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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-08 · 110 added, 76 removed, 213 unchanged (47% of the section changed)

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As used herein and except as the context otherwise requires, “we,” “our,” and “us” refer to Apartment Investment and Management Company (which we refer to as Aimco), Aimco OP L.P.

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

(which we refer to as Aimco Operating Partnership) and their consolidated entities, collectively.

Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States (“GAAP”).

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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 13 million square feet, located in high-growth markets.

In addition, our team has secured significant, high-quality, future development opportunities, including total potential of more than 13 million gross 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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Our current allocation to alternative investments includes:

our 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 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, 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 our equity, reduce exposure to a single investment and, in certain cases, for strategic benefits.

The results from the execution of our business plan during the three months ended March 31, 2024 are further described below.

The results from the execution of our business plan during the three and six months ended June 30, 2024 are further described below.

Financial Results and Recent Highlights

• For the three months ended March 31, 2024, net loss attributable to Aimco common stockholders per share, on a fully dilutive basis, was ($0.07), compared to net loss per share of ($0.06), for the same period in 2023.

Higher net operating income and gains related to our interest rate hedging instruments were offset by higher interest expense and depreciation related to advancing and completing development projects.

• For the three months ended March 31, 2024, revenue and net operating income from our Operating segment were up 5.4% and 6.5% respectively, year-over-year, due primarily to higher average monthly revenue per apartment home of $2,348, up $121 year-over-year.

• During the three months ended March 31, 2024, construction of our three active development projects advanced on plan.

At Upton place in Upper Northwest Washington, D.C., we had leased 100 of the 624 units delivered at rates ahead of underwriting .

• For the three and six months ended June 30, 2024, net loss attributable to Aimco common stockholders per share, on a fully dilutive basis, was ($0.43) and ($0.50), respectively, due primarily to a non-cash impairment charge related to our passive equity investment in IQHQ.

For the same periods in 2023, net loss attributable to Aimco common stockholders per share, on a fully dilutive basis, was ($0.02) and ($0.09), respectively.

• For the three months ended June 30, 2024, revenue and net operating income from our Operating segment were up 4.6% and 4.1% respectively, year-over-year, due primarily to higher average monthly revenue per apartment home of $2,392, up $101 year-over-year.

For the six months ended June 30, 2024, revenue and net operating income from our Operating segment were up 5.0% and 5.3%, respectively, year over year, with average monthly revenue per apartment home of $2,370, up $111 year over year.

• During the three months ended June 30, 2024, construction of Aimco's Strathmore Square and Oak Shore development projects advanced on plan.

Aimco has substantially completed construction at Upton Place in Upper Northwest Washington, D.C and, as of June 30, 2024, had leased 193 of the 689 units at rates ahead of underwriting.

Operating Property Results

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

Highlights for the three months ended March 31, 2024 include:

• Revenue for our Operating segment was $38.6 million, up 5.4% year-over-year, resulting from a $121 increase in average monthly revenue per apartment home to $2,348, partially offset with a 10-basis point decrease in Average Daily Occupancy to 97.9%.

Highlights for the three months ended June 30, 2024 include:

• Revenue for our Operating segment was $38.7 million, up 4.6% year-over-year, resulting from a $101 increase in average monthly revenue per apartment home to $2,392 and a 10-basis point increase in Average Daily Occupancy to 96.3%.

• Expenses for our Operating segment were $12.2 million, up 5.7% year-over-year primarily from higher real estate taxes and insurance.

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

We currently have three active development and redevelopment multifamily projects, located in two U.S.

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

As of June 30, 2024, we had two multifamily development projects under construction, a multifamily community that has been substantially completed and is now in lease-up, and a hotel that was completed in 2023 and is being stabilized.

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

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Metro Area, and Colorado's Front Range.

During the three months ended March 31, 2024, we invested $42.8 million in development and redevelopment activities, inclusive of construction debt and third-party equity, compared to $64.8 million during the three months ended March 31, 2023.

Highlights for the three months ended March 31, 2024 include:

• In Upper Northwest Washington, D.C., construction is nearing completion at Upton Place.

As of March 31, 2024, we have delivered 624 apartment homes with 100 units leased or pre-leased at rental rates greater than underwriting.

To provide additional revenue and vibrancy during lease up, we are collaborating with Placemakr for the temporary use of 150 units as short-term furnished rentals.

Additionally, as of March 31, 2024, more than 82% of the project's 105 thousand square feet of retail space has been leased.

Construction is expected to be complete in the second quarter of 2024.

• In Bethesda, Maryland, construction is progressing on plan at the first phase of Strathmore Square, which will contain 220 highly tailored apartment homes with initial delivery on track for the second half of 2024.

During the three and six months ended June 30, 2024, $29.8 million and $72.6 million of capital was invested in development and redevelopment activities, respectively, primarily funded through construction loan draws, compared to $81.1 million and $145.9 million, respectively, during the same periods in 2023.

Highlights for the three months ended June 30, 2024 include:

• In Upper Northwest Washington, D.C., construction is substantially complete at Upton Place.

As of June 30, 2024, we have delivered all 689 apartment homes with 193 units leased or pre-leased at rental rates greater than underwriting.

Additionally, as of June 30, 2024, more than 82% of the project's 105,000 square feet of retail space has been leased.

• In Bethesda, Maryland, construction is progressing on plan at the first phase of Strathmore Square.

As of June 30, 2024, we have delivered 146 of the total 220 highly tailored apartment homes and welcomed residents into their new homes.

The remaining apartment homes are on track for delivery in the second half of 2024.

• In Corte Madera, CA, construction is ongoing at Oak Shore where 16 luxury single family rental homes and eight accessory dwelling units are being developed.

As of March 31, 2024, initial residences had been delivered with eight leased or pre-leased at rental rates greater than underwriting.

• In the first quarter of 2024, we invested $1.0 million into programming, design, documentation, and entitlement efforts related to select pipeline projects located in South Florida and on the Anschutz Medical Campus in Aurora, Colorado.

As of June 30, 2024, ten residences had been delivered with nine leased or pre-leased at rental rates greater than underwriting.

• In the second quarter of 2024, we invested $3.3 million into programming, design, documentation, and entitlement efforts related to select pipeline projects located in South Florida and on the Anschutz Medical Campus in Aurora, Colorado.

Investment and Disposition Activity

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Consistent with our capital allocation philosophy, we monetize the value within our assets when accretive uses of the proceeds are identified and invest when the risk adjusted returns are superior to other uses of capital.

In the three months ended March 31, 2024, no new investment or significant disposition activity occurred.

In the three months ended June 30, 2024, no new investment or disposition activity occurred.

Balance Sheet and Financing Activities

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

As of March 31, 2024, we had access to $290.4 million in liquidity, including $121.8 million of cash on hand, $18.6 million of restricted cash, and the capacity to borrow up to $150.0 million on our revolving credit facility.

As of June 30, 2024, we had access to $259.4 million in liquidity, including $88.5 million of cash on hand, $20.9 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 rental communities that are under construction or have not achieved and maintained stabilization throughout the current year and comparable period, 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, 2023, and maintained it throughout the current year and comparable period.

Our Development and Redevelopment segment consists of rental communities that are under construction or have not achieved and maintained stabilization throughout the current year and comparable period in the prior year, as well as land assemblages that are being held for future development.

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

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

Results of Operations for the three months ended March 31, 2024, Compared to the same period in 2023

Net income attributable to Aimco common stockholders decreased by $1.4 million for the three months ended March 31, 2024, compared to the same period in 2023, as described more fully below.

Results of Operations for the three and six months ended June 30, 2024 and 2023

Net income attributable to Aimco common stockholders decreased by $56.9 million and $58.3 million, respectively, for the three and six months ended June 30, 2024, compared to the same period in 2023, as described more fully below.

Property Results

As of March 31, 2024, our Development and Redevelopment segment included 10 rental communities, three of which were under construction.

Our Operating segment included 21 residential apartment communities with approximately 5,600 apartment homes, and our Other segment included 1001 Brickell Bay Drive, our only office building, and The Benson Hotel.

During the three months ended March 31, 2024, we revised the information regularly reviewed by our chief operating decision maker ("CODM") to assess our operating performance.

As of June 30, 2024, our Development and Redevelopment segment includes 10 rental communities, two of which were under construction.

Our Operating segment includes 21 residential apartment communities with approximately 5,600 apartment homes, and our Other segment includes 1001 Brickell Bay Drive, our only office building, and The Benson Hotel, our only hotel.

During the first quarter of 2024, we revised the information regularly reviewed by our chief operating decision maker ("CODM") to assess our operating performance.

As a result, we reclassified The Benson Hotel from the Development and Redevelopment segment to the Other segment.

In addition, during the first quarter of 2024, we disposed of St.

George Villas, which was previously reported within our Other segment.

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, 2024.

The recast conforms with our reportable segment classification as of June 30, 2024.

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

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Proportionate Property Net Operating Income

The results of our segments for the three months ended March 31, 2024 and 2023, as presented below, are based on segment classifications as of March 31, 2024 ( dollars in thousands ).

Three Months Ended March 31,

The results of our segments for the three months ended June 30, 2024 and 2023, as presented below, are based on segment classifications as of June 30, 2024 ( dollars in thousands ).

Three Months Ended June 30,

Rental and other property revenues, before utility reimbursements:

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Development and Redevelopment

For the three months ended March 31, 2024, compared to the same period in 2023:

• Development and Redevelopment proportionate property net operating income increased by $1.6 million due primarily to the lease up of apartment homes at The Hamilton.

For the three months ended June 30, 2024, compared to the same period in 2023:

• Development and Redevelopment proportionate property net operating income increased by $0.2 million due primarily to the lease up of apartment homes at The Hamilton and delivery and initial lease-up of Upton Place.

• Operating proportionate property net operating income increased by $1.0 million, or 4.1%.

The increase was attributable primarily to a $2.0 million, or 5.4% increase in rental and other property revenues due to a $121 increase in average monthly revenue per apartment home to $2,348 , offset by a 10-basis point decrease in Average Daily Occupancy to 97.9%.

• Other proportionate property net operating income decreased by $0.4 million, or 16.9%.

The decrease was due primarily to The Benson Hotel commencing operations subsequent to the first quarter of 2023.

The increase was attributable primarily to a $1.7 million, or 4.6% increase in rental and other property revenues due to a $101 increase in average monthly revenue per apartment home to $2,392 , and a 10-basis point increase in Average Daily Occupancy to 96.3%.

• Other proportionate property net operating income increased by $1.0 million, or 100.0%.

The increase was due primarily to The Benson Hotel commencing operations during the second quarter of 2023.

The results of our segments for the six months ended June 30, 2024 and 2023, as presented below, are based on segment classifications as of June 30, 2024 ( dollars in thousands ).

Six Months Ended June 30,

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 six months ended June 30, 2024, compared to the same period in 2023:

• Development and Redevelopment proportionate property net operating income increased by $1.7 million due primarily to the lease up of apartment homes at The Hamilton.

• Operating proportionate property net operating income increased by $2.7 million, or 5.3% The increase was attributable primarily to a $3.7 million, or 5.0% increase in rental and other property revenues due to a $111 increase in average monthly revenue per apartment home to $2,370 .

• Other proportionate property net operating income increased by $0.7 million, or 23.4%.

The increase was due primarily to The Benson Hotel commencing operations during the second quarter of 2023.

Non-Segment Real Estate Operations

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Depreciation and Amortization

For the three months ended March 31, 2024, compared to the same period in 2023, Depreciation and amortization expense increased by $3.2 million, or 19.6%, due primarily to increases at Upton Place and The Benson Hotel resulting from deliveries of apartment homes and completion of construction subsequent to the first quarter of 2023.

For the three and six months ended June 30, 2024, compared to the same periods in 2023, Depreciation and amortization expense increased by $5.1 million, or 29.8%, and $8.3 million, or 24.9%, respectively, due primarily to substantial completion of Upton Place and the completion of The Benson Hotel during the second quarter of 2023.

General and Administrative Expenses

For the three months ended March 31, 2024, compared to the same period in 2023, General and administrative expenses increased by $0.1 million, or 1.7%.

For the three and six months ended June 30, 2024, compared to the same periods in 2023, General and administrative expenses decreased by $0.3 million, or 4.0%, and $0.2 million, or 1.0%, respectively, due primarily to a decrease in expenses for consulting services per the Master Services Agreement with AIR, which concluded at December 31, 2023.

Interest Income

For the three months ended March 31, 2024, compared to the same period in 2023, Interest income increased by $0.6 million, or 28.7%, due primarily to interest earned on seller financing provided in connection with the sale of a land parcel in December 2023.

For the three and six months ended June 30, 2024, compared to the same periods in 2023, Interest income increased by $0.1 million, or 2.3%, and $0.6 million, or 14.3%, respectively, due primarily to interest earned on seller financing provided in connection with the sale of a land parcel in December 2023, offset by a decrease earned on invested cash.

Interest Expense

For the three months ended March 31, 2024, compared to the same period in 2023, Interest expense increased by $3.6 million, or 37.5%, due primarily to increased non-recourse construction loan interest for our development and redevelopment properties.

Realized and Unrealized Gains (Losses) on Interest Rate Options

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

As a result of the mark-to-market adjustments, we recorded unrealized losses of $0.2 million for the three months ended March 31, 2024, compared to unrealized losses of $1.9 million for the same period in 2023.

In addition, we realized gains of $1.9 million for the three months ended March 31, 2024, compared to realized gains of $0.8 million for the same period in 2023.

For the three and six months ended June 30, 2024, compared to the same periods in 2023, Interest expense increased by $7.2 million, or 74.2%, and $10.8 million, or 55.8%, respectively, due primarily to increased non-recourse construction loan draws and reduced capitalization as development projects are advanced and completed .

Realized and Unrealized Gains (Losses) on Interest Rate Contracts

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

As a result of the mark-to-market adjustments, we recorded unrealized losses of $1.3 million and $1.5 million, respectively, for the three and six months ended June 30, 2024, compared to unrealized gains of $2.5 million and $0.6 million, respectively, for the same periods in 2023.

In addition, we realized gains of $1.9 million and $3.8 million for the three and six months ended June 30, 2024, respectively, compared to realized gains of $0.9 million and $1.7 million, respectively, for the same periods in 2023.

Realized and Unrealized Gains (Losses) on Equity Investments

We measure our investments 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 losses of $0.3 million for the three months ended March 31, 2024, compared to unrealized gains of $0.1 million for the same period in 2023.

In addition, we measure our investment in IQHQ at cost, less impairment if any needed, with subsequent adjustments for observable price changes of identical or similar investments of the same issuer since it does not have a readily determinable fair value.

As a result of changes in the values of these investments, we recorded unrealized losses of $47.3 million and $47.5 million, respectively, for the three and six months ended June 30, 2024, primarily due to a $47.0 million non-cash impairment recognized on our investment in IQHQ.

For the same periods in 2023, we recorded unrealized gains of $1.1 million $1.2 million, respectively.

Other Income (Expense), Net

Other income (expense), net , includes costs associated with our risk management activities, partnership administration expenses, fee income, and certain non-recurring items, as well as activity related to our Mezzanine Investment.

For the three months ended March 31, 2024, compared to the same period in 2023, Other income (expense), net decreased by $1.7 million, or 47.5%, due primarily to the incremental expense associated with pre-existing long-term incentive partnership units recorded upon the resignation of one of our board members in the prior period, partially offset by the current period amortization of deferred transaction costs resulting from the partial sale of the Mezzanine Investment in June 2023.

For the three months ended June 30, 2024, compared to the same period in 2023, Other income (expense), net decreased by $0.1 million, or 9.4%.

For the six months ended June 30, 2024, compared to the same period in 2023, Other income (expense), net decreased by $2.0 million, or 41.0%, 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 in the prior period.

Income Tax Benefit (Expense)

Certain aspects of our operations, including our development and redevelopment activities, are conducted through taxable REIT subsidiaries, or TRS entities.

Certain aspects of our operations, including our development and redevelopment activities, are conducted through TRS entities.

Additionally, our TRS entities hold investments in one of our apartment communities and 1001 Brickell Bay Drive.

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

For the three months ended March 31, 2024, we had consolidated net losses subject to tax of $6.6 million, compared to consolidated net losses subject to tax of $4.9 million for the same period in 2023.

For the three months ended March 31, 2024, we recognized an income tax benefit of $2.7 million, compared to an income tax benefit of $4.2 million for the same period in 2023.

The decrease is due primarily to a reduction to the effective state tax rate expected to apply to the reversal of our existing deferred items recognized during the three months ended March 31, 2023.

For the three and six months ended June 30, 2024, we had consolidated net losses subject to tax of $5.3 million and $11.9 million, respectively, compared to consolidated net losses subject to tax of $2.5 million and $7.4 million, respectively, for the same periods in 2023.

For the three months ended June 30, 2024, we recognized an income tax benefit of $2.2 million, compared to an income tax benefit of $0.4 million for the same period in 2023.

The increase is due primarily to the tax effect of fewer gains, increased depreciation, and interest expense associated with properties owned by, and activities of, our TRS entities.

For the six months ended June 30, 2024, we recognized an income tax benefit of $4.9 million, compared to an income tax benefit of $4.6 million for the same period in 2023.

The increase is due primarily to the tax effect of fewer gains, increased depreciation, and interest expense associated with properties owned by, and activities of, our TRS entities.

This increase was partially offset by a reduction to the effective state tax rate expected to apply to the reversal of our existing deferred items recognized during the three months ended March 31, 2023.

Critical Accounting Estimates

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Our critical accounting estimates that involve our more significant judgments and estimates used in the preparation of our consolidated financial statements are detailed 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, 2023.

There have been no significant changes in our critical accounting estimates from those reported in our Form 10-K and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented.

There have been no significant changes in our critical accounting estimates from those reported in our Form 10-K, other than as noted below, and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented.

Investment in IQHQ

On a periodic basis, we perform a qualitative impairment assessment on our investment in IQHQ in accordance with GAAP.

We determined that our investment in IQHQ was impaired after consideration of factors, including adverse capital market conditions, increased real estate development costs, and IQHQ's financial condition.

As a result, we have recognized a $47.0 million non-cash impairment to reduce the carrying value of the investment in IQHQ to $12.7 million as of June 30, 2024.

The measurement of the impairment loss is based on the fair value of our investment in IQHQ.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors.

Estimating the fair value of our investment in IQHQ incorporates various estimates, assumptions, and market data, the most significant being projected operational cash flow, capitalization rates, and discount rates.

We determine capitalization rates and discount rates using third-party market research analytics.

Property operational cash flows are based on historical, current and expected future operating results and take into consideration stated operational strategies.

These projections are adjusted to reflect current economic conditions and require considerable management judgment.

Non-GAAP Measures

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• net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests;

• 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;

• realized and unrealized (gains) losses on interest rate contracts, 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;

• the non-cash (income) loss recognized on our Mezzanine Investment.

The reconciliation of net income (loss) to EBITDAre and Adjusted EBITDAre for the three months ended March 31, 2024 and 2023, is as follows ( in thousands ):

Three Months Ended March 31,

• the non-cash (income) loss recognized on our investment in IQHQ.

The reconciliation of net income (loss) to EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2024 and 2023, is as follows ( in thousands ):

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

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Income tax (benefit) expense

Gain on disposition of real estate

Depreciation and amortization

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Mezzanine investment (income) loss, net

Realized and unrealized (gains) losses on interest rate options

Realized and unrealized (gains) losses on interest rate contracts

Unrealized (gains) losses on IQHQ investment

Adjusted EBITDAre

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

As of March 31, 2024, our available liquidity was $290.4 million, which consisted of:

As of June 30, 2024, our available liquidity was $259.4 million, which consisted of:

• $88.5 million in cash and cash equivalents;

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

As of March 31, 2024, we had sufficient capacity on our non-recourse construction loans to cover our remaining commitments on development and redevelopment projects of approximately $42.4 million.

As of June 30, 2024, we had sufficient capacity on our non-recourse construction loans to cover our remaining commitments on development and redevelopment projects of approximately $17.4 million.

The initial allocations to our joint ventures have remaining unfunded commitments of $3.0 million.

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

As of March 31, 2024, approximately 90% of our outstanding non-recourse property debt had a fixed interest rate and approximately 10% had a variable interest rate, all of which was hedged.

As of June 30, 2024, approximately 90% of our outstanding non-recourse property debt had a fixed interest rate and approximately 10% had a variable interest rate, all of which was hedged.

In addition, the weighted-average contractual rate on our non-recourse debt was 4.8% and 4.6% inclusive of interest rate caps, and the average remaining term to maturity was 6.2 years.

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

As of March 31, 2024, we had no outstanding borrowings under our revolving secured credit facility, which requires that we 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.

As of June 30, 2024, we had no outstanding borrowings under our revolving secured credit facility, which requires that we maintain a fixed charge coverage ratio of 1.25X, minimum tangible net worth of $625.0 million, and maximum leverage of 60.0% as defined in the credit agreement.

We are currently in compliance and expect to remain in compliance with these covenants during the next twelve months.

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Operating Activities

For the three months ended March 31, 2024, net cash provided by operating activities was $21.7 million.

For the six months ended June 30, 2024, net cash provided by operating activities was $29.7 million.

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

Cash provided by operating activities for the three months ended March 31, 2024, increased by $16.1 million compared to the same period in 2023, due primarily to increased net operating income driven by higher rents and the timing of balance sheet position changes.

Cash provided by operating activities for the six months ended June 30, 2024, increased by $12.0 million compared to the same period in 2023, due primarily to increased net operating income driven by higher rents and the timing of balance sheet position changes, partially offset by increased interest expense.

Investing Activities

For the three months ended March 31, 2024, net cash used in investing activities of $41.1 million consisted primarily of capital expenditures.

Net cash used in investing activities for the three months ended March 31, 2024, decreased by $22.1 million compared to the same period in 2023, due primarily to decreased capital expenditures.

For the six months ended June 30, 2024, net cash used in investing activities of $77.4 million consisted primarily of capital expenditures.

Net cash used in investing activities for the six months ended June 30, 2024, decreased by $49.2 million compared to the same period in 2023, due primarily to decreased capital expenditures.

Financing Activities

For the three months ended March 31, 2024, net cash provided by financing activities of $20.5 million consisted primarily of proceeds from non-recourse construction loans, offset by common stock repurchases and distributions to redeemable noncontrolling interests.

Net cash provided by financing activities for the three months ended March 31, 2024, increased by $4.0 million compared to the same period in 2023, due primarily to decrease in common stock repurchases, partially offset by a decrease in proceeds from non-recourse construction loans.

For the six months ended June 30, 2024, net cash provided by financing activities of $17.9 million consisted primarily of proceeds from non-recourse construction loans, offset by common stock repurchases and distributions to redeemable noncontrolling interests.

Net cash provided by financing activities for the six months ended June 30, 2024, decreased by $53.7 million compared to the same period in 2023, due primarily to decreased proceeds from non-recourse construction loans, offset by decreased principal repayments on non-recourse property debt and increased common stock repurchases.

Future Capital Needs

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We use derivative financial instruments as a risk management tool and do not use them for trading or other speculative purposes.

As of March 31, 2024, on a consolidated basis, we had approximately $81.3 million of variable-rate property-level debt outstanding and $300.2 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, 2024, provided protection for our variable interest rate debt.

As of June 30, 2024, on a consolidated basis, we had approximately $81.3 million of variable-rate property-level debt outstanding and $327.7 million of variable-rate construction loans.

The impact of rising interest rates in recent history has been mitigated by our use of interest rate caps, which as of June 30, 2024, 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.

As of March 31, 2024, we estimate an increase or decrease in our variable rate indices of 100 basis points with constant credit risk spreads, would have no impact on interest expense.

As of March 31, 2024, we held interest rate caps with $627.4 million notional value.

These instruments were acquired for $5.8 million and at March 31, 2024, were valued at $5.1 million.

As of March 31, 2024, we had $140.4 million in cash and cash equivalents and restricted cash, a portion of which earns interest at variable rates.

As of June 30, 2024, we estimate an increase or decrease in our variable rate indices of 100 basis points with constant credit risk spreads, would have no material impact on interest expense.

As of June 30, 2024, we held interest rate caps with $627.4 million notional value.

These instruments were acquired for $5.7 million and at June 30, 2024, were valued at $3.7 million.

As of June 30, 2024, we had $109.4 million in cash and cash equivalents and restricted cash, a portion of which earns interest at variable rates.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis