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Item 7. Management’s Discussion and Analysis

2025-02-24 compared with 2024-02-26 · 120 added, 114 removed, 141 unchanged (62% of the section changed)

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The following discussion and analysis of financial condition and results of operations for the year ended December 31, 2024, compared to 2023, should be read in conjunction with the accompanying consolidated financial statements in Part II, Item 8.

For discussion of the year ended December 31, 2022, compared to 2021, please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 31, 2022.

For discussion of the year ended December 31, 2023, compared to 2022, please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024.

Executive Overview

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Financial Results and 2024 Highlights

• For the year ended December 31, 2023, net loss attributable to common stockholders per share, on a fully dilutive basis, was a net loss per share of $1.16, compared to net income per share of $0.49 for the same period in 2022, due primarily to lower transaction-related income in 2023.

• For the year ended December 31, 2023, NOI from our Stabilized Operating Properties was $105.7 million, up 9.3% year-over-year, with average monthly revenue per apartment home increasing by $194 to $2,305.

• For the year ended December 31, 2023, we delivered over 350 apartment homes at The Hamilton in Miami, Florida, Upton Place in Washington, D.C., and Oak Shore in Corte Madera, California;

and we opened the 106-key Benson Hotel and Faculty Club in Aurora, Colorado.

• For the year ended December 31, 2023, we monetized $122.7 million of assets, including the sale of a development land parcel in Fort Lauderdale, Florida, the sale of a 20% stake of our Parkmerced mezzanine investment, and the associated swaption.

In the fourth quarter of 2023, the purchaser of that position forfeited their option to acquire the remaining 80% of the Parkmerced mezzanine investment when they failed to make a required interest payment, resulting in the subordination of their earlier investment.

• For the year ended December 31, 2024, net loss attributable to common stockholders per share, on a fully dilutive basis, was a net loss per share of $0.75.

• For the year ended December 31, 2024, NOI from our Operating segment was $99.0 million, up 4.5% year-over-year, with average monthly revenue per apartment home increase by 3.8% to $2,290.

• For the year ended December 31, 2024, we substantially completed construction at Upton Place in Washington, D.C., Strathmore Square in Bethesda, Maryland, and Oak Shore in Corte Madera, California and advanced the lease-up of our recently completed developments.

• During the fourth quarter, we increased our ownership in Upton Place as our development partner exercised the option to sell their 10% interest in the asset.

Also, Aimco secured a bridge loan to replace the higher cost construction loan, and partially paydown a project-level preferred equity investor.

• During the third quarter, we began construction on an ultra-luxury residential tower located at 640 NE 34th Street ("34th Street") in the Edgewater neighborhood of Miami, Florida.

Total direct project costs for the 34th Street development are expected to be $240.0 million with initial occupancy scheduled in mid-2027.

• During the fourth quarter, we sold, for a total price at Aimco's share of $203.8 million, our interests in two investments in Miami, Florida:

The Hamilton, a recently completed redevelopment of a 276-unit apartment building, and a 2.8-acre development site at 3333 Biscayne Boulevard.

On December 19, 2024, Aimco's Board of Directors declared a $0.60 per share special cash dividend to distribute the net proceeds from these transactions to stockholders of record on January 14, 2025.

• During the fourth quarter, we reached an agreement to sell, in 2025, the Brickell Assemblage for $520.0 million, and the buyer's deposit of $38.0 million is non-refundable.

Operating Property Results

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

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

Highlights for the year ended December 31, 2024 include:

• Revenue for our Operating segment was $149.8 million, up 8.4% year over year, resulting from a $194 increase in average monthly revenue per apartment home to $2,305, partially offset by a 70-basis point decrease in Average Daily Occupancy to 96.7%.

• Expenses for our Operating segment were $44.1 million, up 6.4% year over year, due primarily to higher insurance costs.

• Revenue for our Operating segment was $140.1 million, up 4.5% year over year, resulting from an $85 increase in average monthly revenue per apartment home to $2,290 and an increase in Average Daily Occupancy of 60-basis points to 97.2%.

• Expenses for our Operating segment were $41.1 million, up 4.4% year over year, due primarily to higher real estate taxes and insurance costs.

• Net operating income for our Operating segment was $99.0 million, up 4.5% year over year.

Value Add, Opportunistic and Alternative Investments

Value Add and Opportunistic Investments

Development and Redevelopment

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

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 in three 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.

Additionally, we have a pipeline of future value-add opportunities totaling approximately 13 million gross square feet of development in our target markets of Southeast Florida, the Washington, D.C.

As of December 31, 2024, we had one multifamily development project under construction and three multifamily communities that have been substantially completed and are now in lease-up.

In addition to Aimco's core multifamily developments, The Benson Hotel was completed in 2023 and remains in the stabilization process.

We have a pipeline of future value-add opportunities totaling approximately 7.7 million gross square feet of development in our target markets of Southeast Florida, the Washington, D.C.

Metro Area, and Colorado's Front Range.

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Highlights for the year ended December 31, 2024, include:

• In Bethesda, Maryland, construction continued 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.

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 project is fully secured with Aimco having already funded 100% of its equity commitment.

• In Upper Northwest Washington, D.C., construction at Upton Place is nearing completion and remains on schedule and on budget.

As of December 31, 2023, we have delivered 234 apartment homes, with the first residents at Upton Place having moved into their new homes during the fourth quarter of 2023.

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

As of December 31, 2023, initial homes had been delivered and we welcomed our first residents into their new home.

• In Miami, Florida, construction was completed on The Hamilton, a 276-unit waterfront apartment community redevelopment and the property finished the initial lease-up of apartment homes in the third quarter 2023 at rates well ahead of underwritten rents.

• In Aurora, Colorado, The Benson Hotel and Faculty Club, a 106-key boutique hotel and event center with 18 thousand square feet of event space, was completed in the second quarter 2023 and is open to guests.

Alternative Investments

Our current alternative investments are primarily those investments originated by Aimco Predecessor and include a mezzanine loan 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 2023, we monetized $91.5 million of our Parkmerced mezzanine investments through the sale of a 20% interest in the loan, pre-paid interest, and the monetization of the associated interest rate swaption.

The buyer of the partial interest in the loan received an option to purchase our remaining 80%, however, the option expired when the buyer did not make its contractual payment in the fourth quarter 2023 required to maintain its purchase option.

• In accordance with GAAP and because we receive first priority and a higher annualized return than the buyer of the partial interest in the loan, we were required to record the $33.5 million of cash received from the buyer as a balance sheet liability.

No amount is due to repay the liability until after we receive cash payments in a subsequent transaction or recapitalization that total $134 million (Aimco's 80% remaining ownership of the loan) plus its annualized return.

• Additionally, considering various quantitative and qualitative factors including the buyer’s option expiration, the loan's maturity date, which is concurrent with the property's senior mortgage, and the financial condition of the borrower, we recorded a $158.0 million non-cash impairment to fully write off the remaining investment.

• We continue to monitor the mezzanine investment and seek to recover value but expects to do so without a significant investment or allocation of resources.

• In Upper Northwest Washington, D.C., construction at Upton Place is substantially complete with all 689 apartment homes delivered.

As of December 31, 2024, 314 homes were leased or pre-leased at rental rates greater than underwriting and 90% of the project's 105,000 square feet of retail space has been leased.

• In Bethesda, Maryland, all 220 of the highly tailored apartment homes at the first phase of Strathmore Square have been delivered.

As of December 31, 2024, 84 homes were leased or preleased with rents in line with our initial projections, and 75 homes were occupied.

• In Corte Madera, CA, construction at Oak Shore is substantially complete with all 16 ultra-luxury single family rental homes and eight accessory dwelling units delivered.

As of December 31, 2024, 16 homes were leased or pre-leased at rental rates greater than underwriting.

• During the third quarter, construction began in Miami's Edgewater neighborhood on 34th Street, an ultra-luxury waterfront residential tower that will include 7,000 square feet of retail and rental homes averaging more than 2,500 square feet, with oversized private terraces, top-of-the-line finishes, and unobstructed views of Biscayne Bay.

We expect to welcome the first residents at this $240.0 million project in 3Q 2027 and stabilize occupancy in 4Q 2028 .

• We invested $3.9 million into programming, design, documentation, and entitlement efforts primarily at our 901 North project in Fort Lauderdale, Florida.

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

Investment and Disposition Activity

We are focused on prudently allocating capital and delivering strong investment returns.

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

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.

Highlights for the year ended December 31, 2024 include:

• The monetization of the Parkmerced mezzanine investments as described above.

• In the fourth quarter 2023, our joint venture in Fort Lauderdale, Florida monetized an additional portion of its investment by closing on the sale of the second of three land parcels along Broward Avenue.

• In the fourth quarter, Aimco increased its ownership interest in its Upton Place property by $19.1 million, as its development partner exercised the option to sell the entirety of their 10% interest in the asset.

• In the fourth quarter, we sold, for $203.8 million, our interests in two real estate investments in the Edgewater neighborhood of Miami, Florida, retired $110.1 million of associated liabilities, and, in December, declared a divided to return approximately $90.0 million of capital to stockholders in January 2025.

o The Hamilton, our recently completed major redevelopment was sold for $190.0 million.

o Our interest in 3333 Biscayne Boulevard, a 2.8-acre development site, was purchased by our joint venture partner at a gross valuation of $66.5 million or $13.8 million at our share of the venture.

• In the fourth quarter, we entered into an agreement to sell the Brickell Assemblage for a gross price of $520.0 million.

o The buyer’s initial deposit of $38.0 million is now non-refundable, and due diligence has been completed.

o The buyer can exercise an option to finance up to $115.0 million of the purchase price with a transferable seller financing note from Aimco for a period of 18 months at a rate of 12%.

If exercised, the purchase price increases by $20.0 million, to $540.0 million.

o The sale, which is subject to certain closing conditions and extension options, is scheduled to occur as early as March 2025 but may be extended at the buyer’s option to the fourth quarter of 2025, with such extensions requiring the buyer to increase its non-refundable deposit.

o Net proceeds from the transaction, accounting for the associated property-level debt and deferred tax liability, are estimated to range from $300.0 to $320.0 million depending on the buyer’s election regarding seller financing.

We intend to return the majority of the net proceeds from the transaction upon receipt to stockholders.

Balance Sheet and Financing Activities

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

We are highly focused on maintaining a strong balance sheet, including ample liquidity.

As of December 31, 2024, we had access to $321.0 million in liquidity, including $141.1 million of cash on hand, $31.4 million of restricted cash, and the capacity to borrow up to $148.5 million on our revolving credit facility.

In the fourth quarter, we refinanced our Upton Place asset with a $215.0 million bridge loan.

The three year loan, which has a fixed interest rate of 6.39% and is prepayable at par after 18 months, replaced the construction loan and funded the partial paydown of a project-level preferred equity investor, which together had a weighted average interest rate of 9.22% at the time of payoff.

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

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Results of Operations for the Year Ended December 31, 2024, Compared to the same period in 2023

Net income attributable to Aimco common stockholders decreased by $241.9 million for the year ended December 31, 2023 compared to the same period in 2022, as described more fully below.

Net income attributable to Aimco common stockholders increased by $63.7 million for the year ended December 31, 2024 compared to the same period in 2023, as described more fully below.

Property Results

As of December 31, 2023, our Development and Redevelopment segment included 11 properties, three of which were under construction.

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

George Villas.

During the first quarter of 2023, we reclassified one residential apartment community from the Other segment to the Operating segment because it reached stabilization.

During the fourth quarter of 2023, we sold one land parcel from the Development and Redevelopment segment, which resulted in its removal from the segment.

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 classification as of December 31, 2023.

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

Proportionate property net operating income is defined as our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, including utility reimbursements, for the consolidated communities;

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

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

Please refer to Note 14 to the consolidated financial statements in Item 8 for further discussion regarding our segments, including a reconciliation of these proportionate amounts to consolidated rental and other property revenues and property operating expenses.

Proportionate Property Net Operating Income

As of December 31, 2024, our Development and Redevelopment segment included 9 rental communities, including one under construction and three substantially completed and in lease-up.

Our Operating segment included 20 communities with 5,243 apartment homes, and our Other segment includes The Benson Hotel, our only hotel.

During the first quarter of 2024, we revised the information regularly reviewed by our President and Chief Executive Officer, the 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 year ended December 31, 2024, we disposed of a majority of our partnership interest in St.

George Villas, which was previously reported within the Other segment, and The Hamilton, which was previously reported within the Development and Redevelopment segment.

We also reclassified as held for sale 1001 Brickell Bay Drive, which was previously reported within the Other segment, and Yacht Club Apartments, which was previously reported in our Operating segment.

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

We use property net operating income ("PNOI") to assess the operating performance of our segments.

PNOI is defined as rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, including utility reimbursements, for the consolidated communities;

but excluding

• the results of four apartment communities with an aggregate 142 apartment homes that we neither manage nor consolidate, our investment in IQHQ, the Mezzanine Investment, and investments in real estate technology funds;

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

Please refer to Note 14 to the consolidated financial statements in Item 8 for further discussion regarding our segments, including a reconciliation of these amounts to consolidated rental and other property revenues and property operating expenses.

Property Net Operating Income

The results of our segments for the years ended December 31, 2024 and 2023, as presented below, are based on segment classifications as of December 31, 2024.

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Development and Redevelopment

Proportionate property net operating income:

Property net operating income:

Development and Redevelopment

For the year ended December 31, 2024, compared to the same period in 2023:

• Development and Redevelopment proportionate net operating income increased by $6.7 million primarily due to the lease up of apartment homes at The Hamilton.

• Operating proportionate property net operating income increased by $9.0 million, or 9.3%.

The increase was attributable primarily to a $11.6 million, or 8.4% increase in rental and other property revenues due to higher average revenues of $194 per apartment home, partially offset by a 70-basis point decrease in occupancy.

• Other proportionate property net operating income decreased by $1.4 million, or 13.5%.

The decrease was attributable primarily to a lease termination fee recognized in 2022 and decreases in occupancy following lease expirations earlier in 2023 at our commercial office building in Miami, Florida.

• Development and Redevelopment property net operating income increased by $1.2 million primarily due to the lease up of apartment homes at Upton Place and Strathmore Square.

• Operating property net operating income increased by $4.3 million, or 4.5%.

The increase was attributable primarily to a $6.0 million, or 4.5% increase in rental and other property revenues due to higher average revenues of $85 per apartment home and 60-basis points increase in occupancy.

• Other property net operating income increased by $1.0 million, or 49.4%, primarily due to a full year of The Benson Hotel operations in 2024 whereas operations commenced in the second quarter of 2023.

The results of our segments for the years ended December 31, 2023 and 2022, as presented below, are based on segment classifications as of December 31, 2024.

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Development and Redevelopment

Proportionate property net operating income:

Property net operating income:

Development and Redevelopment

For the year ended December 31, 2023, compared to the same period in 2022:

• Development and redevelopment proportionate net operating income decreased by $1.9 million.

• Operating proportionate property net operating income increased by $13.2 million, or 15.8% for the year ended December 31, 2022, compared to 2021.

• Development and redevelopment property net operating income decreased by $0.7 million due to increases in property operating expenses due to the completion of Upton Place in the fourth quarter of 2023.

• Operating property net operating income increased by $8.1 million, or 9.3% for the year ended December 31, 2023, compared to 2022.

The increase was attributable to a $9.6 million, or 7.7% increase in rental and other property revenues, offset partially by a $1.6 million, or 4.1% increase in property operating expenses due primarily to higher real estate taxes and insurance.

• Other proportionate property net operating income increased by $0.9 million, or 9.2% for the year ended December 31, 2022, compared to 2021, due primarily to the increase in rental and other revenues at 1001 Brickell, offset primarily by the increase in property insurance.

• Other property net operating income decreased by $1.6 million for the year ended December 31, 2023, compared to 2022, due primarily to the commencement of The Benson Hotel operations in the second quarter of 2023.

Non-Segment Real Estate Operations

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Depreciation and Amortization

For the year ended December 31, 2023, compared to the same period in 2022, Depreciation and amortization expense decreased by $90.1 million, or 56.7%, due primarily to $85.7 million of accelerated depreciation recognized relating to the 2022 lease termination as described in Note 4 to the consolidated financial statements.

For the year ended December 31, 2024, compared to the same period in 2023, Depreciation and amortization expense increased by $17.5 million, or 25.5%, due primarily to the substantial completion of Upton Place, Strathmore Square, and Oak Shore in 2024.

General and Administrative Expenses

For the year ended December 31, 2023, compared to the same period in 2022, General and administrative expenses decreased by $6.8 million, or 17.2%, primarily due to a decrease in expenses for consulting services per the Separation Agreement with AIR, which concluded at December 31, 2022.

For the year ended December 31, 2024, compared to the same period in 2023, General and administrative expenses were relatively flat.

Interest Income

For the year ended December 31, 2023, compared to the same period in 2022, Interest income increased by $5.7 million, or more than 100%.

The increase is due primarily to higher rates of interest earned on excess cash invested in treasury bill investments and money market funds in 2023.

For the year ended December 31, 2024, compared to the same period in 2023, Interest income decreased by $0.1 million, or 1%.

The decrease is due primarily to higher rates of interest earned on excess cash invested in treasury bill investments and money market funds in 2023, partially offset by interest earned on seller financing provided in connection with the sale of a land parcel in December 2023.

Interest Expense

For the year ended December 31, 2023, compared to the same period in 2022, Interest expense decreased by $36.1 million, or 48.9% due primarily to the prepayment of the notes payable due to AIR and other property debt, as well as the 2022 lease termination described in Note 4 to the consolidated financial statements.

For the year ended December 31, 2024, compared to the same period in 2023, Interest expense increased by $32.3 million, or 85.7% due primarily to increased non-recourse construction loan draws and reduced capitalization as development projects are advanced and completed, partially offset by the repayment of certain nonrecourse property debt in 2023.

Mezzanine Investment Income (Loss), Net

For the years ended December 31, 2023 and 2022, we recorded Mezzanine Investment (Loss), Net of $155.8 million and $179.2 million, respectively.

This is due primarily to non-cash impairment charges of $158.0 million and $212.8 million for the years ended December 31, 2023 and 2022, respectively.

The prior year non-cash impairment charge was partially offset by interest income, which we ceased to recognize in 2023 following the impairment.

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 $3.8 million and unrealized gains of $36.9 million during the years ended December 31, 2023, and 2022, respectively.

For the years ended December 31, 2024, compared to the same period in 2023, Mezzanine Investment Income (Loss), Net decreased $153.4 million due primarily to a non-cash impairment charge of $158.0 million in the year ended December 31, 2023, partially offset by the recognition in income of the $4.0 million non-refundable option payment upon expiration of the option to acquire the remaining 80% in the Mezzanine Investment.

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 $4.2 million and $3.8 million during the years ended December 31, 2024, and 2023, respectively.

In addition, we realized gains of $6.0 million and $4.9 million during the years ended December 31, 2024, and 2023, respectively.

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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 gains of $0.7 million during the year ended December 31, 2023, compared to unrealized losses of $5.9 million for the same period in 2022.

We measure our investment in IQHQ at cost, less impairment if 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.

During the year ended December 31, 2022, we recognized realized and unrealized gains on our investment in IQHQ totaling $26.2 million resulting from a partial redemption of our investment during June 2022.

There were no observable price changes in 2023.

In addition, we measure our investment in IQHQ using the measurement alternative.

Under the measurement alternative, the investment is measured 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 $49.5 million during the year ended December 31, 2024, compared to unrealized gains of $0.7 million for the same period in 2023, due primarily to a $48.6 million non-cash impairment recognized on our investment in IQHQ.

There were no impairments or observable price changes in 2023.

Gain on Dispositions of Real Estate

During the year ended December 31, 2023, we recognized gains on the disposition of real estate of $8.0 million comprised of $1.9 million from the contribution of real estate to an unconsolidated joint venture and a $6.1 million gain that resulted from the sale of one land parcel, compared to gains of $175.9 million recognized for the same period in 2022, that resulted from the sale of three apartment communities and one land parcel.

Lease Modification Income

No lease modifications occurred during the year ended December 31, 2023.

For the year ended December 31, 2022, we recognized $207.0 million of lease modification income related to the agreement entered into with AIR for the termination of the leases of four properties.

During the year ended December 31, 2024, we recognized gains on the disposition of real estate of $10.6 million due primarily due to the sale of The Hamilton compared to gains of $8.0 million recognized for the same period in 2023 that resulted from the sale of one land parcel and the contribution of real estate to an unconsolidated joint venture.

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.

For the year ended December 31, 2023, compared to the same period in 2022, Other income (expense), net decreased by $4.8 million, or 36.2%, due primarily to advisory expenses related to a strategic business review and the annual stockholder meeting incurred in 2022.

Other income (expense), net , includes costs associated with our risk management activities, partnership administration expenses, fee income, certain non-recurring items, and activity related to our unconsolidated real estate partnerships.

For the year ended December 31, 2024, compared to the same period in 2023, Other income (expense), net decreased by $2.1 million, or 27.1%, 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.

Income Tax Benefit (Expense)

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

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

Additionally, our TRS entities hold our investment in 1001 Brickell Bay Drive.

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

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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 year ended December 31, 2023, we had consolidated net losses subject to tax of $15.2 million, compared to consolidated net income subject to tax of $88.8 million for the same period in 2022.

For the year ended December 31, 2023, we recognized income tax benefit of 12.8 million, compared to income tax expense of $17.3 million for the same period in 2022.

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

For the year ended December 31, 2024, we had consolidated net losses subject to tax of $28.2 million, compared to consolidated net losses subject to tax of $15.2 million for the same period in 2023.

For the year ended December 31, 2024, we recognized income tax benefit of $11.1 million, compared to income tax benefit of $12.8 million for the same period in 2023.

The year-over-year decrease is due primarily to changes in 2023 to the effective tax rate expected to apply to the reversal of our existing deferred items, partially offset by increased tax benefit from higher losses in 2024 at our TRS entities.

Liquidity and Capital Resources

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As of December 31, 2024, we had sufficient capacity on our construction loans to cover our remaining commitments on development and redevelopment projects of approximately $146.9 million.

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

We also have unfunded commitments in the amount of $2.0 million related to four investments in entities that develop technology related to the real estate industry.

We also have unfunded commitments in the amount of $1.4 million related to our 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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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 2024, prior to consideration of its one-year extension option.

Our revolving secured credit facility matures in December 2025.

Leverage and Capital Resources

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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 December 31, 2023, 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 6.7 years.

As of December 31, 2024, all of our outstanding non-recourse property debt had a fixed interest rate.

In addition, the weighted-average contractual rate on our non-recourse debt was 4.4%, and the average remaining term to maturity was 6.8 years.

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

As of December 31, 2023, 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% as defined in the credit agreement.

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 with $148.5 million of available capacity at December 31, 2024.

Our revolving secured credit facility 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% 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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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 year ended December 31, 2023, decreased by $153.8 million compared to the same period in 2022, due primarily to cash received from development and redevelopment property lease terminations in 2022, 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.

Cash provided by operating activities for the year ended December 31, 2024, decreased by $3.5 million compared to the same period in 2023, due primarily to the timing of balance sheet position changes, increased interest expense primarily driven by the substantial completion of Upton Place, Strathmore Square, and Oak Shore in 2024, offset by increased net operating income driven by higher rents and occupancy.

Investing Activities

For the year ended December 31, 2023, net cash used in investing activities of $260.4 million consisted primarily of capital expenditures of $272.5 million, offset by $9.3 million of proceeds received from the disposition of real estate.

Net cash used in investing activities for the year ended December 31, 2023, increased by $139.6 million compared to the same period in 2022, due primarily to increased capital expenditures and lower proceeds from dispositions of real estate, offset by decreased funding for net real estate and investment transactions.

For the year ended December 31, 2024, net cash provided by investing activities of $30.6 million consisted primarily of $186.2 million of proceeds from dispositions of real estate and $5.8 million of proceeds from dispositions of unconsolidated real estate partnerships, offset by capital expenditures of $160.0 million.

Net cash provided by investing activities for the year ended December 31, 2024, increased by $291.0 million compared to the same period in 2023, due primarily to greater proceeds from dispositions of real estate and unconsolidated real estate partnerships and decreased capital expenditures.

Financing Activities

For the year ended December 31, 2023, net cash provided by financing activities of $119.4 million consisted primarily of proceeds from construction loans, the sale of a participation in the Mezzanine Investment, and the monetization of interest rate options, partially offset by repayments on non-recourse property debt and common stock repurchases.

Net cash provided by financing activities for the year ended December 31, 2023, increased by $217.7 million compared to the same period ended in 2022, due primarily to prior year repayment and borrowing activity, offset by current year activity, including increased proceeds from construction loans, the sale of a participation in the Mezzanine Investment and the monetization of interest rate options.

For the year ended December 31, 2024, net cash used in financing activities of $43.9 million consisted primarily of principal repayments of non-recourse construction loans, the redemption and purchase of noncontrolling interests, and common stock repurchases, offset by proceeds from non-recourse construction loans and proceeds from interest rate contracts.

Net cash used in financing activities for the year ended December 31, 2024, changed by $163.3 million compared to the same period ended in 2023, due primarily to current year repayments of non-recourse construction loans, the redemption and purchase of noncontrolling interests, and decreased proceeds from interest rate contracts, partially offset by increased proceeds from non-recourse construction loans and contributions from noncontrolling interests.

Non-GAAP Measures

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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) 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 the (income) loss recognized on our Mezzanine Investment.

We define Adjusted EBITDAre as EBITDAre adjusted to exclude the effect of the following items:

• 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 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 non-cash (income) loss recognized on a passive equity investment.

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

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Gain on dispositions of real estate

Lease modification income

Unrealized (gains) losses from investment in unconsolidated partnerships

Depreciation and amortization

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Mezzanine investment (income) loss, net

Realized and unrealized (gains) losses on interest rate options

Unrealized (gains) losses on IQHQ investment

Realized and unrealized (gains) losses on interest rate contracts

Unrealized (gains) losses on a passive equity investment

Adjusted EBITDAre

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

We believe that the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements.

We believe that the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements for the year ended December 31, 2024.

Refer to 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 years ended December 31, 2023 and 2022 for significant judgments and estimates related to comparative reporting period.

Impairment of investment in IQHQ

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

We determined during the year ended December 31, 2024 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 recognized a $48.6 million non-cash impairment to reduce the carrying value of the investment in IQHQ to $11.1 million as of December 31, 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.

Impairment of Real Estate and Other Long-Lived Assets

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There were no such impairments for the years ended December 31, 2024, 2023, and 2022.

Mezzanine Investment

On a periodic basis, we assess the Mezzanine Investment for impairment.

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.

We determined our Mezzanine Investment was impaired on an other-than-temporary basis after considering various factors, including the purchaser's option expiration, the loan’s maturity date, and the decline in value of the real estate collateral due to an increased capitalization rate.

As a result, we have recognized a $158.0 million non-cash impairment to reduce the carrying value of the Mezzanine Investment to zero as of December 31, 2023.

This non-cash impairment is inclusive of the 20% non-controlling participation sold in June 2023.

Although we do not expect proceeds from the Mezzanine Investment to exceed our first priority return requiring repayment of the $33.5 million received, we are unable to derecognize the Mezzanine investment - participation sold in accordance with GAAP.

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What changed 10-K

Item 7. Management’s Discussion and Analysis