Remainder of 2023

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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.

As of March 31, 2023, our Development and Redevelopment segment consists of 12 properties:

three residential apartment communities with 1,185 planned apartment homes, a single family rental community with 16 planned homes plus eight accessory dwelling units, and one hotel with 106 planned rooms, and 18,000 square feet of event space, which we are actively developing or redeveloping;

and, land parcels held for development.

Our Operating segment includes 21 residential apartment communities with 5,600 apartment homes that have achieved stabilized level of operations as of January 1, 2022 and maintained it throughout the current year and comparable period.

We aggregate all our apartment communities that have reached stabilization into our Operating segment.

Our Other segment consists of properties that are not included in our Development and Redevelopment or Operating segments.

During the nine months ended September 30, 2022 we disposed of two Seattle, Washington area properties that had previously been reported as held for sale assets and one stabilized property located in Fremont, CA that was previously reported within our Operating segment.

In addition, we terminated the leases for four residential apartment communities that were previously reported within our Development and Redevelopment segment.

During the three months ended March 31, 2023 , we reclassified one residential apartment community from the Other segment to the Operating segment because it reached stabilization.

Prior period segment information has been recast based upon our current segment population, and is consistent with how our chief operating decision maker ("CODM") evaluates the business.

The recast conforms with our reportable segment composition as of September 30, 2022.

The recast conforms with our reportable segment classification as of March 31, 2023.

Our Other segment consists of properties currently owned that are not included in our Development and Redevelopment or Operating segments.

Our Other segment includes 1001 Brickell Bay Drive, our only office building, and St.

George Villas.

Our 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.

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;

As of September 30, 2022, our Development and Redevelopment segment consists of 10 properties:

two residential apartment communities with 965 planned apartment homes, a single family rental community with 16 planned homes plus eight accessory dwelling units, and one hotel, with 106 planned rooms, we are actively developing or redeveloping;

and, land parcels held for development.

Our Operating segment includes 21 consolidated apartment communities with 5,582 apartment homes.

Our Other segment includes Eldridge Townhomes apartment community, 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 September 30, 2022 and 2021 (in thousands):

Development and Redevelopment

Proportionate

and Other Adjustments (1)

Corporate and Amounts Not Allocated to Segments (2)

Three Months Ended September 30, 2022:

Rental and other property revenues

Property operating expenses

Other operating expenses not allocated

to segments (3)

Total operating expenses

Proportionate property net operating

income (loss)

Other items included in income before

income tax (4)

Income (loss) before income tax

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

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

The following tables present the results of operations of consolidated properties with our segments reported on a proportionate basis for the three months ended March 31, 2023 and 2022, (in thousands):

Development and Redevelopment

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Corporate and Amounts Not Allocated to Segments (2)

Three Months Ended September 30, 2021:

Three Months Ended March 31, 2023:

Rental and other property revenues

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Income (loss) before income tax

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

Development and Redevelopment

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Corporate and Amounts Not Allocated to Segments (2)

Nine Months Ended September 30, 2022:

Rental and other property revenues

Property operating expenses

Other operating expenses not allocated

to segments (3)

Total operating expenses

Proportionate property net operating

income (loss)

Other items included in income before

income tax (4)

Income (loss) before income tax

Development and Redevelopment

Proportionate and Other Adjustments (1)

Corporate and Amounts Not Allocated to Segments (2)

Nine Months Ended September 30, 2021:

Three Months Ended March 31, 2022:

Rental and other property revenues

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Income (loss) before income tax

(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.

(1) Represents adjustments for noncontrolling interests in consolidated real estate partnerships' share of the results of consolidated communities in our segments, which are included in the related consolidated amounts, but excluded from proportionate property net operating income for our segment evaluation.

Also includes the reclassification of utility reimbursements from revenues to property operating expenses for the purpose of evaluating segment results.

Utility reimbursements are included in Rental and other property revenues in our Condensed Consolidated Statements of Operations prepared in accordance with GAAP.

(2) Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any.

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

(4) 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 September 30, 2022 and December 31, 2021, were as follows (in thousands):

(4) Other items included in Income before income tax benefit consist primarily of interest expense, mezzanine investment income (loss), net realized and unrealized gains (losses) on interest rate options, and realized and unrealized gains (losses) on equity investments.

Net real estate and non-recourse property debt, net, of our segments as of March 31, 2023 and December 31, 2022, were as follows (in thousands):

Development and Redevelopment

Corporate (1)

As of September 30, 2022:

As of March 31, 2023:

Buildings and improvements

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Development and Redevelopment

Corporate (1)

As of December 31, 2022:

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Net real estate

Non-recourse property debt, net

(1) During the nine months ended September 30, 2022, certain properties were sold or reclassified as Held for Sale, and therefore are not included in our segment balance sheets, as of September 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 September 30, 2022 the Development and Redevelopment segment right-of-use lease assets and lease liabilities aggregated to $ 95.5 million and $ 98.5 million, respectively, and as of December 31, 2021, aggregated to $ 429.8 million and $ 435.1 million, respectively.

As of September 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 September 30, 2022 , we wrote off $ 326.1 million and $ 337.3 million right-of-use lease assets and lease liability, respectively.

Note 11 –

Financing Activities

Our outstanding indebtedness as of September 30, 2022 includes the following borrowings that closed during the nine months ended September 30, 2022 (in thousands):

September 30, 2022

Contractual Interest Rate

Maturity Date

Variable-Rate:

Variable property loans

Construction loan

One-Month SOFR+ 4.41 % (min 5.56 %)

June 2025 (2)

Non-recourse property loans

(1) Includes two variable rate property loans for $ 60.0 million and $ 40.0 million, respectively.

The $ 60.0 million loan has an original maturity date of August 2024 , with an option to extend the loan term one additional year to August 2025 .

Total debt issuance costs for this loan of approximately $ 1.5 million have been deferred, and this loan bears an interest rate based on the One-Month SOFR plus a 6.75 % spread with an all in minimum interest rate of 8.00 %.

The $ 40.0 million loan has an original maturity date of January 2024 , with two options to extend the loan term for six month periods to July 2024 and January 2025 .

This loan bears an interest rate based on One-Month SOFR plus a 6.45 % spread with an all in minimum interest rate of 6.50 %.

(2) The Construction Loan includes an option to extend the maturity one additional year to August 2025 .

Total debt issuance costs of approximately $ 1.2 million have been deferred.

(3) Includes 14 long term, fixed rate, non-recourse property loans with 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.

Note 12 –

Subsequent Events

In October 2022, we entered into an $ 81.3 million non-recourse property loan with an initial term of 36 months, extendable for two additional one year periods, and with an interest rate based on the sum of the One-Month Term SOFR plus a spread of 4.5 %, subject to a minimum all-in interest rate of 6.0 %.

Concurrently, we paid a $ 1.5 million premium to enter an $ 81.3 million notional amount interest rate cap agreement, which caps the One-Month Term SOFR at 3.5 %.

Non-recourse property debt and construction loans, net

In addition to the amounts disclosed in the tables above, as of March 31, 2023 the Development and Redevelopment segment right-of-use lease assets and lease liabilities aggregated to $ 110.6 million and $ 116.2 million, respectively, and as of December 31, 2022, aggregated to $ 110.3 million and $ 114.6 million, respectively.

As of March 31, 2023, right-of-use lease assets and lease liabilities primarily relate to our investments in Upton Place, Strathmore, and Oak Shore.

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

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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;

adverse economic and geopolitical conditions, including as a result of the COVID-19 pandemic, which negatively impact our operations, including on our ability to maintain current or meet projected occupancy, rental rate and property operating results;

the effect of acquisitions, dispositions, developments, and redevelopments;

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and our ability to comply with debt covenants, including financial coverage ratios.

and the outcome and consequences of the current proxy contest with Land & Buildings Capital Growth, L.P.("Land & Buildings").

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;

the effects and duration of the COVID-19 pandemic, geopolitical events which may adversely affect the markets in which our securities trade, and other macroeconomic conditions, including, among other things, supply chain challenges, rising interest rates and inflation, all of which heightens the impact of the other risks and factors described herein, and the impact on entities in which we hold a partial interest, including our indirect interest in the partnership that owns Parkmerced Apartments;

real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets;

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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;

the outcome and consequences of activist stockholders on our business;

possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently owned by us;

and such other risks and uncertainties described from time to time in our filings with the Securities and Exchange Commission (“SEC”).

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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.

Our mission is to make real estate investments, primarily focused on the multifamily sector within targeted U.S.

markets, where outcomes are enhanced through our human capital and substantial value is created for investors, teammates, and the communities in which we operate.

Our value proposition includes our:

Platform, consisting of a cohesive and 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;

Diversified portfolio, consisting of high-performing in-process value-add investments, a deep pipeline that has nearly tripled since the Separation with a total potential of more than 15 million square feet, alternative investments, and a portfolio of stabilized real estate to provide risk management and produce predictable cash flow;

Capital redeployment plan of reallocating our equity to higher returning investments and prudent recycling of capital.

Platform, consisting of a cohesive, talented, and tenured team with diverse real estate industry experience combined with a disciplined and proven investment process;

Diversified portfolio, consisting of in-process value-add investments, a deep pipeline, which includes approximately 14 million square feet of potential future development, a national portfolio of stabilized multifamily real estate and select indirect and passive investments;

Capital redeployment plan of prudent recycling of capital, reallocating our equity to higher returning investments.

Our primary goal is outsized risk adjusted returns and accelerating growth for our shareholders.

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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”

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

Aimco targets a balanced allocation, which includes investments in “Value Add”

and “Opportunistic”

multifamily real estate.

From time to time, we expect to allocate a limited/small portion of our capital to passive debt and equity investments, both directly and indirectly.

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 our 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.

multifamily real estate, primarily located in Southeast Florida, the Washington D.C.

Metro Area and Colorado's Front Range, plus investment in a geographically diversified portfolio of "Core" and "Core-Plus" apartment communities.

In addition, we currently hold select alternative assets, consisting primarily of indirect, real estate related debt and equity investments.

We plan to significantly reduce our allocation to these investments over time.

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

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 platform that leverages 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.

Over time, we expect our enterprise to produce superior returns on equity on a risk-adjusted basis and it is our plan to do so by:

Benefiting from a national platform while leveraging local and regional expertise

We have corporate headquarters in Denver, Colorado and Washington D.C.

Our investment platform is managed by experienced professionals based in three regions, where we will focus our new investment activity:

Southeast Florida, the Washington D.C.

Metro Area and Colorado's Front Range.

By regionalizing this platform, we are able to leverage the in-depth local market knowledge of each regional leader, creating a comparative advantage when sourcing, evaluating, and executing investment opportunities.

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Our dedicated team will source and execute development and redevelopment projects, and various other direct investment strategies.

The Aimco development and redevelopment portfolio currently includes $0.6 billion of projects in construction and lease-up.

In addition, since the Separation, our team has secured significant, high-quality, future development opportunities, more than tripling Aimco’s controlled pipeline to a total potential of more than 15 million square feet, located in high-growth markets.

Our development and redevelopment portfolio currently includes projects in construction and lease-up.

In addition, our team has secured significant, high-quality, future development opportunities, including total potential of more than 14 million square feet, located in high-growth markets.

Generally, we seek direct investment opportunities in locations where barriers to entry are high, target customers can be clearly defined and where we have a comparative advantage over others in the market.

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We also own one commercial office building that is part of an assemblage with an adjacent apartment building.

The target composition of our stabilized portfolio will continue to include primarily B multifamily assets, spread across a geographically diversified portfolio and with a bias toward long established residential neighborhoods that rank highly in regard to schools, employment fundamentals and state and regional governance.

The target composition of our stabilized portfolio will continue to include primarily B multifamily assets, spread across a geographically diversified portfolio, with a bias toward long established residential neighborhoods that rank highly in regard to schools, employment fundamentals and state and regional governance.

Core-Plus opportunities offer the opportunity for incremental capital investment while maintaining stabilized cashflow to accelerate income growth and improve asset values.

Managing and investing in other alternative investments

We expect to allocate a limited portion of our capital to passive debt and equity investments, both directly and at the entity level when warranted by risk adjusted returns.

Managing and, over time, reducing our allocation to alternative investments

We currently hold select alternative investments, the majority of which originated with Aimco Predecessor and, over time, plan to significantly reduce capital allocated to these investments.

Our current allocation to alternative investments includes:

our indirect interest 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.

our indirect interest in the Mezzanine Investment to the Parkmerced partnership, which owns 3,165 apartment homes and future development rights in San Francisco, California, and our passive equity investments in IQHQ, Inc.

("IQHQ"), a privately-held life sciences real estate development company, and in property technology funds consisting of entities that develop technology related to the real estate industry.

Maintaining sufficient liquidity and utilizing safe financial leverage

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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 nine months ended September 30, 2022 are further described below.

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

Financial Results and Recent Highlights

Net income per share attributable to Aimco, on a fully dilutive basis, was $0.19 for the three months ended September 30, 2022, compared to a loss of ($0.03) for the three months ended September 30, 2021, due primarily to gains related to dispositions of real estate.

Net income per share attributable to Aimco, on a fully dilutive basis was $1.81 for the nine months ended September 30, 2022, compared to a loss of ($0.03) for the nine months ended September 30, 2021, due primarily to lease modification income and gains related to the dispositions of real estate.

For the three months ended September 30, 2022, revenue and net operating income from our Operating Properties were up 11.5% and 17.5%, respectively, year over year, with average monthly revenue per apartment home of $2,173, up $261 year over year, and average daily occupancy of 96.0%, down 190 basis points year over year.

In September 2022, we as lessee and AIR as lessor, closed the previously announced $669 million lease termination transaction with respect to four leases entered into on January 1, 2021 that pertained to our North Tower of Flamingo Point, 707 Leahy, The Fremont, and Prism properties.

This transaction terminated the four leases on September 1, 2022 eliminating $469 million of obligations related to the four leased properties.

In exchange we received a payment of $200 million.

Our execution in the development and lease-up of these assets resulted in more than $100 million of realized value creation (net of costs) for Aimco shareholders.

In July 2022, we paid $147.0 million to complete the prepayment of the $534.1 million of Notes Payable to AIR.

In July and August 2022, we closed on the sales of two apartment communities, exiting the greater Seattle market for $122.0 million.

For the three months ended March 31, 2023, net loss attributable to Aimco common stockholders per share, on a fully dilutive basis, was $0.06, compared to net income per share of $0.05 for the same period in 2022, primarily due to a reduction in accrued Mezzanine Investment income recognition and fair value adjustments on our interest rate options.

For the three months ended March 31, 2023, revenue and net operating income from our Stabilized Operating Properties were up 11.4% and 13.1%, respectively, year over year, with average monthly revenue per apartment home of $2,227, up $238 year over year.

Value Add, Opportunistic & Alternative Investments

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We generally seek development and redevelopment opportunities where barriers to entry are high, target customers can be clearly defined, and where we have a comparative advantage over others in the market.

We will focus our new investment activity in Southeast Florida, the Washington D.C.

Metro Area and Colorado's Front Range.

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

We currently have four active development and redevelopment projects, located across four U.S.

We currently have five active development and redevelopment projects, located in four U.S.

markets, in varying phases of construction and lease-up.

These projects remain on track, as measured by budget, lease-up metrics, and current market valuations.

During the three and nine months ended September 30, 2022, we invested $60.6 million and $188.9 million respectively, in development and redevelopment activities.

Additionally, we have a pipeline of future value-add opportunities totaling approximately 14 million gross square feet of development in our target markets of Southeast Florida, the Washington D.C.

Metro, and Colorado's Front Range.

During the three months ended March 31, 2023, we invested $64.8 million in development and redevelopment activities.

Updates include:

As of September 30, 2022, at The Hamilton in Miami, Florida, leasing of units ahead of initial occupancy progressed with 83 units pre-leased.

Construction remains 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.

As previously announced, following the successful development and lease-up of 707 Leahy in Redwood City, California, Prism in Cambridge, Massachusetts, North Tower of Flamingo Point in Miami Beach, Florida, and The Fremont on the Anschutz Medical Campus in Aurora, Colorado, Aimco and AIR entered an agreement that cancelled our leasehold interest in each property on September 1, 2022.

The transaction was completed on schedule at a combined asset value of $669 million.

We received $200 million, resulting in value creation, net of costs, of approximately $100 million, which was realized about 18 months sooner than originally anticipated.

Construction is now complete at the major redevelopment of The Hamilton, a 276-unit bayfront apartment community in Miami, Florida, and the property was 88% leased or pre-leased as of March 31, 2023, at rates well ahead of underwritten rents.

Construction is progressing on plan at the first phase of Strathmore Square in Bethesda, Maryland, which will contain 220 highly tailored apartment homes when complete in 2025.

This suburban infill project is located adjacent to the Grosvenor-Strathmore Metro station and the Strathmore Performing Arts Campus, and is 1.5 miles from The National Institutes of Health main campus.

Funding for the $164.0 million project is fully secured with Aimco having a remaining equity commitment, as of March 31, 2023, of $10.7 million.

Construction remains on schedule and on budget at Upton Place in Northwest Washington, D.C.

We plan to start pre-leasing Upton’s 689 apartment homes during the summer of 2023 in anticipation of initial delivery in the fourth quarter of 2023.

As of March 31, 2023, 80% of the project's 105,000 square feet of retail space has been leased.

Construction is ongoing at Oak Shore, in Corte Madera, California, where 16 luxury single family rental homes and eight accessory dwelling units are being developed.

We expect to deliver the first homes in the third quarter with pre-leasing efforts having begun in the first quarter of 2023.

Construction of the Benson Hotel and Faculty Club, a 106-key boutique hotel and event center, with 18,000 square feet of event space, located on the Anschutz Medical Campus in Aurora, Colorado.

In April, the hotel was completed and open to guests.

As the only ‘on campus’

accommodations, The Benson is garnering strong interest from the many departments and offices located on the surrounding Anschutz Medical Campus which includes The University of Colorado Medical School, UC Health Hospital, Children’s Hospital Colorado, The Rocky Mountain VA Medical Center and the burgeoning Fitzsimons Innovation Community.

In the three months ended March 31, 2023, we invested $5.7 million into our future development pipeline projects located in Southeast Florida, the Washington D.C.

Metro, and Colorado’s Front Range.

Programming, design, documentation and entitlement efforts continue with projected unit counts and rentable square footage on track to meet or exceed initial projections.

We have received Urban Development Review Board approvals related to our 34th Street and Biscayne Boulevard properties in Miami’s Edgewater neighborhood, conditional approvals on our Broward Boulevard sites in Fort Lauderdale, and earlier this month submitted a major amendment to the existing approval for the first phase of development at its site in Fort Lauderdale’s Flagler Village neighborhood.

As part of our capital allocation strategy, we may choose to monetize certain of our pipeline assets prior to vertical construction in an effort to maximize value add and risk adjusted returns.

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 $362.8 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.

Due to the relative size of our investment and alternative accretive uses of capital, we initiated a marketing effort in July 2022 to explore opportunities to monetize all or a portion of our investment.

Increased uncertainty within financial markets has led us to extend the timeline for this process and its execution.

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

Over time, we plan to significantly reduce capital allocated to these investments.

Updates for our alternative investments include:

In February 2023, we entered into an agreement to sell our Parkmerced Mezzanine Investment for $167.5 million.

The initial $5.0 million deposit received by the purchaser became nonrefundable in April 2023 when various conditions, including transfer consents, were cleared.

The sale is expected to close during the three months ended June 30, 2023.

Together with the monetization of the $1.5 billion notional swaption, purchased in conjunction with the Mezzanine Investment to protect against future interest rate increases, we expect gross proceeds from these transactions to be approximately $220 million.

Investment Activity

Aimco is focused on development and redevelopment, funded through our joint ventures.

Aimco will also consider opportunistic investments in related activities.

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

Updates include:

As previously announced, in July and August 2022, Aimco closed on the purchase of two development parcels, completing the assemblage it contracted to acquire, for $100 million, in February 2022.

The nine-acre assemblage 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.

In February 2023, we entered into an option agreement with the Fitzsimons Redevelopment Authority.

If exercised, the option allows for the long-term lease of 4.8 acres of land located on the Anschutz Medical Campus in Aurora, Colorado that can accommodate approximately 850,000 square feet of commercial life science development built out over multiple phases.

The option's annual cost is approximately $0.5 million.

Operating Property Results

Aimco owns a diversified portfolio of stabilized apartment communities located in eight major U.S.

We own a diversified portfolio of stabilized apartment communities located in eight major U.S.

markets with average rents in line with local market averages.

We also own a commercial office building that is part of an assemblage with an adjacent apartment building.

Highlights for the three months ended September 30, 2022 include:

Revenue in the third quarter of 2022 was $34.7 million, up 11.5% year over year, resulting from a $261 increase in average monthly revenue per apartment home to $2,173, offset with a 190-basis point decrease in Average Daily Occupancy to 96.0%.

Expenses in the third quarter of 2022 were $10.2 million, down 0.8% year over year.

Net operating income in the third quarter of 2022 was $24.5 million, up 17.5% year-over-year.

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

Revenue for our Operating segment for the three months ended March 31, 2023, was $36.7 million, up 11.4% year over year, resulting from a $238 increase in average monthly revenue per apartment home to $2,227, offset with a 50-basis point decrease in Average Daily Occupancy to 98.0%.

Expenses for our Operating segment for the three months ended March 31, 2023, were $11.2 million, up 7.6% year-over-year.

Net operating income for our Operating segment for the three months ended March 31, 2023 was $25.5 million, up 13.1% 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 nine months ended September 30, 2022, we executed leases on over 76,000 square feet of office space, at rates per square foot 15% higher than leases executed in the nine months ended September 30, 2021.

As of September 30, 2022, the building was 84% occupied, up from 73% at the same time last year.

Following first quarter lease expirations, as of March 31, 2023, the building was 77% occupied.

Balance Sheet and Financing Activity

We are highly focused on maintaining a strong balance sheet, including having at all times ample liquidity.

As of September 30, 2022, we had access to $375.4 million in liquidity, including $206.3 million of cash on hand, $19.1 million of restricted cash, and the capacity to borrow up to $150.0 million on our revolving credit facility.

As of March 31, 2023, we had access to $338.6 million in liquidity, including $166.1 million of cash on hand, $22.5 million of restricted cash, and the capacity to borrow up to $150.0 million on our revolving credit facility.

Refer to the Liquidity and Capital Resources section for additional information regarding our leverage.

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(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 Development and Redevelopment segment includes properties that are under construction or have not achieved stabilization, as well as land assemblages that are being held for future development.

Our Operating segment includes 21 residential apartment communities that have achieved stabilized levels of operations as of January 1, 2022 and maintained it throughout the current year and comparable period.

We aggregate all our apartment communities that have reached stabilization into our Operating segment.

Our Other segment consists of properties that are not included in our Development and Redevelopment or Operating segments.

Our Other segment consists of properties currently owned that are not included in our Development and Redevelopment or Operating segments.

The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements included in Item 1.

Three and Nine Months Ended September 30, 2022 compared with the Three and Nine Months Ended September 30, 2021

Net income increased by $34.5 million and by $281.3 million during the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, as described more fully below.

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

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

Property Results

As of September 30, 2022, our Development and Redevelopment segment included four properties that were under construction.

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.

As of March 31, 2023, our Development and Redevelopment segment included 12 properties, five of which were properties that were under construction, while the remaining were land held for development.

Our Operating segment included 21 communities with 5,600 apartment homes, and our Other segment included 1001 Brickell Bay Drive, our only office building and St.

George Villas.

During the three months ended March 31, 2023, we reclassified one residential apartment community from the Other segment to the Operating segment because it reached stabilization.

Prior period segment information has been recast based upon our current segment population, and is consistent with how our CODM evaluates the business.

The recast conforms with our reportable segment classification as of March 31, 2023.

We use proportionate property net operating income to assess the operating performance of our segments.

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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;

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

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

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Proportionate Property Net Operating Income

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

Three Months Ended

September 30,

(in thousands)

Rental and other property revenues, before utility reimbursements:

Development and Redevelopment

Property operating expenses, net of utility reimbursements:

Development and Redevelopment

Proportionate property net operating income:

Development and Redevelopment

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

Development and Redevelopment proportionate property net operating income decreased from the amounts presented in our Form 10-Q dated June 30, 2022, due to the termination of the four initial leases.

Operating proportionate property net operating income increased by $3.6 million, or 17.5%.

The increase was attributable primarily to a $3.6 million, or 11.5% increase in rental and other property revenues due to higher average revenues of $261 per apartment home, offset with a 190-basis point decrease in occupancy.

Other proportionate property net operating income increased by $0.6 million, or 27.5%.

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

Nine Months Ended September 30,

Historical Change

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

Three Months Ended March 31,

(in thousands)

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Development and Redevelopment

For the nine months ended September 30, 2022, compared to the same period in 2021:

Development and redevelopment proportionate property net operating income decreased by $1.0 million, due primarily to the major redevelopment of The Hamilton.

Development and redevelopment proportionate property net operating income decreased in the third quarter due to the termination of the four leases.

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

Development and Redevelopment proportionate property net operating income increased by $0.3 million due to the lease up of units at The Hamilton.

Operating proportionate property net operating income increased by $3.0 million, or 13.1%.

The increase was attributable primarily to a $3.7 million, or 11.4% increase in rental and other property revenues due to higher average revenues of $238 per apartment home, offset with a 50-basis point decrease in occupancy.

Other proportionate property net operating income increased by $3.0 million, or 46.0%.

Other proportionate property net operating income decreased by $0.4 million, or 14.2%.

Non-Segment Real Estate Operations

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Depreciation and Amortization

For the three and nine months ended September 30, 2022, depreciation and amortization expense increased by $63.7 million, or 100%, and $80.4 million, or 100%, respectively, when compared to the same periods in 2021, primarily due to accelerated depreciation recognized relating to the lease termination transaction in the amount of $69.9 million and $85.7 million for the three and nine months ended September 30, 2022, respectively.

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

General and Administrative Expenses

For the three months ended September 30, 2022, general and administrative expenses increased by $1.9 million, or 21.9% compared to the three months ended September 30, 2021.

For the nine months ended September 30, 2022, general and administrative expenses increased by $6.7 million, or 29.6% compared to the nine months ended September 30, 2021.

General and administrative expenses incurred for the three and nine months ended September 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 three and nine months ended September 30, 2022 and 2021, general and administrative expenses included $1.7 million and $4.6 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.

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

Interest Income

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

Interest Expense

For the three and nine months ended September 30, 2022, compared to the same periods in 2021, interest expense decreased by $3.0 million, or 23.4%, and increased by $27.9 million, or 73.4%, respectively.

The quarterly decrease of $3.0 million was due primarily to repayment and refinancing activity.

The year to date increase of $27.9 million was due primarily to spread maintenance costs related to prepayment of the Notes Payable to AIR and other debt, the refinancing of certain property debt, and the payoff of a construction loan.

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 September 30, 2022 and December 31, 2021, the total receivable, including accrued and unpaid interest, was $362.8 million and $337.8 million, respectively.

During the three and nine months ended September 30, 2022, we recognized $8.4 million and $25.0 million, respectively, of income in connection with the mezzanine loan, compared to $7.6 million and $22.7 million during the three and nine months ended September 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.

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

Mezzanine Investment Income (Loss), Net

For the three months ended March 31, 2023, we recognized $0.1 million of loss in connection with the Mezzanine Investment, compared to $8.2 million of income for the three months ended March 31, 2022, respectively.

During the year ended December 31, 2022, we recorded a non-cash impairment and as a result, we have ceased recognition of income on the Mezzanine Investment.

Realized and Unrealized Gains (Losses) on Interest Rate Options

We recorded unrealized gains of $7.5 million and $38.3 million, respectively, during the three and nine months ended September 30, 2022, compared to unrealized gains of $2.2 million and $10.6 million during the three and nine months ended September 30, 2021, respectively.

In addition, we recorded realized gains of $1.7 million and $9.7 million during the three and nine months ended September 30, 2022.

We are required to adjust our interest rate options to fair value on a quarterly basis.

As a result of the mark-to-market adjustments, we recorded unrealized losses of $1.9 million and unrealized gains of $18.8 million for the three months ended March 31, 2023 and 2022, respectively.

In addition, we realized gains of $0.8 million for the three months ended March 31, 2023.

Realized and Unrealized Gains (Losses) on Equity Investments

In June 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 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.at the same per share value as the cash redemption.

We measure our investments in property technology funds at NAV as a practical expedient.

As a result of changes in NAV, we recorded unrealized losses of $2.2 million and $6.0 million, respectively, during the three and nine months ended September 30, 2022, compared to unrealized gains of $1.2 million and $2.1 million during the three and nine months ended September 30, 2021.

Gains on Dispositions of Real Estate

In July and August 2022, we sold our Cedar Rim and 2900 on First properties located in Seattle, Washington, for a total gross sales price of $122.0 million and recognized gains from the sales of $75.5 million.

In May 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

In June 2022, we as lessee and AIR as lessor, entered into a lease termination agreement pursuant to which AIR paid us a termination payment on September 1, 2022.

Upon receipt of this payment, the leases with respect to four properties were terminated, and we relinquished control of the associated leasehold improvements and underlying land of these four properties.

The total lease modification income recognized for the nine months ended September 30, 2022 was $207.0 million.

We measure our investment in stock based on its market price at period end and our investments in property technology funds at NAV as a practical expedient.

As a result of changes in the values of these investments, we recorded unrealized gains of $0.1 million for the three months ended March 31, 2023, compared to unrealized losses of $4.3 million for the three months ended March 31, 2022.

Other Income (Expense), Net

Other income (expense), net, includes costs associated with our risk management activities, partnership administration expenses, valuation changes associated with equity investments, fee income, and certain non-recurring items.

Other income (expense), net, for the three months ended September 30, 2022 decreased by $0.8 million, or 100.0%, compared to the three months ended September 30, 2021.

Other income (expense), net, for the nine months ended September 30, 2022, decreased by $4.7 million, or 100.0% compared to 2021.

Other income (expense), net , includes costs associated with our risk management activities, partnership administration expenses, fee income, and certain non-recurring items.

For the three months ended March 31, 2023, compared to the same period in 2022, other expenses, net increased by $2.5 million, or 100.0%, primarily due to the incremental expense associated with pre-existing long-term incentive partnership units recorded upon the resignation of one of our board members.

Income Tax Benefit (Expense)

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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 nine months ended September 30, 2022, we had consolidated net loss and income subject to tax of $75.6 million and $91.0 million, respectively.

For the three and nine months ended September 30, 2021, we had consolidated net losses subject to tax of $7.9 million and $26.4 million, respectively.

For the three months ended September 30, 2022, we recognized income tax benefit of $17.6 million compared to a $2.0 million benefit during the same period in 2021.

The change is primarily due to the GAAP income taxes associated with the lease modification depreciation expense recognized in the third quarter of 2022.

For the nine months ended September 30, 2022, we recognized income tax expense of $24.3 million compared to a $9.9 million benefit during the same period in 2021.

The change is primarily due to the GAAP income taxes associated with the net lease modification income recognized in 2022.

For the three months ended March 31, 2023, we had consolidated net losses subject to tax of $4.9 million, compared to net losses subject to tax of $14.8 million for the same period in 2022.

For the three months ended March 31, 2023, we recognized income tax benefit of $4.2 million, compared to income tax benefit of $4.1 million for the same period in 2022.

The change is due primarily to the tax effect of depreciation associated with properties owned by, and activities of, our TRS entities, as well as a reduction to the effective state tax rate expected to apply to the reversal of our existing deferred items.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions.

We believe that the critical accounting policies that involve our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements relate to the impairment of long-lived assets and capitalized costs.

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

Our critical accounting policies are described in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2022.

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

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

adjustments to reflect our share of EBITDAre of investments in unconsolidated entities.

EBITDAre is defined by Nareit and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts.

We define Adjusted EBITDAre as EBITDAre adjusted to exclude 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.

We define Adjusted EBITDAre as EBITDAre adjusted to exclude the effect of net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests, and realized and unrealized (gains) losses on interest rate options, which we believe allow investors to compare a measure of our earnings before the effects of our capital structure and indebtedness with that of other companies in the real estate industry.

Additionally, we exclude interest income recognized on our Mezzanine Investment that was accrued but not paid.

The reconciliation of net income to EBITDAre and Adjusted EBITDAre for the three and nine months ended September 30, 2022 and 2021, is as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

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

Three Months Ended March 31,

Net income (loss)

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Income tax (benefit) expense

Gains on dispositions of real estate

Lease modification income

Depreciation and amortization

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EBITDAre adjustments attributable to noncontrolling interests

Mezzanine investment income, net (1)

Mezzanine investment (income) loss, net

Realized and unrealized (gains) losses on interest rate options

Unrealized (gains) losses on IQHQ investment

Adjusted EBITDAre

(1) Includes the portion of accrued and unpaid income recognized during the year

Liquidity and Capital Resources

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Our primary sources of liquidity are cash flows from operations and borrowing capacity under our loan agreements.

As of September 30, 2022, our available liquidity was $375.4 million, which consisted of:

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

$166.1 million in cash and cash equivalents;

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$150.0 million of available capacity to borrow under our revolving secured credit facility.

We have commitments for, and expect to spend, approximately $152.1 million on development and redevelopment projects underway, with $211.2 million undrawn on our construction loans as of September 30, 2022.

The initial allocation to our Edgewater joint venture and DC joint ventures have remaining unfunded commitments of $14.2 million.

We also have unfunded commitments in the amount of $2.7 million related to four investments in entities that develop technology for the real estate industry.

We have commitments for approximately $133.2 million and remaining planned spend of $142.7 million on development and redevelopment projects, with $268.4 million undrawn on our construction loans as of March 31, 2023.

The initial allocation to our joint ventures have remaining unfunded commitments of $9.5 million.

We also have unfunded commitments in the amount of $2.3 million related to four investments in entities that develop technology related to the real estate industry.

Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, and future investments.

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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.

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.

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Any adverse changes in the lending environment could negatively affect our liquidity.

We have taken steps to mitigate a portion of our repricing risk.

We have taken steps to mitigate a portion of our short-term refunding risk.

However, if property or development financing options become unavailable, we may consider alternative sources of liquidity, such as reductions in capital spending or apartment community dispositions.

As of September 30, 2022, 81% of our outstanding debt had a fixed interest rate and 19% had a variable interest rate.

The weighted-average interest rate on our non-recourse debt was 4.86%, and the average remaining term to maturity was 7.2 years.

At quarter end, Aimco had interest rate cap protection in place for 100% of its variable interest rate debt.

Aimco's use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates.

While our primary source of leverage is property-level debt, we also have a secured $150.0 million credit facility with a syndicate of financial institutions, and construction loans.

As of September 30, 2022, we had no outstanding borrowings under our revolving secured credit facility.

As of March 31, 2023, approximately 83% of our outstanding non-recourse property debt had a fixed interest rate and approximately 17% had a variable interest rate.

In addition, the weighted-average rate on our non-recourse debt was 5.3%, and the average remaining term to maturity was 6.9 years.

At March 31, 2023, substantially all of our outstanding non-recourse property debt was either fixed or hedged.

Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates.

While our primary source of leverage is property-level debt and construction loans, we also have a secured $150.0 million credit facility with a syndicate of financial institutions.

As of March 31, 2023, we had no outstanding borrowings under our revolving secured credit facility.

Under our revolving secured credit facility, we have agreed to maintain a fixed charge coverage ratio of 1.25X minimum tangible net worth of $625.0 million, and maximum leverage of 60.0% as defined in the credit agreement.

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Operating Activities

For the nine months ended September 30, 2022, net cash provided by operating activities was $228.3 million.

For the three months ended March 31, 2023, net cash provided by operating activities was $5.6 million.

Our operating cash flow is primarily affected by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment communities and general and administrative costs.

Cash provided by operating activities for the nine months ended September 30, 2022, increased by $206.2 million compared to the same period ended in 2021 due to timing of balance sheet position changes.

Cash provided by operating activities for the three months ended March 31, 2023, decreased by $0.9 million compared to the same period ended in 2022, due primarily to lower net operating income associated with apartment communities sold in the latter part of 2022 and timing of balance sheet position changes, partially offset by decreased interest payments.

Investing Activities

For the nine months ended September 30, 2022, our net cash used in investing activities of $83.0 million consisted primarily of capital expenditures of $184.0 and $130.1 million of cash used to acquire undeveloped land parcels in Fort Lauderdale, Florida, offset by $243.1 million of proceeds received from the disposition of our properties located in Fremont, California and Seattle, Washington.

Total capital additions were $184.0 million and $134.9 million during the nine months ended September 30, 2022 and 2021, respectively, and were primarily used for construction costs on our development and redevelopment properties.

We have generally funded capital additions with available cash, cash provided by operating activities, and construction loans.

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.

For the three months ended March 31, 2023, net cash used in investing activities of $63.2 million consisted primarily of capital expenditures of $64.8 million.

Net cash used in investing activities for the three months ended March 31, 2023, decreased by $48.2 million compared to the same period ended in 2022, due primarily to decreased real estate acquisitions and funding of our passive equity investment in IQHQ, partially offset by increased capital expenditures.

We have generally funded capital additions with available cash and cash provided by operating activities and construction loans.

Financing Activities

For the nine months ended September 30, 2022, our net cash used in financing activities of $164.4 million consisted primarily of the $534.1 million payoff of the Notes Payable to AIR, $284.6 million to retire property debt and the $138.4 million paydown

of construction loans, offset by $674.7 million in cash raised from the issuance of new property debt and a $102.0 million redeemable noncontrolling interest preferred equity contribution from an institutional partner.

Net cash provided by financing activities for the nine months ended September 30, 2021 was $158.6 million primarily due to $142.3 million of proceeds received from construction loans undertaken.

For the three months ended March 31, 2023, net cash provided by financing activities of $16.5 million consisted primarily of proceeds from construction loans, partially offset by repurchases of Common Stock and distributions to noncontrolling interests.

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

Future Capital Needs

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Our chief market risks are refunding risk, that is the availability of property debt or other cash sources to refund maturing property debt, and repricing risk, that is the possibility of increases in base interest rates and credit risk spreads.

We use long-dated, fixed-rate, non-recourse property debt in order to avoid the refunding and repricing risks of short-term borrowings.

We primarily use long-dated, fixed-rate, non-recourse property debt on stabilized properties in order to avoid the refunding and repricing risks of short-term borrowings.

We use working capital primarily to fund short-term uses.

We make limited use of derivative financial instruments primarily to mitigate repricing risk, and we do not use them for trading or other speculative purposes.

As of September 30, 2022, on a consolidated basis, we had approximately $91.9 million of variable-rate property-level debt outstanding in addition to three variable rate construction loans that totaled $86.7 million.

We estimate that a change in variable rates of 100 basis points with constant credit risk spreads would reduce or increase interest expense by approximately $1.8 million.

This risk is mitigated by Aimco's use of interest rate caps, which as of September 30, 2022, provided protection for 100% of its variable interest rate debt.

Aimco's use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and Aimco's view on forecasted interest rates.

As of September 30, 2022, we held interest rate swaps and caps with $1.7 billion notional value that provide protection through June 2025.

These instruments were acquired for $15.7 million and are currently valued at $61.3 million.

We make limited use of derivative financial instruments and we do not use them for trading or other speculative purposes.

As of March 31, 2023, on a consolidated basis, we had approximately $164.2 million of variable-rate property-level debt outstanding and $144.7 million of variable rate construction loans.

The impact of rising interest rates is mitigated by our use of interest rate caps, which as of March 31, 2023, provided protection for our variable interest rate debt.

Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates.

We estimate that an increase in our variable rate indices of 100 basis points with constant credit risk spreads, would increase interest expense by $0.5 million on an annual basis.

We estimate that a decrease in our variable rate indices of 100 basis points with constant credit risk spreads, would reduce interest expense by $0.5 million on an annual basis.

As of March 31, 2023, we held interest rate swaps and caps with $2.0 billion notional value.

These instruments were acquired for $17.7 million and at March 31, 2023 were valued at $60.4 million.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements