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Item 1A. Risk Factors

2025-02-24 compared with 2024-02-26 · 81 added, 31 removed, 486 unchanged (19% of the section changed)

The risk factors noted in this section, and other factors noted throughout this Annual Report, describe certain risks and uncertainties that could cause our actual results to differ materially from those contained in any forward-looking statement.

SUMMARY RISK FACTORS

• Adverse economic and geopolitical conditions, health crises and dislocations in the financial and credit markets could adversely affect our financial condition and results of operations.

• Development, redevelopment, and construction risks could affect our profitability.

• Failure to generate sufficient net operating income may adversely affect our liquidity, limit our ability to fund necessary capital expenditures, or adversely affect our ability to pay dividends or distributions.

• Our business and financial results could be adversely affected by significant inflation, higher interest rates or deflation.

• Our ability to continue to grow or maintain our pipeline of development and redevelopment opportunities may be constrained.

• Our properties are geographically concentrated.

• Our development projects may subject us to certain liabilities, and we are subject to risks associated with developing properties in partnership with others.

• Development of properties may entail a lengthy, uncertain, and costly entitlement process.

• Government regulations and legal challenges may delay the start or completion of the development of our communities, increase our expenses or limit our building of apartments or other activities.

• Competition could limit our ability to lease apartment homes, increase or maintain rents or execute our development strategy.

• Because real estate investments are relatively illiquid, we may not be able to sell apartment communities or other assets when appropriate.

• Climate change may adversely affect our business.

• Potential liability or other expenditures associated with potential environmental contamination may be costly.

• Rent control laws and other regulations that limit our ability to increase rental rates may negatively impact our rental income and profitability.

• Laws benefiting disabled persons may result in our incurrence of unanticipated expenses.

• Moisture infiltration and resulting mold remediation may be costly.

• Although we are insured for certain risks, the cost of insurance, increased claims activity, or losses resulting from casualty events may affect our financial condition and results of operations.

• Natural disasters and severe weather may affect our financial condition and results of operations.

• We depend on our senior management.

• We rely on our property managers to manage our properties.

• Our business and operations would suffer in the event of significant disruptions or cyberattacks of our information technology systems or our failure to comply with laws, rules and regulations related to privacy and data protection.

• Compliance with ever evolving federal and state laws relating to the handling of information about individuals involves significant expenditure and resources, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust, which could materially adversely affect our business, results of operations, and financial condition.

• We do not have control over the operations of our alternative investments, which could adversely affect our financial condition and results of operations.

• There may be, or there may be the appearance of, conflicts of interest in our relationship with AIR.

• Our business could be negatively affected as a result of the actions of activist stockholders.

• We are seeking to maximize shareholder value by exploring strategic alternatives.

There can be no assurance that we will be successful in executing a strategic transaction.

• We are subject to risks associated with our debt financing.

• Disruptions in the financial markets could affect our ability to obtain financing and the cost of available financing and could adversely affect our liquidity.

• Increases in interest rates would increase our interest expense and reduce our profitability and could adversely affect our business, operating results, and financial condition.

• Covenant restrictions may limit our operations and impact our ability to make payments to our investors.

• We may increase leverage in executing our development plan.

• Aimco may fail to qualify as a REIT.

• REIT distribution requirements limit our available cash.

• Aimco may be subject to federal, state, and local income taxes in certain circumstances.

• Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.

• Complying with the REIT requirements may cause Aimco to forgo otherwise attractive business opportunities.

• Changes to United States federal income tax laws could materially and adversely affect Aimco and Aimco’s stockholders.

• If the Aimco Operating Partnership were to fail to qualify as a partnership for federal income tax purposes, Aimco would fail to qualify as a REIT and suffer other adverse consequences.

• There are restrictions on the ability to transfer and redeem Aimco Operating Partnership Units, there is no public market for Aimco Operating Partnership Units and holders of Aimco Operating Partnership Units are subject to dilution.

• Cash distributions by Aimco Operating Partnership are not guaranteed and may fluctuate with partnership performance.

• Holders of OP Units have limited voting rights and are limited in their ability to effect a change of control.

• Holders of OP Units may not have limited liability in specific circumstances.

• Aimco may have conflicts of interest with holders of OP Units.

• Provisions in the Aimco Operating Partnership agreement may limit the ability of a holder of OP Units to challenge actions taken by the general partner.

• Aimco Operating Partnership and its subsidiaries may be prohibited from making distributions and other payments.

• Aimco’s charter includes limits on ownership of Aimco shares.

• Aimco’s charter and the Maryland General Corporations Law may limit the ability of a third-party to acquire control of Aimco.

RISKS RELATED TO BUSINESS

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• our ability to complete developments and redevelopments and other construction projects as planned.

Given the nature of the effects of a potential epidemic, pandemic, or other health crisis, it remains challenging to predict the ultimate impact of such events on the global economy, our residents and commercial tenants, our communities, and the operations of entities in which we hold an interest (including our economic interest in the partnership owning the “Parkmerced Apartments”).

Such events, depending on their nature, duration, and intensity, could have a material adverse effect on our operating results and financial condition.

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• we may be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third-party permits and authorizations, which could result in increased costs or the delay or abandonment of opportunities;

• we may incur costs that exceed our original estimates due to increased material, labor, or other factors and costs, such as those resulting from litigation, program changes, inflation, interest rate increases or supply chain disruptions;

• we may be unable to complete construction and lease-up of an apartment community on schedule, including as a result of global supply chain disruptions, resulting in increased construction and financing costs and a decrease in expected rental revenues;

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• unexpected events or circumstances may arise during the development or redevelopment process that affect the timing of completion and the cost and profitability of the development or redevelopment;

• loss of a key member of a redevelopment or development team could adversely affect our ability to deliver developments and redevelopments on time and within our budget;

• loss of a key member of a development team could adversely affect our ability to deliver developments and redevelopments on time and within our budget;

• government restrictions, standards or regulations intended to reduce greenhouse gas emissions and potential climate change impacts may increase in the future in the form of restrictions or additional requirements on development in certain areas;

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The inability to source opportunities could impede our growth and could have a material adverse effect on us.

Our properties are geographically concentrated in Florida, Chicago, and in the Northeast region of the United States, which makes us more susceptible to regional and local adverse economic and other conditions than if we owned a more geographically diversified portfolio.

The majority of our properties are located in Florida, Chicago, and in the Northeast region of the United States.

Our properties are geographically concentrated in Florida, Chicago, the Washington, D.C.

Metro Area, and in the Northeast region of the United States, which makes us more susceptible to regional and local adverse economic and other conditions than if we owned a more geographically diversified portfolio.

The majority of our properties are located in Florida, Chicago, the Washington, D.C.

Metro Area, and in the Northeast region of the United States.

As a result, we are particularly susceptible to adverse economic or other conditions in these markets (such as periods of economic slowdown or recession, business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes, and the cost of complying with governmental regulations or increased regulation), as well as to natural disasters (including earthquakes, storms, and hurricanes), potentially adverse effects of “global warming,” and other disruptions that occur in these markets (such as terrorist activity or threats of terrorist activity and other events), any of which may have a greater impact on the value of our assets or on our operating results than if we owned a more geographically diversified portfolio.

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Our noncompliance with environmental laws could result in fines and penalties, obligations to remediate, permit revocations, other sanctions and reputational harm.

In addition, regulations and other expectations related to environmental matters and climate change are not uniform, and may be inconsistently interpreted or applied, which can increase the complexity and costs of compliance as well as any associated litigation or enforcement risks.

Governmental regulation affects not only construction activities but also sales activities, mortgage lending activities, and other dealings with consumers.

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operations, and financial condition could be materially adversely affected.

Our implementation of a new enterprise resource planning ("ERP") system may adversely affect our business, results of operations, and financial condition or the effectiveness of our internal control over financial reporting.

We are engaged in a phased implementation of a new ERP system, which will to continue throughout 2024.

During the third quarter of 2023, we implemented the first phase, which replaced a legacy system where a significant portion of our transactions were originated, processed, or recorded.

The ERP system is designed to accurately maintain our financial records, enhance operational functionality and provide timely information to our management team related to the operation of our business.

The implementation of a new ERP system has required, and will continue to require, the investment of significant financial and human capital resources.

While we have invested, and continue to invest, significant resources in planning, project management, consulting, and training, it is possible that significant implementation, operational, and functionality issues may arise during the course of implementing and utilizing the ERP system, and it is further possible that we may experience significant delays, increased costs, and other difficulties that are not presently contemplated.

Any significant disruptions, delays, deficiencies, or errors in the design, implementation, and utilization of the ERP system could adversely affect our operations, prevent us from accurately and timely reporting our financial results, and negatively impact our business, results of operations and financial condition.

Additionally, if we do not effectively implement and utilize the ERP system as planned or the system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to adequately assess its effectiveness could be delayed.

We do not have control over the partnership owning the Parkmerced Apartments, the operation of which could adversely affect our financial condition and results of operations.

Our indirect interest in the partnership owning the Parkmerced Apartments is subject to certain risks, including, but not limited to, exposure to the skill and capital of the controlling party and those resulting from fluctuations in San Francisco occupancy rates, operating disruptions due to effects of the pandemic, and the current economic situation which may result in all, or a portion of the loan not being repaid.

In November 2019, Aimco Predecessor made a five-year, $275.0 million mezzanine loan to the partnership owning the Parkmerced Apartments (the “Mezzanine Investment”).

The loan bears interest at a 10% annual rate, accruing if not paid from property operations.

In June 2023, we closed on the sale of a 20% non-controlling participation in the loan for $33.5 million.

In connection with the participation sold, the purchaser also made a $4.0 million non-refundable payment for the option to acquire the remaining 80% for an additional $134 million plus our annualized return.

The option expired unexercised in the quarter ended December 31, 2023.

We have recognized a $158.0 million non-cash impairment to reduce the carrying value of loan to zero as of December 31, 2023.

While we have impaired and written down the carrying value of the Mezzanine Investment to zero, risks remains that all or a portion of the loan will not be repaid.

There can be no assurances that we will not take additional charges in the future related to the impairment of our assets.

We do not have control over the operations of our alternative and equity method investments, which could adversely affect our financial condition and results of operations.

Our interests in alternative investments consist of the mezzanine loan to the partnership owning the Parkmerced Apartments (the “Mezzanine Investment”), as well as our investments in IQHQ and real estate technology funds.

Our equity method investments include ownership interests in unconsolidated real estate partnerships that own four operating properties and one land parcel held for development.

These investments are subject to certain risks, including, but not limited to, exposure to the skill and capital of the controlling party, local market conditions, increases in construction financing costs (when applicable), and occupancy rates.

In 2023 and 2022, we recognized non-cash impairment charges on our Mezzanine Investment of $158.0 million and $212.6 million, respectively.

The carrying value of the Mezzanine Investment was zero as of December 31, 2024 and 2023.

While we have impaired and written down the carrying value of the Mezzanine Investment to zero and the mezzanine loan is in maturity default, the risk remains that all or a portion of the loan will not be repaid.

In 2024, we recognized a non-cash impairment of $48.6 million on our passive equity investment in IQHQ reducing the carrying value to $11.1 million.

There can be no assurances that we will not take additional charges in the future related to the impairment of our alternative and equity method investments.

Any future impairment could have a material adverse effect on our financial condition and results of operations.

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Our business could be negatively affected as a result of the actions of activist stockholders.

Publicly traded companies have increasingly become subject to campaigns by investors advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases, or even sales of assets or the entire company.

We have been subject to stockholder activism in the past and given our stockholder composition and other factors, it is possible our stockholders or future activist stockholders may attempt to effect such changes in the future.

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Additionally, perceived uncertainties as to our future direction as a result of stockholder activism or changes to the composition of our Board may lead to the perception of a change in the direction of the business, instability, or lack of continuity, which may be exploited by our competitors, cause concern to our current or potential lenders, partners, or others with whom we do business, and make it more difficult to attract and retain qualified personnel.

We are seeking to maximize shareholder value by exploring strategic alternatives.

There can be no assurance that we will be successful in executing a strategic transaction.

We are actively considering strategic alternatives in an effort to unlock and maximize stockholder value.

These strategic alternatives may include, but not be limited to, exploration of potential sales of the major components of the business (in one or a series of transactions), an acceleration of individual asset sales, or a sale or merger of the Company as a whole.

We may not be able to identify or consummate a suitable transaction and do not currently have any commitments relating to any transactions.

We may not be able to successfully implement a strategic transaction we pursue, and even if we determine to pursue one or more strategic transactions, we may be unable to do so on acceptable financial terms and any such transaction may not improve the market price of our common stock.

Pursuing a strategic opportunity is subject to risks, including those outlined herein, and if we are unsuccessful in consummating a strategic transaction, our business could be materially adversely affected.

RISKS RELATED TO OUR INDEBTEDNESS AND FINANCING

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A significant number of our assets, including apartment communities, land, and construction projects serve as collateral for our credit facility, property debt and construction loans.

Our secured credit facility matures in December 2024, prior to consideration of its one-year extension option.

Our secured credit facility matures in December 2025.

Certain of our subsidiaries have existing secured property-level debt equal to approximately $689.9 million and construction loans of approximately $393.8 million as of December 31, 2024.

Over time, we are likely to become party to additional financing arrangements, including credit facilities or other bank debt, bonds, and mortgage financing.

Over time, we are likely to become party to additional financing arrangements, which may include credit facilities or other bank debt, bonds, and mortgage financing.

Our organizational documents do not limit the amount of debt that we may incur, and we have significant amounts of debt outstanding.

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Cash distributions by Aimco Operating Partnership are not guaranteed and may fluctuate with partnership performance.

Aimco Operating Partnership does not intend to make regular distributions to holders of OP Units (other than what is required for Aimco to maintain its REIT status).

Aimco Operating Partnership does not intend to make regular distributions to holders of OP Units (other than what is required for Aimco to maintain its REIT status or return capital to stockholders).

There can be no assurance regarding the amounts of available cash that Aimco Operating Partnership will generate or the portion that its general partner will choose to distribute.

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Aimco may have conflicts of interest with holders of OP Units.

Conflicts of interest could arise in the future as a result of the relationships between the general partner of Aimco Operating Partnership and its affiliates (including us), on the one hand, and Aimco Operating Partnership or any partner thereof, on the other.

Conflicts of interest could arise in the future as a result of the relationships between the general partner of Aimco Operating Partnership and its affiliates (including Aimco), on the one hand, and Aimco Operating Partnership or any partner thereof, on the other.

The directors and officers of the general partner have fiduciary duties to manage the general partner in a manner beneficial to us, as the sole stockholder of the general partner.

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Our Chief Information Officer (CIO) reports to the Chief Administrative Officer & General Counsel and leads the Company’s overall cybersecurity function.

Prior to December 31, 2023, the Audit Committee received regular reports from AIR on our cybersecurity risks.

Since December 31, 2023, the Audit Committee has begun receiving and will continue to receive regular reports from our CIO on our cybersecurity risks, including briefings on our cyber risk management program and cybersecurity incidents.

The Audit Committee receives regular reports from our CIO on our cybersecurity risks, including briefings on our cyber risk management program and cybersecurity incidents.

Audit Committee members also receive periodic presentations on cybersecurity topics from our CIO, supported by our internal security staff, or external experts as part of the Board’s continuing education on topics that impact public companies.

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markets and with average rents in line with local market averages (generally defined as B class).

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

We also own an apartment building and its adjacent office building, Yacht Club Apartments and 1001 Brickell Bay Drive (together referred to as the "Brickell Assemblage"), in a land assemblage that is under contract to be sold.

Our current development and redevelopment portfolio consists of 9 properties, including developable land, located primarily in Southeast Florida, the Washington, D.C.

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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-K

Item 1A. Risk Factors