Section 1: 10-K (10-K 2017)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
Form 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-13232 (Apartment Investment and Management Company)
Commission File Number 0-24497 (AIMCO Properties, L.P.)
Apartment Investment and Management Company
AIMCO Properties, L.P.
(Exact name of registrant as specified in its charter)
Maryland (Apartment Investment and Management Company)
Delaware (AIMCO Properties, L.P.)
(State or other jurisdiction of
incorporation or organization)
4582 South Ulster Street, Suite 1100
Denver, Colorado
(Address of principal executive offices)
84-1259577
84-1275621
(I.R.S. Employer
Identification No.)
80237
(Zip Code)
(303) 757-8101
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Class A Common Stock (Apartment Investment and Management Company)
Class A Cumulative Preferred Stock (Apartment Investment and Management Company)
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None (Apartment Investment and Management Company)
Partnership Common Units (AIMCO Properties, L.P.)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.
Apartment Investment and Management Company: Yes x No o
AIMCO Properties, L.P.: Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Apartment Investment and Management Company: Yes o No x
AIMCO Properties, L.P.: Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
Apartment Investment and Management Company: Yes x No o
AIMCO Properties, L.P.: Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files).
Apartment Investment and Management Company: Yes x No o
AIMCO Properties, L.P.: Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Apartment Investment and Management Company: Yes o No x
AIMCO Properties, L.P.: Yes x No o
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “ large accelerated filer,” “ accelerated filer,” “ non-accelerated filer” and “ smaller reporting company” in Rule 12b-2 of the Exchange Act.
Apartment Investment and Management Company:
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Accelerated filer
x
o
o
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
AIMCO Properties, L.P.:
Large accelerated filer
Non-accelerated filer
o
(Do not check if a smaller reporting company)
o
Accelerated filer
Smaller reporting company
Emerging growth company
Emerging growth company
o
x
o
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Apartment Investment and Management Company: Yes o No x
AIMCO Properties, L.P.: Yes o No x
The aggregate market value of the voting and non-voting common stock of Apartment Investment and Management Company held by non-affiliates of Apartment
Investment and Management Company was approximately $6.7 billion as of June 30, 2017. As of February 27, 2018, there were 157,330,262 shares of Class A
Common Stock outstanding.
As of February 27, 2018, there were 164,901,915 Partnership Common Units outstanding.
Portions of Apartment Investment and Management Company’s definitive proxy statement to be issued in conjunction with Apartment Investment and Management
Company’s annual meeting of stockholders to be held May 1, 2018, are incorporated by reference into Part III of this Annual Report.
_______________________________________________________
Documents Incorporated by Reference
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EXPLANATORY NOTE
This filing combines the Annual Reports on Form 10-K for the fiscal year ended December 31, 2017, of Apartment Investment and Management
Company, or Aimco, and AIMCO Properties, L.P., or the Aimco Operating Partnership. Where it is important to distinguish between the two
entities, we refer to them specifically. Otherwise, references to “we,” “us” or “our” mean collectively Aimco, the Aimco Operating Partnership and
their consolidated entities.
Aimco, a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. Aimco, through wholly-owned
subsidiaries, is the general and special limited partner of and, as of December 31, 2017, owned a 95.5% ownership interest in the common partnership
units of, the Aimco Operating Partnership. The remaining 4.5% interest is owned by limited partners. As the sole general partner of the Aimco
Operating Partnership, Aimco has exclusive control of the Aimco Operating Partnership’s day-to-day management.
The Aimco Operating Partnership holds all of Aimco’s assets and manages the daily operations of Aimco’s business. Pursuant to the Aimco
Operating Partnership agreement, Aimco is required to contribute to the Aimco Operating Partnership any assets which it may acquire including all
proceeds from the offerings of its securities. In exchange for the contribution of these assets, Aimco receives additional interests in the Aimco
Operating Partnership with similar terms (e.g., if Aimco contributes proceeds of a stock offering, Aimco receives partnership units with terms
substantially similar to the stock issued by Aimco).
We believe combining the periodic reports of Aimco and the Aimco Operating Partnership into this single report provides the following
benefits:
• We present our business as a whole, in the same manner our management views and operates the business;
• We eliminate duplicative disclosure and provide a more streamlined and readable presentation because a substantial portion of the
disclosures apply to both Aimco and the Aimco Operating Partnership; and
• We save time and cost through the preparation of a single combined report rather than two separate reports.
We operate Aimco and the Aimco Operating Partnership as one enterprise, the management of Aimco directs the management and operations
of the Aimco Operating Partnership, and the members of the Board of Directors of Aimco are identical to those of the Aimco Operating Partnership.
We believe it is important to understand the few differences between Aimco and the Aimco Operating Partnership in the context of how Aimco
and the Aimco Operating Partnership operate as a consolidated company. Aimco has no assets or liabilities other than its investment in the Aimco
Operating Partnership. Also, Aimco is a corporation that issues publicly traded equity from time to time, whereas the Aimco Operating Partnership
is a partnership that has no publicly traded equity. Except for the net proceeds from stock offerings by Aimco, which are contributed to the Aimco
Operating Partnership in exchange for additional limited partnership interests (of a similar type and in an amount equal to the shares of stock sold in
the offering), the Aimco Operating Partnership generates all remaining capital required by its business. These sources include the Aimco Operating
Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of debt and
equity securities, including additional partnership units, and proceeds received from the sale of apartment communities.
Equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of Aimco
and those of the Aimco Operating Partnership. Interests in the Aimco Operating Partnership held by entities other than Aimco, which we refer to as
OP Units, are classified within partners’ capital in the Aimco Operating Partnership’s financial statements and as noncontrolling interests in
Aimco’s financial statements.
To help investors understand the differences between Aimco and the Aimco Operating Partnership, this report provides separate consolidated
financial statements for Aimco and the Aimco Operating Partnership; a single set of consolidated notes to such financial statements that includes
separate discussions of each entity’s stockholders’ equity or partners’ capital, as applicable; and a combined Management’s Discussion and
Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity.
This report also includes separate Part II, Item 9A. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for Aimco
and the Aimco Operating Partnership in order to establish that the requisite certifications have been made and that Aimco and the Aimco Operating
Partnership are both compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18
U.S.C. §1350.
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
TABLE OF CONTENTS
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2017
Item
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
Page
2
7
14
15
15
16
17
20
20
45
45
45
46
50
50
50
50
50
50
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FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances.
Certain information included in this Annual Report contains or may contain information that is forward-looking, within the meaning of the
federal securities laws, including, without limitation, statements regarding: our ability to maintain current or meet projected occupancy, rental
rates and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; our ability to meet budgeted
costs and timelines, and achieve budgeted rental rates related to our redevelopment and development investments; expectations regarding sales
of our apartment communities and the use of proceeds thereof; and our ability to comply with debt covenants, including financial coverage
ratios.
Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of
risks and factors, some of which are beyond our control, including, without limitation:
• Real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we
operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the
level of unemployment; the amount, location and quality of competitive new housing supply; the timing of acquisitions, dispositions,
redevelopments and developments; and changes in operating costs, including energy costs;
•
•
•
Financing risks, including the availability and cost of capital markets’ financing; the risk that our cash flows from operations may be
insufficient to meet required payments of principal and interest; and the risk that our earnings may not be sufficient to maintain
compliance with debt covenants;
Insurance risks, including the cost of insurance, natural disasters and severe weather such as hurricanes; and
Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of
governmental regulations that affect us and interpretations of those regulations; and possible environmental liabilities, including costs,
fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously
owned by us.
In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and
complex provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue
Code, through actual operating results, distribution levels and diversity of stock ownership.
Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” described in
Item 1A of this Annual Report and the other documents we file from time to time with the Securities and Exchange Commission.
PART I
Item 1. Business
The Company
Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-
administered and self-managed real estate investment trust, or REIT, focused on the ownership, management, redevelopment and limited
development of quality apartment communities located in some of the largest markets in the United States.
Aimco, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, owns a majority of the ownership interests in AIMCO
Properties, L.P., or the Aimco Operating Partnership, a Delaware limited partnership formed on May 16, 1994. Aimco conducts all of its business and
owns all of its assets through the Aimco Operating Partnership.
As of December 31, 2017, we had ownership interests in 182 apartment communities with 43,802 apartment homes.
Business Overview
Our business activities are defined by a commitment to our core values of integrity, respect, collaboration, performance and a focus on our
customers. These values and our corporate mission, “to consistently provide quality apartment homes in a respectful environment delivered by a
team of people who care,” shape our culture. In all of our interactions with residents, team members, business partners, lenders, and equity holders,
we aim to be the best owner and operator of apartment communities and an outstanding corporate citizen.
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Our principal financial objective is to provide predictable and attractive returns to our equity holders. We measure our current return using
Adjusted Funds From Operations and our long-term return using Economic Income (each of which are defined under the Non-GAAP Measures
heading in Item 7). Our business plan to achieve this principal financial objective is to:
•
•
•
operate our portfolio of desirable apartment homes with a high level of focus on customer selection and customer satisfaction and in an
efficient manner that produces predictable and growing Free Cash Flow, which is defined under the Operational Excellence heading, below;
improve our portfolio of apartment communities, which is diversified both by geography and by price point by selling apartment
communities with lower projected free cash flow internal rates of return and investing the proceeds from such sales through capital
enhancements, redevelopment, development, and acquisitions with greater land value, higher expected rent growth, and projected free cash
flow internal rates of return in excess of those expected from the communities sold;
use low levels of financial leverage primarily in the form of non-recourse, long-dated, fixed-rate property debt and perpetual preferred equity,
a combination which reduces our refunding and re-pricing risk and which provides a hedge against increases in interest rates; and
•
focus intentionally on a collaborative and productive culture based on respect for others and personal responsibility.
Our business is organized around five areas of strategic focus: operational excellence; redevelopment; portfolio management; balance sheet; and
team and culture. Our areas of strategic focus are described in more detail below. Recent accomplishments in the execution of such strategies are
discussed in the Executive Overview in Item 7.
Operational Excellence
We own and operate a portfolio of market rate apartment communities diversified by both geography and price point, which we refer to as our
Real Estate portfolio. At December 31, 2017, our Real Estate portfolio included 136 apartment communities with 36,904 apartment homes in which we
held an average ownership of 99%. This portfolio was divided about two thirds by value to our “Same Store” portfolio of stabilized apartment
communities and about one third by value to “Other Real Estate,” which includes recently acquired communities and communities under
redevelopment or development whose long-term financial contribution is not yet stabilized.
We also held nominal ownership positions in partnerships that own 46 low-income housing tax credit apartment communities with 6,898
apartment homes. We provide services to these partnerships and receive fees and other payments in return. Our relationship with these
partnerships is different than real estate ownership and is better described as an asset management business, or Asset Management.
To manage our property operations efficiently and to increase the benefits from our local management expertise, we give direct responsibility for
operations within each area to area operations leaders with regular oversight by senior management. To enable the area operations leaders to focus
on sales and service, as well as to improve financial control and budgeting, we have dedicated area financial officers who support the operations
leaders. Additionally, with the exception of routine maintenance and purchases and installation of equipment, we have specialized teams that
manage capital spending related to larger and more complicated construction.
We seek to improve our property operations by: employing service-oriented, well-trained team members; taking advantage of advances in
technology; centralizing operational tasks where efficient to do so; standardizing business processes, operational measurements, and internal
reporting; and enhancing financial controls over field operations. We focus on the following areas:
• Customer Satisfaction. Our operating culture is focused on our residents and providing them with a high level of service in a clean, safe,
and respectful living environment. We regularly monitor and evaluate our performance by providing customers with numerous
opportunities to grade our work. In 2017, we received 84,000 customer grades averaging 4.25 on a five-point scale. We use this customer
feedback as a daily management tool. We also publish on-line these customer evaluations as important and credible information for
prospective customers. We have automated certain aspects of our on-site operations to enable current and future residents to interact with
us using methods that are efficient and effective for them, such as making on-line requests for service work and executing leases and lease
renewals on-line. In addition, we emphasize the quality of our on-site team members through recruiting, training and retention programs,
which, with the continuous, real-time customer feedback, contributes to improved customer service. We believe that greater customer
satisfaction leads to higher resident retention and increased occupancy rates, which in turn leads to increased revenue and reduced costs.
•
Resident Selection and Retention. In our apartment communities, we believe that one’s neighbors are a meaningful part of the customer
experience, together with the location of the community and the physical quality of the apartment homes.
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Part of our property operations strategy is to focus on attracting and retaining stable, credit-worthy residents who are also good neighbors.
We have explicit criteria for resident selection, which we apply to new leases and to renewal leases, including creditworthiness and behavior
in accordance with our community standards and our written “Good Neighbor Commitment.” Our focus on resident selection and retention
led to 53% of expiring leases being renewed in 2017, which is above peer average.
• Revenue Management and Ancillary Services. We have a centralized revenue management system that leverages people, processes, and
technology to work in partnership with our local property management teams to develop rental rate pricing. We seek to increase Free Cash
Flow, which we define as net operating income less Capital Replacements, by optimizing the balance between rental and occupancy rates, as
well as taking into consideration costs such as preparing an apartment home for a new resident. We are focused on careful measurements of
on-site operations, as we believe that timely and accurate collection of apartment community performance and resident profile data will
enable us to maximize Free Cash Flow through better property management and leasing decisions. We seek to maximize profit by performing
timely data analysis of new and renewal pricing for each apartment home, thereby enabling us to adjust rents quickly in response to changes
in supply and demand and minimize vacancy time. We also generate incremental revenue by providing services to our residents, including, at
certain apartment communities, telecommunications services, parking options, package lockers, and storage space rental.
• Controlling Expenses. Innovation is the foundation of our cost control efforts. Innovative activities include: moving administrative tasks to
our shared service center, which reduces costs and allows site teams to focus on sales and service; taking advantage of economies of scale
at the corporate level, through electronic procurement which reduces complexity and increases purchasing volume discounts; focusing on
life cycle costs by investing in more durable, longer-lived materials, which reduce turn times and costs; and leveraging technology to
enhance the customer experience through website design and package lockers, which meet today’s customer preference for self-service. For
the year ended December 31, 2017 compared to 2016, Same Store property operating expenses increased by 0.7%. Same Store controllable
operating expenses, which we define as property operating expenses excluding taxes, insurance and utility expenses, decreased by 1.3%. The
compounded annual growth rate for Same Store controllable operating expenses for the past decade is negative 0.4%.
•
Improving and Maintaining Apartment Community Quality. We believe that the physical condition and amenities of our apartment
communities are important factors in our ability to maintain and increase rental rates. We invest in the maintenance and improvement of our
apartment communities primarily through: Capital Enhancements, which may include kitchen and bath remodeling, energy conservation
projects, and investments in longer-lived materials as described above, all of which are generally lesser in scope than is a redevelopment and
do not significantly disrupt property operations; Capital Improvements, which extend the useful life of an apartment community from its
condition at our date of purchase; and Capital Replacements, which are capital additions made to replace the portion of an apartment
community consumed during our ownership. During 2017, we invested approximately $2,800 per apartment home in Capital Enhancements,
$470 per apartment home in Capital Improvements, and $1,050 per apartment home in Capital Replacements.
Redevelopment
Redevelopment is our second line of business where we create value equal to 25% to 35% of our incremental investment by repositioning
communities within the Aimco portfolio and by constructing new communities. We measure the rate and quality of financial returns by Net Asset
Value creation, an important component of Economic Income, our primary measure of long-term financial performance (Net Asset Value is defined
under the Non-GAAP Measures heading in Item 7). We invest to earn risk-adjusted returns in excess of those expected from the apartment
communities sold in paired trades to fund the redevelopment and development.
We undertake a range of redevelopments, including those in which buildings or exteriors are renovated without the need to vacate apartment
homes; those in which significant renovation of apartment homes may be accomplished upon lease expiration and turnover; and those in which an
entire building or community is vacated. We often execute redevelopments using a phased approach, in which we renovate an apartment
community in stages. Redevelopment work may include seeking entitlements from local governments, which enhance the value of our existing
portfolio by increasing density, that is, the right to add apartment homes to a site.
We also undertake ground-up development when warranted by risk-adjusted investment returns, either directly in connection with the
redevelopment of an existing apartment community or, on a more limited basis, at a new location. When warranted, we rely on the expertise and
credit of a third-party developer familiar with the local market to limit our exposure to construction risk.
Of these two activities, we favor redevelopment because it permits adjustment of the scope and timing of spending to align with changing
market conditions and customer preferences.
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Portfolio Management
Our portfolio management strategy involves the allocation of investment capital to enhance rent growth and increase long term capital values
through portfolio design emphasizing land value as well as location and submarket. We target geographic diversification in our portfolio in order to
reduce the volatility of our rental revenue and to reduce the risk of undue concentration in any particular market. Similarly, we seek price point
diversification by owning communities that offer apartment homes at rents below those asked by competitive new building supply.
Our portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points, averaging “B/B+” in quality and is also diversified
among some of the largest markets in the United States. Please refer to the Executive Overview heading under Item 7 for a description of our
portfolio quality ratings. At December 31, 2017, our Real Estate portfolio was allocated about one half to “A” rated properties, and about one half to
“B” and “C+” rated properties.
As part of our portfolio strategy, we seek to sell up to 10% of our portfolio annually and to reinvest the proceeds from such sales in accretive
uses such as capital enhancements, redevelopments, occasional developments, and selective acquisitions with projected free cash flow internal
rates of return higher than expected from the communities being sold. Through this disciplined approach to capital recycling, we have significantly
increased the quality and expected rental rate growth of our portfolio.
Balance Sheet
Our leverage strategy seeks to increase financial returns while using leverage with appropriate caution. We limit risk through balance sheet
structure, employing low leverage, primarily non-recourse and long-dated property debt; build financial flexibility by maintaining ample unused and
available credit as well as holding properties with substantial value unencumbered by property debt; and use partners’ capital when it enhances
financial returns or reduces investment risk.
We target the ratio of Proportionate Debt plus Preferred Equity to Adjusted EBITDA to be below 7.0x and we target the ratio of Adjusted
EBITDA to Adjusted Interest Expense and Preferred Dividends to be greater than 2.5x. Please refer to the Non-GAAP Measures heading under Item
7 for definitions of these terms. Our leverage includes our share of long-term, non-recourse property debt secured by apartment communities in our
Real Estate portfolio, our term loan, outstanding borrowings under our revolving credit facility, and outstanding preferred equity.
Our liquidity consists of cash balances and available capacity on our revolving line of credit. At December 31, 2017, we had on hand $616.6
million in cash and restricted cash plus available capacity on our line of credit.
We also manage our financial flexibility by maintaining an investment grade rating and holding apartment communities that are unencumbered
by property debt. At December 31, 2017, we held unencumbered apartment communities with an estimated fair market value of approximately $1.8
billion, up 12.5% year-over year.
Please refer to the Executive Overview and Liquidity and Capital Resources headings under Item 7 for additional information regarding our
balance sheet and liquidity.
Team and Culture
Our team and culture are keys to our success. Our intentional focus on a collaborative and productive culture based on respect for others and
personal responsibility is reinforced by a preference for promotion from within based on succession planning and talent development to produce a
strong, stable team that is the enduring foundation of our success. In 2017, Aimco was recognized by the Denver Post as a Top Work Place. We are
one of only a dozen Colorado companies of all sizes that have earned this designation for five consecutive years.
Competition
In attracting and retaining residents to occupy our apartment communities, we compete with numerous other housing providers. Our apartment
communities compete directly with other rental apartments as well as condominiums and single-family homes that are available for rent or purchase
in the markets in which our apartment communities are located. Principal factors of competition include rent or price charged, attractiveness of the
location and apartment community, and the quality and breadth of services. The number of competitive apartment communities relative to demand
in a particular area has a material effect on our ability to lease apartment homes at our communities and on the rents we charge. In certain markets,
there exists an oversupply of newly-constructed apartment homes, single-family homes, and condominiums relative to consumer demand, which
affects the pricing and occupancy of our rental apartments.
We also compete with other real estate investors, including other apartment REITs, pension and investment funds, partnerships, and investment
companies in acquiring, redeveloping, managing, obtaining financing for, and disposing of apartment communities. This competition affects our
ability to acquire apartment communities we want to add to our portfolio and the price that we pay
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in such acquisitions; our ability to finance or refinance communities in our portfolio and the cost of such financing; and our ability to dispose of
communities we no longer desire to retain in our portfolio and the timing and price available to us when we seek to dispose of such communities.
Taxation
Aimco
Aimco has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, which we refer to as the Code, commencing with
our taxable year ended December 31, 1994, and intends to continue to operate in such a manner. The Code imposes various requirements related to
organizational structure, distribution levels, diversity of stock ownership, and certain restrictions with regard to owned assets and categories of
income that must be met in order to continue to qualify as a REIT. If Aimco continues to qualify for taxation as a REIT, Aimco will generally not be
subject to United States federal corporate income tax on its taxable income that is currently distributed to stockholders. This treatment substantially
eliminates the “double taxation” (at the corporate and stockholder levels) that generally results from an investment in a corporation.
Certain of Aimco’s operations or a portion thereof, including property management and risk management are conducted through taxable REIT
subsidiaries, each of which we refer to as a TRS. A TRS is a subsidiary C-corporation that has not elected REIT status and, as such, is subject to
United States federal corporate income tax. We use TRS entities to facilitate our ability to offer certain services and activities to our residents and
investment partners that cannot be offered directly by a REIT. We also use TRS entities to hold investments in certain apartment communities.
The Aimco Operating Partnership
The Aimco Operating Partnership is treated as a “pass-through” entity for United States federal income tax purposes and is not subject to
United States federal income taxation. Partners in the Aimco Operating Partnership, however, are subject to tax on their allocable share of
partnership income, gains, losses, deductions, and credits, regardless of whether the partners receive any actual distributions of cash or other
property from the Aimco Operating Partnership during the taxable year. Generally, the characterization of any particular item is determined by the
Aimco Operating Partnership, rather than at the partner level, and the amount of a partner’s allocable share of such item is governed by the terms of
the Aimco Operating Partnership’s Partnership Agreement. The Aimco Operating Partnership is subject to tax in certain states.
Regulation
General
Apartment communities and their owners are subject to various laws, ordinances, and regulations, including those related to real estate broker
licensing and regulations relating to recreational facilities such as swimming pools, activity centers and other common areas. Changes in laws
increasing the potential liability for environmental conditions existing on apartment communities or increasing the restrictions on discharges or
other conditions, as well as changes in laws affecting development, construction, and safety requirements, may result in significant unanticipated
expenditures, which would adversely affect our net income and cash flows from operating activities. In addition, existing rent control laws, as well
as future enactment of rent control or rent stabilization laws, such as legislation that has been considered in New York and certain cities in
California, or other laws regulating multifamily housing may reduce rental revenue or increase operating costs in particular markets.
Environmental
Various federal, state, and local laws subject apartment community owners or operators to liability for management, and the costs of removal or
remediation, of certain potentially hazardous materials that may be present at an apartment community. These materials may include lead-based
paint, asbestos, polychlorinated biphenyls, and petroleum-based fuels. Such laws often impose liability without regard to fault or whether the owner
or operator knew of, or was responsible for, the release or presence of such materials. In connection with the ownership, operation, and
management of apartment communities, we could potentially be liable for environmental liabilities or costs associated with our current apartment
communities, communities we acquire or manage in the future, or communities we previously owned or operated in the past. These and other risks
related to environmental matters are described in more detail in Item 1A. Risk Factors.
Insurance
Our primary lines of insurance coverage are property, general liability, and workers’ compensation. We believe that our insurance coverages
adequately insure our apartment communities against the risk of loss attributable to fire, earthquake, hurricane, tornado, flood, terrorism, and other
perils, and adequately insure us against other risk. Our coverage includes deductibles, retentions and
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limits that are customary in the industry. We have established loss prevention, loss mitigation, claims handling, and litigation management
procedures to manage our exposure.
Employees
At December 31, 2017, we had approximately 1,350 team members, of which about 1,000 were at the apartment community level performing on-site
functions, or at our shared service center performing tasks that have been centralized there, with the balance managing corporate and area
functions, including investment and debt transactions, legal, finance and accounting, information systems, human resources and other support
functions. As of December 31, 2017, unions represented approximately 80 of our team members. We have never experienced a work stoppage and
believe we maintain satisfactory relations with our team members.
Available Information
Our combined Annual Report on Form 10-K, our combined Quarterly Reports on Form 10-Q, Current Reports on Form 8-K filed by Aimco or the
Aimco Operating Partnership and any amendments to any of those reports that we file with the Securities and Exchange Commission are available
free of charge as soon as reasonably practicable through Aimco’s website at www.aimco.com. The information contained on Aimco’s website is not
incorporated into this Annual Report. Aimco’s Common Stock is listed on the New York Stock Exchange under the symbol “AIV.” In 2017, Aimco’s
chief executive officer submitted his annual corporate governance listing standards certification to the New York Stock Exchange, which
certification was unqualified.
Item 1A. Risk Factors
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.
Redevelopment, development and construction risks could affect our profitability.
We are currently redeveloping certain of our apartment communities. During 2018, we expect to invest $120 million to $200 million in
redevelopment and development activities. Redevelopment and development are subject to numerous risks, including the following:
• 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 costs, such as litigation;
• we may be unable to complete construction and lease-up of an apartment community on schedule, resulting in increased construction and
financing costs and a decrease in expected rental revenues;
•
occupancy rates and rents at an apartment community may fail to meet our expectations for a number of reasons, including changes in
market and economic conditions beyond our control and the development of competing communities;
• we may be unable to obtain financing with favorable terms, or at all, which may cause us to delay or abandon an opportunity;
• we may abandon opportunities that we have already begun to explore, or stop projects we have already commenced, for a number of
reasons, including changes in local market conditions or increases in construction or financing costs, and, as a result, we may fail to recover
costs already incurred in exploring those opportunities;
• we may incur liabilities to third parties during the redevelopment or development process;
•
•
unexpected events or circumstances may arise during the redevelopment or development process that affect the timing of completion and
the cost and profitability of the redevelopment or development; and
loss of a key member of a redevelopment or development team could adversely affect our ability to deliver redevelopments and
developments on time and within our budget.
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 ability to fund necessary capital expenditures on our apartment communities depends on, among other things, our ability to generate net
operating income in excess of required debt payments. If we are unable to fund capital expenditures on our apartment communities, we may not be
able to preserve the competitiveness of our communities, which could adversely affect their net operating income and long term value.
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Our ability to make payments to our investors depends on our ability to generate net operating income in excess of required debt payments and
capital expenditure requirements. Our net operating income and liquidity may be adversely affected by events or conditions beyond our control,
including:
•
•
•
•
•
•
•
the general economic climate;
an inflationary environment in which the costs to operate and maintain our communities increase at a rate greater than our ability to increase
rents, which we can only do upon renewal of existing leases or at the inception of new leases;
competition from other apartment communities and other housing options;
local conditions, such as loss of jobs, unemployment rates, or an increase in the supply of apartments, that might adversely affect apartment
occupancy or rental rates;
changes in governmental regulations and the related cost of compliance;
changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multifamily housing; and
changes in interest rates and the availability of financing.
Competition could limit our ability to lease apartment homes or increase or maintain rents.
Our apartment communities compete for residents with other housing alternatives, including other rental apartments and condominiums, and, to
a lesser degree, single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale.
Competitive residential housing as well as household formation and job creation in a particular area could adversely affect our ability to lease
apartment homes and to increase or maintain rental rates.
Because real estate investments are relatively illiquid, we may not be able to sell apartment communities when appropriate.
Real estate investments are relatively illiquid and generally cannot be sold quickly. REIT tax rules also restrict our ability to sell apartment
communities. Thus, we may not be able to change our portfolio promptly in response to changes in economic or other market conditions. Our ability
to dispose of apartment communities in the future will depend on prevailing economic and market conditions, including the cost and availability of
financing. This could have a material adverse effect on our financial condition or results of operations.
If we are not successful in our acquisition of apartment communities, our results of operations could be adversely affected.
The selective acquisition of apartment communities is a component of our strategy. However, we may not be able to complete transactions
successfully in the future. Although we seek to acquire apartment communities when such acquisitions increase our free cash flow internal rate of
returns and are accretive to Net Asset Value, such transactions may fail to perform in accordance with our expectations. In particular, following
acquisition, the value and operational performance of an apartment community may be diminished if obsolescence or neighborhood changes occur
before we are able to redevelop or sell the community. This could have an adverse effect on our financial condition or results of operations.
Our existing and future debt financing could result in foreclosure of our apartment communities, prevent us from making distributions on our
equity, or otherwise adversely affect our liquidity.
We are subject to the risk that our cash flow from operations will be insufficient to make required payments of principal and interest, and the risk
that existing indebtedness may not be refinanced or that the terms of any refinancing will not be as favorable as the terms of existing indebtedness.
If we fail to make required payments of principal and interest on our non-recourse debt, our lenders could foreclose on the apartment communities
and other collateral securing such debt, which would result in the loss to us of income and asset value. As of December 31, 2017, the majority of our
apartment communities were encumbered by debt. Our organizational documents do not limit the amount of debt that we may incur, and we have
significant amounts of debt outstanding. Payments of principal and interest may leave us with insufficient cash resources to operate our
communities or pay distributions required to be paid in order to maintain Aimco’s qualification as a REIT.
Disruptions in the financial markets could affect our ability to obtain financing and the cost of available financing and could adversely affect
our liquidity.
Our ability to obtain financing and the cost of such financing depends on the overall condition of the United States credit markets. During
periods of economic uncertainty, the United States credit markets may experience significant liquidity disruptions, which may cause the spreads on
debt financings to widen considerably and make obtaining financing, both non-recourse property debt and corporate borrowings, such as those
under our revolving credit agreement, more difficult. In particular, apartment
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borrowers have benefited from the historic willingness of Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan
Mortgage Corporation, or Freddie Mac, to make substantial amounts of loans secured by multi-family properties, even in times of economic
distress. These two lenders are federally chartered and subject to federal regulation, making uncertain their prospects and ability to provide liquidity
in a future downturn.
If our ability to obtain financing is adversely affected, we may be unable to satisfy scheduled maturities on existing financing through other
sources of liquidity, which could result in lender foreclosure on the apartment communities securing such debt and loss of income and asset value,
each of which would adversely affect our liquidity.
Increases in interest rates would increase our interest expense and reduce our profitability.
As of December 31, 2017, we had approximately $399.8 million of variable-rate indebtedness outstanding associated with our Real Estate
portfolio. We estimate that an increase in 30-day LIBOR of 100 basis points with constant credit risk spreads would reduce our net income and the
amount of net income attributable to our common security holders (including Aimco common stockholders and the Aimco Operating Partnership’s
common unitholders) by approximately $3.8 million on an annual basis.
At December 31, 2017, our Real Estate portfolio had approximately $95.3 million in cash and cash equivalents and restricted cash, a portion of
which bear interest at variable rates indexed to LIBOR-based rates, which may partially mitigate the effect of an increase in variable rates on our
variable-rate indebtedness discussed above.
Covenant restrictions may limit our ability to make payments to our investors.
Some of our debt and other securities contain covenants that restrict our ability to make distributions or other payments to our investors unless
certain financial tests or other criteria are satisfied. Our revolving credit agreement provides, among other things, that we may not make
distributions to our investors during any four consecutive fiscal quarters in an aggregate amount greater than 95% of our Funds From Operations
for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain Aimco’s REIT status. Our outstanding
classes of preferred stock or preferred units prohibit the payment of dividends on our Common Stock or common partnership units if we fail to pay
the dividends to which the holders of the preferred stock or preferred units are entitled.
The Aimco Operating Partnership and its subsidiaries may be prohibited from making distributions and other payments.
All of Aimco’s apartment communities are owned, and all of Aimco’s operations are conducted, by the Aimco Operating Partnership. Further,
many of the Aimco Operating Partnership’s apartment communities are owned by subsidiaries of the Aimco Operating Partnership. As a result,
Aimco depends on distributions and other payments from the Aimco Operating Partnership, and the Aimco Operating Partnership depends on
distributions and payments from its subsidiaries in order to satisfy our financial obligations and make payments to our investors. The ability of the
Aimco Operating Partnership and its subsidiaries to make such distributions and other payments depends on their earnings and cash flows and
may be subject to statutory or contractual limitations. As an equity investor in the Aimco Operating Partnership and its subsidiaries, our right to
receive assets upon their liquidation or reorganization will be effectively subordinated to the claims of their creditors. To the extent that we are
recognized as a creditor of such subsidiaries, our claims may still be subordinate to any security interest in or other lien on their assets and to any
of their debt or other obligations that are senior to our claims.
Potential liability or other expenditures associated with potential environmental contamination may be costly.
Various federal, state and local laws subject apartment community owners or operators to liability for management, and the costs of removal or
remediation, of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Potentially
hazardous materials may include polychlorinated biphenyls, petroleum-based fuels, lead-based paint, or asbestos, among other materials. Such laws
often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The
presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well
as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with
investigation and remediation actions, damages to natural resources and for potential fines or penalties in connection with such damage or with
respect to the improper management of hazardous materials. Moreover, private plaintiffs may potentially make claims for investigation and
remediation costs they incur or personal injury, disease, disability or other infirmities related to the alleged presence of hazardous materials at an
apartment community. In addition to potential environmental liabilities or costs associated with our current apartment communities, we may also be
responsible for such liabilities or costs associated with communities we acquire or manage in the future, or apartment communities we no longer
own or operate.
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Laws benefiting disabled persons may result in our incurrence of unanticipated expenses.
Under the Americans with Disabilities Act of 1990, or ADA, all places intended to be used by the public are required to meet certain federal
requirements related to access and use by disabled persons. The Fair Housing Amendments Act of 1988, or FHAA, requires apartment communities
first occupied after March 13, 1991, to comply with design and construction requirements for disabled access. For those apartment communities
receiving federal funds, the Rehabilitation Act of 1973 also has requirements regarding disabled access. These and other federal, state and local
laws may require structural modifications to our apartment communities or changes in policy/practice, or affect renovations of the communities.
Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants and also could result in an order to
correct any non-complying feature, which could result in substantial capital expenditures. Although we believe that our apartment communities are
substantially in compliance with present requirements, we may incur unanticipated expenses to comply with the ADA, the FHAA and the
Rehabilitation Act of 1973 in connection with the ongoing operation or redevelopment of our apartment communities.
Moisture infiltration and resulting mold remediation may be costly.
Although we are proactively engaged in managing moisture intrusion and preventing the presence of mold at our apartment communities, it is
not unusual for periodic moisture intrusion to cause mold in isolated locations within an apartment community. We have implemented policies,
procedures and training, and include a detailed moisture intrusion and mold assessment during acquisition due diligence. We believe these
measures will manage mold exposure at our apartment communities and will minimize the effects that mold may have on our residents. To date, we
have not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. We have only limited insurance
coverage for property damage claims arising from the presence of mold and for personal injury claims related to mold exposure.
Government housing regulations may limit the opportunities at some of our apartment communities and failure to comply with resident
qualification requirements may result in financial penalties and/or loss of benefits, such as rental revenues paid by government agencies.
Additionally, the government may cease to operate or reduce funding for government housing programs which would result in a loss of benefits
from those programs.
We own equity interests in consolidated and unconsolidated entities that own certain apartment communities that benefit from governmental
programs intended to provide housing to people with low or moderate incomes. These programs, which are usually administered by the United
States Department of Housing and Urban Development, or HUD, or state housing finance agencies, typically provide one or more of the following:
mortgage insurance; favorable financing terms; tax-exempt interest; historic or low-income housing tax credits; or rental assistance payments to the
apartment community owners. As a condition of the receipt of assistance under these programs, the apartment communities must comply with
various requirements, which typically limit rents to pre-approved amounts and limit our choice of residents to those with incomes at or below certain
levels. Failure to comply with these requirements may result in financial penalties or loss of benefits. We are usually required to obtain the approval
of HUD in order to acquire or dispose of a significant interest in or manage a HUD-assisted apartment community. We may not always receive such
approval.
Additionally, there is no guarantee that the government will continue to operate these programs or that the programs will be operated in a
manner that generates benefits consistent with those received in the past. Any cessation of or change in the administration of benefits from these
government housing programs may result in our loss or reduction in the amount of the benefits we receive under these programs, including rental
subsidies. During 2017, 2016 and 2015, rental revenues for our Real Estate portfolio included $30.6 million, $30.9 million and $25.6 million,
respectively, from subsidies from government agencies. Of the 2017 subsidies, approximately 23.9% related to communities sold during 2017 leaving
about $7.1 million related to communities benefiting from housing assistance contracts that expire in 2018, which we are in the process of renewing
or anticipate renewing, and $16.2 million related to communities benefiting from housing assistance contracts that expire after 2018 and had a
weighted average term of 8.0 years. Any loss or reduction in the amount of these benefits may adversely affect our liquidity and results of
operations.
We also hold nominal ownership positions in partnerships owning low-income housing tax credit communities. We provide services to these
partnerships and receive fees and other payments in return. We refer to this relationship as our Asset Management business. During 2017, 2016 and
2015, rental revenues of communities owned by partnerships served by our Asset Management business included $49.0 million, $49.3 million and
$47.8 million, respectively, of subsidies from government agencies.
Although we are insured for certain risks, the cost of insurance, increased claims activity or losses resulting from casualty events may affect our
operating results and financial condition.
We are insured for a portion of our consolidated apartment communities’ exposure to casualty losses resulting from fire, earthquake, hurricane,
tornado, flood and other perils, which insurance is subject to deductibles and self-insurance retention. We recognize casualty losses or gains based
on the net book value of the affected apartment community and the amount of any related
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insurance proceeds. In many instances, the actual cost to repair or replace the apartment community may exceed its net book value and any
insurance proceeds. We recognize the uninsured portion of losses as casualty losses in the periods in which they are incurred. In addition, we are
self-insured for a portion of our exposure to third-party claims related to our employee health insurance plans, workers’ compensation coverage and
general liability exposure. With respect to our exposure to claims of third parties, we establish reserves at levels that reflect our known and
estimated losses. The ultimate cost of losses and the impact of unforeseen events may vary materially from recorded reserves, and variances may
adversely affect our operating results and financial condition. We purchase insurance to reduce our exposure to losses and limit our financial losses
on large individual risks. The availability and cost of insurance are determined by market conditions outside our control. No assurance can be made
that we will be able to obtain and maintain insurance at the same levels and on the same terms as we do today. If we are not able to obtain or
maintain insurance in amounts we consider appropriate for our business, or if the cost of obtaining such insurance increases materially, we may
have to retain a larger portion of the potential loss associated with our exposures to risks.
Natural disasters and severe weather may affect our operating results and financial condition.
Natural disasters such as earthquakes and severe weather such as hurricanes may result in significant damage to our apartment communities.
The extent of our casualty losses and loss in operating income in connection with such events is a function of the severity of the event and the
total amount of exposure in the affected area. When we have geographic concentration of exposures, a single catastrophe (such as an earthquake)
or destructive weather event (such as a hurricane) affecting a region may have a significant adverse effect on our financial condition and results of
operations. We cannot accurately predict natural disasters or severe weather, or the number and type of such events that will affect us. As a result,
our operating and financial results may vary significantly from one period to the next. Although we anticipate and plan for losses, there can be no
assurance that our financial results will not be adversely affected by our exposure to losses arising from natural disasters or severe weather in the
future that exceed our previous experience and assumptions.
We depend on our senior management.
Our success depends upon the retention of our senior management, including Terry Considine, our chief executive officer. We have a
succession planning and talent development process that is designed to identify potential replacements and develop our team members to provide
depth in the organization and a bench of talent on which to draw. However, there are no assurances that we would be able to find qualified
replacements for the individuals who make up our senior management if their services were no longer available. The loss of services of one or more
members of our senior management team could have a material adverse effect on our business, financial condition and results of operations. We do
not currently maintain key-man life insurance for any of our employees.
Aimco may fail to qualify as a REIT.
If Aimco fails to qualify as a REIT, Aimco will not be allowed a deduction for dividends paid to its stockholders in computing its taxable income,
and will be subject to United States federal income tax at regular corporate rates. This would substantially reduce our funds available for
distribution to our investors. Unless entitled to relief under certain provisions of the Code, Aimco also would be disqualified from taxation as a REIT
for the four taxable years following the year during which it ceased to qualify as a REIT. In addition, Aimco’s failure to qualify as a REIT would
place us in default under our revolving credit agreement.
We believe that Aimco operates, and has since its taxable year ended December 31, 1994 operated, in a manner that enables it to meet the
requirements for qualification as a REIT for United States federal income tax purposes. Aimco’s continued qualification as a REIT will depend on its
satisfaction of certain asset, income, investment, organizational, distribution, stockholder ownership and other requirements on a continuing basis.
Aimco’s ability to satisfy the asset tests depends upon our analysis of the fair market values of our assets, some of which are not susceptible to a
precise determination, and for which we do not obtain independent appraisals. Aimco’s compliance with the REIT annual income and quarterly
asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis.
Moreover, the proper classification of an instrument as debt or equity for United States federal income tax purposes may be uncertain in some
circumstances, which could affect the application of the REIT qualification requirements. Accordingly, there can be no assurance that the Internal
Revenue Service, or the IRS, will not contend that our interests in subsidiaries or other issuers constitutes a violation of the REIT requirements.
Moreover, future economic, market, legal, tax or other considerations may cause Aimco to fail to qualify as a REIT, or Aimco’s Board of Directors
may determine to revoke its REIT status.
REIT distribution requirements limit our available cash.
As a REIT, Aimco is subject to annual distribution requirements. The Aimco Operating Partnership pays distributions intended to enable Aimco
to satisfy its distribution requirements. This limits the amount of cash available for other business purposes, including amounts to fund our growth.
Aimco generally must distribute annually at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and
excluding any net capital gain, in order for its distributed earnings not to be
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subject to United States federal corporate income tax. We intend to make distributions to Aimco’s stockholders to comply with the requirements of
the Code. However, differences in timing between the recognition of taxable income and the actual receipt of cash could require us to sell apartment
communities or borrow funds on a short-term or long-term basis to meet the 90% distribution requirement of the Code.
Aimco may be subject to federal and state income taxes, in certain circumstances.
Even if Aimco qualifies as a REIT, Aimco may be subject to United States federal income and excise taxes in various situations, such as on its
undistributed income. Aimco could also be required to pay a 100% tax on any net income on non-arm’s length transactions between Aimco and a
taxable REIT subsidiary and on any net income from sales of apartment communities that were held for sale primarily in the ordinary course. State
and local tax laws may not conform to the United States federal income tax treatment, and Aimco may be subject to state or local taxation in various
state or local jurisdictions in which Aimco transacts business. Any taxes imposed on Aimco would reduce our operating cash flow and net income
and could negatively impact our ability to pay dividends and distributions.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
REITs are entitled to a U.S. federal tax deduction for dividends paid to their stockholders. As compared to other taxable corporations, this ability
to reduce or eliminate the REIT’s taxable income by paying dividends to stockholders is a principal benefit of maintaining REIT status, generally
resulting in a lower combined tax liability of the REIT and its stockholders as compared to that of the combined tax liability of other taxable
corporations and their stockholders. Notwithstanding this combined benefit, dividends payable by REITs may result in marginally higher taxes to
the stockholder.
C-corporations are generally required to pay U.S. federal income tax on earnings. After tax earnings are then available for stockholder dividends.
The maximum U.S. federal tax rate applicable to income from "qualified dividends" payable to U.S. stockholders that are individuals, trusts and
estates is currently 20%, plus the 3.8% investment tax surcharge. While dividends payable by REITs are generally not eligible for the qualified
dividend reduced rates, stockholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends from
REITs. This deduction is available for taxable years beginning after December 31, 2017 and before January 1, 2026 and will generally cause the
maximum tax rate for ordinary dividends from REITs to be 29.6%, plus the 3.8% investment tax surcharge.
Beginning in 2018, REIT dividends payable to individuals, trusts and estates can be taxed at 20% for capital gains and qualified dividends, 25%
for unrecaptured Section 1250 gains, or 29.6% for ordinary dividends, whereas qualified dividends from C-corporations are generally taxed at 20%.
Both are subject to the 3.8% investment tax surcharge. Based on the character of Aimco’s 2017 REIT dividends, the effective U.S. federal income tax
rate that would be be paid on Aimco’s 2018 dividends by stockholders who are individuals, trusts and estates would be 25.5% before considering
the 3.8% investment tax surcharge. To the extent, the character of Aimco’s 2018 REIT dividends are similar to that of 2017, Aimco dividends would
be taxed at a marginal rate 5.5% higher than the rate for a C-corporation dividend. In 2017, the ordinary income portion of of Aimco’s REIT taxable
income was elevated compared to prior years. If the character of Aimco’s 2018 REIT dividends are similar to the average of the last three years,
Aimco dividends would be taxed at a marginal rate 4.6% higher than the rate for a C-corporation dividend.
Changes to U.S. federal income tax laws could materially and adversely affect Aimco and Aimco's stockholders.
The present U.S. federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative
action at any time, which could affect the U.S. federal income tax treatment of an investment in Aimco Common Stock. The U.S. federal income tax
rules dealing with REITs constantly are under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department,
which results in statutory changes as well as frequent revisions to regulations and interpretations. The recently enacted Tax Cuts and Jobs Act
made substantial changes to the Code. Among those changes are a significant permanent reduction in the generally applicable corporate tax rate,
changes in the taxation of individuals and other non-corporate taxpayers that generally but not universally reduce their tax rates on a temporary
basis subject to ‘‘sunset” provisions, the elimination or modification of various currently allowed deductions (including substantial limitations on
the deductibility of interest and, in the case of individuals, the deduction for personal state and local taxes), certain additional limitations on the
deduction of net operating losses, and preferential rates of taxation on most ordinary REIT dividends and certain business income derived by
noncorporate taxpayers in comparison to other ordinary income recognized by such taxpayers. The effect of these and the many other changes
made in the Tax Cuts and Jobs Act is highly uncertain, both in terms of their direct effect on the taxation of an investment in our common stock and
their indirect effect on market conditions generally. Furthermore, many of the provisions of the Tax Cuts and Jobs Act will require guidance through
the issuance of Treasury regulations in order to assess their effect. There may be a substantial delay before such regulations are promulgated,
increasing the uncertainty as to the ultimate effect of the statutory amendments on Aimco. There may also be technical corrections legislation
proposed with respect to the Tax Cuts and Jobs Act, the effect and timing of which cannot be predicted and may be adverse to Aimco or Aimco's
stockholders.
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Investors are urged to consult their tax advisors with respect to these changes and the potential effect on their investment in Aimco’s Common
Stock.
Limits on ownership of shares specified in Aimco’s charter may result in the loss of economic and voting rights by purchasers that violate those
limits.
Aimco’s charter limits ownership of Common Stock by any single stockholder (applying certain “beneficial ownership” rules under the federal
securities laws) to 8.7% (or up to 12.0% upon a waiver from Aimco’s Board of Directors) of outstanding shares of Common Stock, or 15% in the
case of certain pension trusts, registered investment companies and Mr. Considine (or up to 18.0% for such pension trusts or registered investment
companies upon a waiver from Aimco’s Board of Directors). Aimco’s charter also limits ownership of Aimco’s Common Stock and preferred stock
by any single stockholder to 8.7% of the value of the outstanding Common Stock and preferred stock, or 15% in the case of certain pension trusts,
registered investment companies and Mr. Considine. The charter also prohibits anyone from buying shares of Aimco’s capital stock if the purchase
would result in Aimco losing its REIT status. This could happen if a transaction results in fewer than 100 persons owning all of Aimco’s shares of
capital stock or results in five or fewer persons (applying certain attribution rules of the Code) owning 50% or more of the value of all of Aimco’s
shares of capital stock. If anyone acquires shares in excess of the ownership limit or in violation of the ownership requirements of the Code for
REITs:
•
the transfer will be considered null and void;
• we will not reflect the transaction on Aimco’s books;
• we may institute legal action to enjoin the transaction;
• we may demand repayment of any dividends received by the affected person on those shares;
• we may redeem the shares;
•
•
the affected person will not have any voting rights for those shares; and
the shares (and all voting and dividend rights of the shares) will be held in trust for the benefit of one or more charitable organizations
designated by Aimco.
Aimco may purchase the shares of capital stock held in trust at a price equal to the lesser of the price paid by the transferee of the shares or the
then current market price. If the trust transfers any of the shares of capital stock, the affected person will receive the lesser of the price paid for the
shares or the then current market price. An individual who acquires shares of capital stock that violate the above rules bears the risk that the
individual:
• may lose control over the power to dispose of such shares;
• may not recognize profit from the sale of such shares if the market price of the shares increases;
• may be required to recognize a loss from the sale of such shares if the market price decreases; and
• may be required to repay to us any dividends received from us as a result of his or her ownership of the shares.
Aimco’s charter may limit the ability of a third-party to acquire control of Aimco.
The 8.7% and other ownership limits discussed above may have the effect of delaying or precluding acquisition by a third-party of control of
Aimco without the consent of Aimco’s Board of Directors. Aimco’s charter authorizes its Board of Directors to issue up to 510,587,500 shares of
capital stock. As of December 31, 2017, 500,787,260 shares were classified as Common Stock, of which 157,189,447 were outstanding, and 9,800,240
shares were classified as preferred stock, of which 5,000,000 were outstanding. Under Aimco’s charter, its Board of Directors has the authority to
classify and reclassify any of Aimco’s unissued shares of capital stock into shares of capital stock with such preferences, conversion or other
rights, voting power restrictions, limitations as to dividends, qualifications or terms or conditions of redemptions as the Board of Directors may
determine. The authorization and issuance of a new class of capital stock could have the effect of delaying or preventing someone from taking
control of Aimco, where there is a difference of opinion between the Aimco Board of Directors and others as to what is in Aimco’s stockholders’
best interests.
The Maryland General Corporation Law may limit the ability of a third-party to acquire control of Aimco.
As a Maryland corporation, Aimco is subject to various Maryland laws that may have the effect of discouraging offers to acquire Aimco and
increasing the difficulty of consummating any such offers, where there is a difference of opinion between the Aimco Board of Directors and others
as to what is in Aimco’s stockholders’ best interests. The Maryland General Corporation Law, specifically the Maryland Business Combination Act,
restricts mergers and other business combination transactions between Aimco
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and any person who acquires, directly or indirectly, beneficial ownership of shares of Aimco’s stock representing 10% or more of the voting power
without Aimco’s Board of Directors’ prior approval. Any such business combination transaction could not be completed until five years after the
person acquired such voting power, and generally only with the approval of stockholders representing 80% of all votes entitled to be cast and 66-
2/3% of the votes entitled to be cast, excluding the interested stockholder, or upon payment of a fair price. The Maryland General Corporation Law,
specifically the Maryland Control Share Acquisition Act, provides generally that a person who acquires shares of Aimco’s capital stock
representing 10% or more of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares
eligible to vote. Additionally, the Maryland General Corporation Law provides, among other things, that the board of directors has broad discretion
in adopting stockholders’ rights plans and has the sole power to fix the record date, time and place for special meetings of the stockholders. To
date, Aimco has not adopted a stockholders’ rights plan. In addition, the Maryland General Corporation Law provides that a corporation that:
•
•
has at least three directors who are not officers or employees of the entity or related to an acquiring person; and
has a class of equity securities registered under the Securities Exchange Act of 1934, as amended,
may elect in its charter or bylaws or by resolution of the board of directors to be subject to all or part of a special subtitle that provides that:
•
•
•
•
•
the corporation will have a staggered board of directors;
any director may be removed only for cause and by the vote of two-thirds of the votes entitled to be cast in the election of directors
generally, even if a lesser proportion is provided in the charter or bylaws;
the number of directors may only be set by the board of directors, even if the procedure is contrary to the charter or bylaws;
vacancies may only be filled by the remaining directors, even if the procedure is contrary to the charter or bylaws; and
the secretary of the corporation may call a special meeting of stockholders at the request of stockholders only on the written request of the
stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting, even if the procedure is contrary to the
charter or bylaws.
To date, Aimco has not made any of the elections described above.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
Additional information about our consolidated apartment communities is contained in “Schedule III - Real Estate and Accumulated
Depreciation” in this Annual Report on Form 10-K. Refer to Note 4 to the consolidated financial statements in Item 8 for additional information
regarding property debt.
Our Real Estate portfolio is diversified by both price point and geography and consists of market rate apartment communities in which we own a
substantial interest. Our Real Estate portfolio includes garden style, mid-rise and high-rise apartment communities located in 22 states and the
District of Columbia. Our portfolio strategy seeks predictable rent growth from a portfolio of apartment communities diversified among some of the
largest markets in the United States, and that is diversified across “A,” “B” and “C+” price points, averaging “B/B+” in quality. As of December 31,
2017, our Real Estate portfolio consisted of roughly one half “A” quality communities and one half “B” and “C+” quality communities (as measured
by gross asset value). Please refer to the Executive Overview heading under Item 7 for a description of our portfolio quality ratings. The following
table sets forth information on the apartment communities in our Real Estate portfolio as of December 31, 2017:
Atlanta
Bay Area
Boston
Chicago
Denver
Greater New York
Greater Washington, DC
Los Angeles
Miami
Philadelphia
San Diego
Seattle
Other markets
Total Real Estate portfolio
Number of
Apartment
Communities
Number of
Apartment
Homes
Average Economic
Ownership
5
16
15
10
8
18 —
13
13
5
5
12
2
14
136
817
3,236
4,689
3,246
2,065
1,040
5,325
4,347
2,652
2,796
2,423
239
4,029
36,904
100 %
100 %
100 %
100 %
98 %
100 %
99 %
100 %
100 %
97 %
97 %
100 %
97 %
99 %
At December 31, 2017, we owned an equity interest in 136 apartment communities with 36,904 apartment homes in our Real Estate portfolio. We
consolidated 132 of these apartment communities with 36,762 apartment homes.
These consolidated apartment communities contained, on average, 279 apartment homes, with the largest community containing 2,113 apartment
homes. These apartment communities offer residents a range of amenities, including resort pools with cabanas, grills, clubhouses, spas, fitness
centers, package lockers, dog parks and large open spaces. Many of the apartment homes offer features such as granite countertops, wood
flooring, stainless steel appliances, fireplaces, spacious closets, washer and dryer connections, balconies and patios.
The majority of our consolidated apartment communities are encumbered by property debt. At December 31, 2017, apartment communities in our
Real Estate portfolio were encumbered by, in aggregate, $3.5 billion of property debt with a weighted average interest rate of 4.6% and a weighted
average maturity of 7.2 years. The apartment communities collateralizing this non-recourse property debt have an estimated aggregate fair value of
$10.9 billion. At December 31, 2017, we held unencumbered apartment communities with an estimated fair value of approximately $1.8 billion.
At December 31, 2017, we also held nominal ownership positions in partnerships that own 46 apartment communities with 6,898 apartment homes
that qualify for low-income housing tax credits and are structured to provide for the pass through of tax credits and tax deductions to their partners.
We provide asset management and other services to these partnerships and receive fees and other payments in return. In accordance with
accounting principles generally accepted in the United States of America, or GAAP, we consolidate most of these partnerships, which own an
aggregate of 39 apartment communities with 6,211 apartment homes.
Item 3. Legal Proceedings
As further discussed in Note 5 to the consolidated financial statements in Item 8, we are engaged in discussions with regulatory agencies
regarding environmental matters at apartment communities we, or predecessor entities, previously owned. Although the outcome of these matters is
uncertain, we do not expect the resolution to have a material adverse effect on our consolidated financial condition, results of operations or cash
flows.
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Additionally, as further discussed in Note 3 to the consolidated financial statements in Item 8, in January 2018 we reached an agreement to settle
litigation pertaining to the ownership of a property we acquired in 2014.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Aimco
Aimco’s Common Stock has been listed and traded on the NYSE under the symbol “AIV” since July 22, 1994. The following table sets forth the
quarterly high and low sales prices of our Common Stock, as reported on the NYSE, and the dividends declared in the periods indicated:
Quarter Ended
December 31, 2017
September 30, 2017
June 30, 2017
March 31, 2017
December 31, 2016
September 30, 2016
June 30, 2016
March 31, 2016
High
Low
Dividends
Declared
(per share)
$
$
$
$
45.47
46.45
44.99
46.53
45.45
47.59
44.16
41.82
$
$
43.15
42.42
42.64
43.11
39.88
43.30
39.57
35.45
0.36
0.36
0.36
0.36
0.33
0.33
0.33
0.33
Aimco’s Board of Directors determines and declares its dividends. In making a dividend determination, Aimco’s Board of Directors considers a
variety of factors, including: REIT distribution requirements; current market conditions; liquidity needs; and other uses of cash, such as for
deleveraging and accretive investment activities. Aimco’s Board of Directors targets a dividend payout ratio between 65% and 70% of Adjusted
Funds From Operations (which is defined in Item 7). In January 2018, Aimco’s Board of Directors declared a cash dividend of $0.38 per share on its
Common Stock. On an annualized basis, this represents an increase of 6% compared to the dividends paid in 2017. This dividend is payable on
February 28, 2018, to stockholders of record on February 16, 2018. Aimco’s Board of Directors anticipates similar per share quarterly cash dividends
for the remainder of 2018. However, the Board of Directors may adjust the dividend amount or the frequency with which the dividend is paid based
on then prevailing circumstances.
On February 27, 2018, the closing price of Aimco Common Stock was $38.43 per share, as reported on the NYSE, and there were 157,330,262
shares of Common Stock outstanding, held by 1,741 stockholders of record. The number of holders does not include individuals or entities who
beneficially own shares but whose shares are held of record by a broker or clearing agency, but does include each such broker or clearing agency
as one record holder.
As a REIT, Aimco is required to distribute annually to holders of its Common Stock at least 90% of its “real estate investment trust taxable
income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary
income.
From time to time, Aimco may issue shares of Common Stock in exchange for OP Units, defined under The Aimco Operating Partnership heading
below. Please refer to Note 7 to the consolidated financial statements in Item 8 for further discussion of such exchanges. Aimco may also issue
shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the year ended December 31,
2017, Aimco did not issue any shares of Common Stock in exchange for OP Units or limited partnership interests in consolidated real estate
partnerships.
Aimco’s Board of Directors has, from time to time, authorized Aimco to repurchase shares of its outstanding capital stock. There were no
repurchases of Aimco shares during the year ended December 31, 2017. As of December 31, 2017, Aimco was authorized to repurchase
approximately 19.3 million shares. This authorization has no expiration date. These repurchases may be made from time to time in the open market or
in privately negotiated transactions.
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Performance Graph
The following graph compares cumulative total returns for Aimco’s Common Stock, the MSCI US REIT Index, the NAREIT Apartment Index, and
the Standard & Poor’s 500 Total Return Index (the “S&P 500”). The MSCI US REIT Index is published by Morgan Stanley Capital International Inc.,
a provider of equity indices. The NAREIT Apartment Index is published by The National Association of Real Estate Investment Trusts, or NAREIT,
a representative of real estate investment trusts and publicly traded real estate companies with interests in United States real estate and capital
markets. The MSCI REIT Index reflects total shareholder return for a broad range of REITs and the NAREIT Apartment Index provides a more direct
multifamily peer comparison of total shareholder return. The indices are weighted for all companies that fit the definitional criteria of the particular
index and are calculated to exclude companies as they are acquired and to add companies to the index calculation as they become publicly traded
companies. All companies that fit the definitional criteria and existed at the point in time presented are included in the index calculations. The graph
assumes the investment of $100 in Aimco’s Common Stock and in each index on December 31, 2012, and that all dividends paid have been
reinvested. The historical information set forth below is not necessarily indicative of future performance.
Index
Aimco (1)
MSCI US REIT (1)
NAREIT Apartment Index (2)
S&P 500 (1)
For the fiscal years ended December 31,
2012
2013
2014
2015
2016
2017
$
100.00 $
100.00
100.00
100.00
98.95 $
102.47
93.80
132.39
146.49 $
133.60
130.97
150.51
162.81 $
136.97
152.52
152.59
190.96 $
148.75
156.88
170.84
189.68
156.29
162.72
208.14
(1) Source: S&P Global Market Intelligence © 2018
(2) Source: National Association of Real Estate Investment Trusts
The Performance Graph will not be deemed to be incorporated by reference into any filing by Aimco under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Aimco specifically incorporates the same by reference.
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The Aimco Operating Partnership
Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as OP Units. OP Units include
common partnership units, which we refer to as common OP Units, as well as partnership preferred units, or preferred OP Units. There is no public
market for the Aimco Operating Partnership’s common partnership units, including OP Units, and we have no intention of listing the common
partnership units on any securities exchange. In addition, the Aimco Operating Partnership’s Partnership Agreement restricts the transferability of
common partnership units, including OP Units. The following table sets forth the distributions declared per common partnership unit in each
quarterly period during the two years ended December 31, 2017 and 2016:
Quarter Ended
December 31
September 30
June 30
March 31
$
2017
2016
$
0.36
0.36
0.36
0.36
0.33
0.33
0.33
0.33
The Aimco Operating Partnership’s Board of Directors determines and declares its distributions. Aimco, through wholly-owned subsidiaries, is
the general and special limited partner of and, as of December 31, 2017, owned a 95.5% ownership interest in the common partnership units of the
Aimco Operating Partnership and the Aimco Operating Partnership holds all of Aimco’s assets and manages the daily operations of Aimco’s
business. The distributions paid by the Aimco Operating Partnership to Aimco are used by Aimco to fund the dividends paid to its stockholders.
Accordingly, the per share dividends Aimco pays to its stockholders generally equal the per share distributions paid by the Aimco Operating
Partnership to holders of its common partnership units.
At February 27, 2018, there were 164,901,915 common partnership units and equivalents outstanding (157,330,262 of which were held by Aimco)
that were held by 2,624 unitholders of record.
The Aimco Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one year, limited partners
other than Aimco have the right to redeem their common OP Units for cash or, at our election, shares of Aimco Common Stock.
No common OP Units or preferred OP Units held by Limited Partners were redeemed for shares of Aimco Common Stock during the year ended
December 31, 2017.
The following table summarizes the Aimco Operating Partnership’s repurchases of common OP Units for the three months ended December 31,
2017:
Fiscal period
October 1 - October 31, 2017
November 1 - November 30, 2017
December 1 - December 31, 2017
Total
Dividend and Distribution Payments
Total Number of
Units Purchased
Average Price
Paid per Unit
1,212
4,155
2,685
8,052
$
$
45.04
44.26
44.42
44.43
Total Number of
Units Purchased as Part of
Publicly Announced Plans or
Programs
Maximum Number
of Units that May Yet Be
Purchased Under Plans or
Programs
N/A
N/A
N/A
N/A
N/A
N/A
Our revolving credit agreement includes customary covenants, including a restriction on dividends and other restricted payments, but permits
dividends and distributions during any four consecutive fiscal quarters in an aggregate amount of up to 95% of Aimco’s Funds From Operations
for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain Aimco’s REIT status.
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Item 6. Selected Financial Data
The following selected financial data is based on audited historical financial statements of Aimco and the Aimco Operating Partnership. This
information should be read in conjunction with such financial statements, including the notes thereto, and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” included herein or in previous filings with the Securities and Exchange Commission.
OPERATING DATA:
Total revenues (1)
Net income (1)
Net income attributable to Aimco/the Aimco Operating
Partnership per common share/unit – diluted
BALANCE SHEET INFORMATION:
Total assets
Total indebtedness
Non-recourse property debt of partnerships served by Asset
Management business
OTHER INFORMATION:
$
$
$
Years Ended December 31,
2017
2016
2015
2014
2013
(dollar amounts in thousands, except per share data)
1,005,437 $
347,079
$
995,854
483,273
$
981,310
271,983
$
984,363
356,111
974,053
237,825
1.96 $
2.67
$
1.52
$
2.06
$
1.40
6,079,040 $
3,861,770
$
6,232,818
3,648,206
$
6,118,681
3,599,648
$
6,068,631
3,852,885
6,046,579
4,090,653
227,141
236,426
249,493
255,140
265,196
Dividends/distributions declared per common share/unit
$
1.44 $
1.32
$
1.18
$
1.04
$
0.96
(1) Effective January 1, 2014, we adopted a new accounting standard, which revised the definition of a discontinued operation. In the selected financial data
presentation above, for the year ended December 31, 2013, total revenues excludes revenue generated by discontinued operations of $62.2 million and net
income includes income from discontinued operations, net of tax, of $203.2 million.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
We are focused on the ownership, management, redevelopment and limited development of quality apartment communities located in some of
the largest markets in the United States.
Our principal financial objective is to provide predictable and attractive returns to our equity holders. We measure our current return using
Adjusted Funds From Operations, or AFFO, and our long-term total return using Economic Income. In 2017, AFFO grew by 7.6% to $2.12 per share.
Over the last five years, our Economic Income grew at a compound annual return of 13.7%, comprised of 10.6% compounded annual growth in net
asset value, or NAV, per share and $5.78 in cash dividends per share paid over the period. We also use Pro forma Funds From Operations, or Pro
forma FFO, as a measure of operational performance. Economic Income, NAV, AFFO, and Pro forma FFO are non-GAAP measures and are defined
under the Non-GAAP Measures heading below.
Our business and five areas of strategic focus are described in more detail within the Business Overview in Item 1. The results from execution of
our business plan in 2017 are further described in the sections that follow.
Net income attributable to common stockholders per common share decreased by $0.71 for the year ended December 31, 2017, as compared to
2016, primarily due to lower gains on the sale of apartment communities and higher depreciation expense, partially offset by increased contribution
from property net operating income more fully described below.
Pro forma FFO per share increased $0.13, or 5.6%, for the year ended December 31, 2017, as compared to 2016. The primary driver of this increase
was property net operating income growth of $0.11 per share, consisting of:
•
•
$0.10 from Same Store property net operating income growth of 4.2%, driven primarily by a 3.2% increase in revenue and almost flat
expense growth;
$0.12 from the lease-up over the last 12 months of more than 800 renovated homes at redevelopment communities and completion of the
lease-up of One Canal in Boston, and Indigo in Redwood City, California; and
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•
•
$0.02 from our Other Real Estate apartment communities, primarily due to rate increases; partially offset by
$0.13 lower property net operating income from apartment communities sold in 2016 to fund redevelopment and development activities and
acquisitions.
As compared to 2016, lower interest rates, higher tax benefit, higher transactional income and other factors, partially offset by lower deferred tax
credit income, contributed an additional $0.02 to Pro forma FFO per share.
The $0.13 increase in year-over-year Pro forma FFO per share plus $0.02 in lower capital replacement spending due to fewer apartment homes
increased AFFO by $0.15, or 7.6% per share.
Operational Excellence
We own and operate a portfolio of market rate apartment communities diversified by both geography and price point. At December 31, 2017, our
Real Estate portfolio included 136 apartment communities with 36,904 apartment homes in which we held an average ownership of approximately
99%.
Our property operations team delivered solid results for our Real Estate portfolio for the year ended December 31, 2017. Highlights include:
•
•
Same Store net operating income growth greater than 4% for the seventh year in a row;
Same Store rent increases on renewals and new leases averaged 4.6% and 0.6%, respectively, for a weighted average increase of 2.5%; and
• Completion of the lease-up of One Canal in Boston, and Indigo in Redwood City, California.
Our focus on efficient operations through productivity initiatives such as centralization of administrative tasks, optimization of economies of
scale at the corporate level, and investment in more durable, longer-lived materials has helped us control operating expenses. As a result of these
efforts, our Same Store controllable operating expenses, which we define as property operating expenses before real estate taxes, insurance and
utilities, decreased by 1.3% for the year ended December 31, 2017 compared to 2016. The compounded annual growth rate for Same Store
controllable operating expenses for the past decade is negative 0.4%.
For the year ended December 31, 2017, our Real Estate portfolio provided 69% net operating income margins and 64% Free Cash Flow margins.
Free Cash Flow is defined under the Non-GAAP Measures heading below.
In addition to those communities in our Real Estate portfolio, as of December 31, 2017, we held nominal ownership positions (generally less than
1%) in partnerships that own 46 low-income housing tax credit communities with 6,898 apartment homes. We provide asset management and other
services to these partnerships and receive fees and other payments in return. Our relationship with these partnerships is different than real estate
ownership and is better described as an Asset Management business. We have limited upside or downside exposure. In accordance with GAAP,
we consolidate most of these partnerships and communities, thus reflecting their operating results as though they were our own until our fee and
other interests have been repaid, generally upon sale of the underlying communities.
Redevelopment
Our second line of business is the redevelopment and development of apartment communities where we create value equal to 25% to 35% of our
incremental investment by repositioning communities within the Aimco portfolio and by constructing new communities. We measure the rate and
quality of financial returns by Net Asset Value creation, an important component of Economic Income, our primary measure of long-term financial
performance. We invest to earn risk-adjusted returns in excess of those expected from the apartment communities sold in paired trades to fund the
redevelopment or development.
We also undertake ground-up development when warranted by risk-adjusted investment returns, either directly in connection with the
redevelopment of an existing apartment community or, on a more limited basis, at a new location. When warranted, we rely on the expertise and
credit of a third-party developer familiar with the local market to limit our exposure to construction risk.
Of these two activities, we favor redevelopment because it permits adjustment of the scope and timing of spending to align with changing
market conditions and customer preferences.
During the year ended December 31, 2017, we invested $172.4 million primarily in our ongoing redevelopment and development projects.
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During the year ended December 31, 2017, we completed construction on the third tower of Park Towne Place in Center City, Philadelphia. As of
December 31, 2017, the first three towers combined were 89% leased with approximately 40 homes remaining to be leased at the third redeveloped
tower to reach occupancy stabilization. Based on these results, we decided to proceed with a $40 million redevelopment of the fourth and final
tower. We have completed de-leasing and commenced construction on this tower, and lease-up is scheduled to commence in the spring of 2018.
We have planned and entitled a new $117.0 million, 226 apartment home community to be known as Parc Mosaic, located in Boulder, Colorado
on the site of our Eastpointe community. As part of this plan, as of December 31, 2017, we completed the de-leasing of Eastpointe and commenced
demolition and construction. The site is two miles from the new Google campus and is across the street from Ball Aerospace’s Technology Campus
and Foothills Hospital. Building in Boulder is highly regulated and new supply is limited, notwithstanding higher enrollment at the University of
Colorado and increased employment generally.
Inclusive of these two new projects, our total estimated net investment in redevelopment and development activities is $714.6 million, with a
projected weighted average net operating income yield on these investments of 6.1%, assuming untrended rents. As of December 31, 2017, $513.1
million of this total has been funded.
During 2017, we leased over 800 apartment homes at our redevelopment communities. As of December 31, 2017, our lease-up exposure at active
redevelopment and development projects included approximately 611 apartment homes, of which 232 were in the fourth tower of Park Towne Place,
which we expect to be available for lease beginning in the summer of 2018 and 215 were in Parc Mosaic, which we expect to be available for lease
beginning in the summer of 2019.
See below under the Liquidity and Capital Resources – Redevelopment/Development heading for additional information regarding our
redevelopment and development investment during the year ended December 31, 2017.
Portfolio Management
Our portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points, averaging “B/B+” in quality and is diversified
across some of the largest markets in the U.S. We measure the quality of apartment communities in our Real Estate portfolio based on average rents
of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance and
analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of the local market
average, as “B” quality apartment communities those earning rents between 90% and 125% of the local market average; as “C+” quality apartment
communities those earning rents greater than $1,100 per month, but lower than 90% of local market average; and as “C” quality apartment
communities those earning rents less than $1,100 per month and lower than 90% of local market average. We classify as “B/B+” quality a portfolio
that on average earns rents between 100% and 125% of the local market average rents where the portfolio is located. Although some companies and
analysts within the multifamily real estate industry use apartment community quality ratings of “A,” “B,” and “C,” some of which are tied to local
market rent averages, the metrics used to classify apartment community quality as well as the period for which local market rents are calculated may
vary from company to company. Accordingly, our rating system for measuring apartment community quality is neither broadly nor consistently
used in the multifamily real estate industry.
As part of our portfolio strategy, we seek to sell up to 10% of our portfolio annually and to reinvest the proceeds from such sales in accretive
uses such as capital enhancements, redevelopments, occasional developments, and selective acquisitions with projected Free Cash Flow internal
rates of return higher than expected from the communities being sold. Through this disciplined approach to capital recycling, we have significantly
increased the quality and expected growth rate of our portfolio, resulting in a compound annual growth rate in average revenue per Aimco
apartment home of 8.8% over the last three years.
Average Revenue per Aimco apartment home (1)
Portfolio Average Rents as a Percentage of Local Market Average Rents
Percentage A (4Q 2017 Average Revenue per Aimco Apartment Home $2,707)
Percentage B (4Q 2017 Average Revenue per Aimco Apartment Home $1,848)
Percentage C+ (4Q 2017 Average Revenue per Aimco Apartment Home $1,721)
Percentage C
Three Months Ended
December 31,
2017
2014
$
2,123
$
113 %
53 %
32 %
15 %
— %
1,650
108 %
45 %
33 %
5 %
17 %
(1) Represents average monthly rental and other property revenues divided by the number of occupied apartment homes multiplied by our ownership interest
in the apartment community as of the end of the current period.
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The quality of our portfolio improved through value created by our redevelopment and transaction activities, contributing to the increase in
average revenue per apartment home. The increase is due to rent growth from the improved quality of our portfolio, driven in part by the sale of
apartment communities with average monthly revenues per Aimco apartment home lower than those of the retained portfolio, and also by our
reinvestment of the sales proceeds through redevelopment, development and acquisition of apartment communities with higher rents and better free
cash flow return prospects than the apartment communities sold.
As we execute our portfolio strategy, we expect to increase average revenue per Aimco apartment home for our Real Estate portfolio at a rate
greater than market rent growth; increase free cash flow margins; and maintain sufficient geographic and price point diversification to moderate
volatility and concentration risk.
During the year ended December 31, 2017, we sold five apartment communities with 2,291 apartment homes for a gain of $297.9 million and gross
proceeds of $397.0 million resulting in net proceeds of $381.1 million. Two of these apartment communities were affordable communities located in
Washington, DC and Philadelphia, and three were located in southern New Jersey and southern Virginia.
In January 2018, we agreed to sell our interests in the entities owning the La Jolla Cove property in settlement of legal actions filed in 2014 by a
group of disappointed buyers who had hoped to acquire the property. As a result of the settlement, we recognized a gross impairment loss of $35.8
million in our 2017 results, $25.6 million of which relates to the establishment of a deferred tax liability assumed in connection with our acquisition of
the business entities. Upon closing of the transaction, the tax liability will be assumed by the buyer, resulting in no economic loss. The remaining
$10.2 million loss is offset by cash distributions we received during our ownership and avoided legal costs for continued litigation. On an economic
basis, we agreed to sell these entities at roughly our purchase price, adjusted for retained cash distributions and avoided legal costs.
Also in January 2018, we sold three additional apartment communities with 513 apartment homes for a gain of approximately $50.0 million, net of
tax, and gross proceeds of $71.9 million, resulting in $64.6 million in net proceeds. Two of these communities are located in southern Virginia and
one is located in suburban Maryland.
Proceeds from the 2017 and 2018 sales were used to repay outstanding borrowings on our revolving credit facility, effectively funding the equity
portion of the Palazzo reacquisition, as further discussed in Note 3 to the consolidated financial statements in Item 8, as well as our 2017
redevelopment and development activities.
Balance Sheet
We target net leverage of $3.8 billion. At December 31, 2017, our leverage of $3.9 billion was above this target due to the timing of the three
apartment community sales discussed above that closed in January 2018.
Our leverage includes our share of long-term, non-recourse property debt encumbering apartment communities in our Real Estate portfolio, our
term loan, outstanding borrowings on the revolving credit facility and outstanding preferred equity. In our calculation of leverage, we exclude non-
recourse property debt obligations of consolidated partnerships served by our Asset Management business, as these are not our obligations and
they have limited effect on the amount of fees and other amounts we expect to receive in our role as asset manager for these partnerships.
Our leverage strategy seeks to increase financial returns while using leverage with appropriate caution. We limit risk through balance sheet
structure, employing low leverage, primarily non-recourse and long-dated property debt; build financial flexibility by maintaining ample unused and
available credit as well as holding properties with substantial value unencumbered by property debt; and use partners’ capital when it enhances
financial returns or reduces investment risk.
We target the ratio of Proportionate Debt and Preferred Equity to Adjusted EBITDA to be below 7.0x and we target the ratio of Adjusted
EBITDA to Adjusted Interest Expense and Preferred Dividends to be greater than 2.5x.
Proportionate Debt, Adjusted EBITDA and Adjusted Interest Expense, as used in these ratios, are non-GAAP financial measures, which are
further discussed and reconciled under the Non-GAAP Measures – Leverage Ratios heading. Preferred Equity represents Aimco’s preferred stock
and the Aimco Operating Partnership’s preferred OP Units. Our leverage ratios for the three months ended December 31, 2017, are presented below:
Proportionate Debt to Adjusted EBITDA
Proportionate Debt and Preferred Equity to Adjusted EBITDA
Adjusted EBITDA to Adjusted Interest Expense
Adjusted EBITDA to Adjusted Interest Expense and Preferred Dividends
23
6.5x
6.9x
3.3x
3.1x
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We calculate our leverage ratios based on the most recent three month amounts, annualized. Our calculation of Adjusted EBITDA in our
leverage ratios has been adjusted on a pro forma basis to reflect the disposition of five apartment communities during the period as if the sales had
closed on October 1, 2017. The effect of this pro forma adjustment may be found in the Adjusted EBITDA reconciliation under the Non-GAAP
Measures heading.
During 2017, we closed or rate-locked nine fixed-rate, non-recourse, amortizing, property loans totaling $550.8 million. On a weighted basis, the
term of these loans averaged 9.1 years and their interest rates averaged 3.48%, 123 basis points above the corresponding treasury rates at the time
of pricing.
Also during 2017, we restructured five fixed-rate, non-recourse, amortizing, property loans totaling $17.4 million, extending their maturity dates
from 2018 to 2023 and reducing their weighted average interest rate from 4.13% to 3.63%.
The net effect of 2017 property debt refinancing activities has been to lower our weighted average fixed interest rates by about 20 basis points to
4.64%, generating prospective annual interest savings of approximately $6.6 million.
Our liquidity consists of cash balances and available capacity on our revolving line of credit. As of December 31, 2017, we had on hand $616.6
million of cash and restricted cash plus available capacity on our revolving line of credit.
We also manage our financial flexibility by maintaining an investment grade rating and holding apartment communities that are unencumbered
by property debt. At December 31, 2017, we held unencumbered apartment communities with an estimated fair market value of approximately $1.8
billion, up 12.5% year-over-year.
Two credit rating agencies rate our creditworthiness, using different methodologies and ratios for assessing our credit, and both have rated our
credit and outlook as BBB- (stable), an investment grade rating. Although some of the ratios they use are similar to those we use to measure our
leverage, there are differences in our methods of calculation and therefore our leverage ratios disclosed above are not indicative of the ratios that
may be calculated by these agencies.
For additional information regarding our leverage, please see the discussion under the Liquidity and Capital Resources heading.
Team and Culture
Our team and culture are keys to our success. Our intentional focus on a collaborative and productive culture based on respect for others and
personal responsibility is reinforced by a preference for promotion from within based on succession planning and talent development to produce a
strong, stable team that is the enduring foundation of our success. In 2017, Aimco was recognized by the Denver Post as a Top Work Place. We are
one of only a dozen Colorado companies of all sizes that have earned this designation for five consecutive years.
Key Financial Indicators
The key financial indicators that we use in managing our business and in evaluating our operating performance are Economic Income, our
measure of total return, and Adjusted Funds From Operations, our measure of current return. In addition to these indicators, we evaluate our
operating performance and financial condition using: Pro forma Funds From Operations; FCF; same store property operating results; proportionate
property net operating income; average revenue per effective apartment home; leverage ratios; and net leverage. Certain of these financial
indicators are non-GAAP financial measures, which are defined, further described and, for certain of the measures, reconciled to comparable GAAP-
based measures under the Non-GAAP Measures heading below.
Results of Operations
Because our operating results depend primarily on income from our apartment communities, the supply of and demand for apartments influences
our operating results. Additionally, the level of expenses required to operate and maintain our apartment communities and the pace and price at
which we redevelop, acquire and dispose of our apartment communities affect our operating results.
The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the
accompanying consolidated financial statements in Item 8.
Overview
2017 compared to 2016
Net income attributable to Aimco and net income attributable to the Aimco Operating Partnership decreased by $114.6 million and $120.0 million,
respectively, for the year ended December 31, 2017 as compared to 2016. The decrease in income was
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principally due to a decrease in gain on dispositions of real estate and an increase in depreciation and amortization resulting from redeveloped
apartment homes placed into service and the completion of One Canal and the acquisition of Indigo in 2016, partially offset by improved operating
results as further described below.
2016 compared to 2015
Net income attributable to Aimco and net income attributable to the Aimco Operating Partnership increased by $181.7 million and $190.8 million,
respectively, for the year ended December 31, 2016 as compared to 2015. The increase in income was principally due to an increase in gain on
dispositions of real estate, partially offset by an increase in depreciation and amortization resulting from redeveloped apartment homes placed into
service and the completion of One Canal and the acquisition of Indigo in 2016.
The following paragraphs discuss these and other items affecting the results of operations of Aimco and the Aimco Operating Partnership in
more detail.
Property Operations
As described under the preceding Executive Overview heading, our Real Estate segment consists primarily of market rate apartment communities
in which we hold a substantial equity ownership interest.
We use proportionate property net operating income to assess the operating performance of our Real Estate portfolio. Proportionate property
net operating income reflects our share of rental and other property revenues less direct property operating expenses, including real estate taxes, for
consolidated apartment communities we manage. Accordingly, the results of operations of our Real Estate segment discussed below are presented
on a proportionate basis and exclude the results of four apartment communities with 142 apartment homes that we neither manage nor consolidate.
We do not include offsite costs associated with property management or casualty-related amounts in our assessment of segment performance.
Accordingly, these items are not allocated to our segment results discussed below. Refer to Note 12 in the consolidated financial statements in Item
8 for further discussion regarding our reportable segments, including a reconciliation of these proportionate amounts to consolidated rental and
other property revenues and property operating expenses.
Real Estate Proportionate Property Net Operating Income
We classify apartment communities within our Real Estate segment as Same Store and Other Real Estate. Same Store communities are those that
have reached a stabilized level of operations as of the beginning of a two-year comparable period and maintained it throughout the current and
comparable prior year, and are not expected to be sold within 12 months. Other Real Estate includes apartment communities that do not meet the
Same Store definition, including, but not limited to: redevelopment and development apartment communities, which are those currently under
construction that have not achieved a stabilized level of operations and those that have been completed in recent years that have not achieved and
maintained stabilized operations for both the current and comparable prior year; acquisition apartment communities, which are those we have
acquired since the beginning of a two-year comparable period; and communities that we expect to sell within 12 months but do not yet meet the
criteria to be classified as held for sale.
As of December 31, 2017, as defined by our segment performance metrics, our Real Estate segment consisted of 92 Same Store communities with
26,386 apartment homes and 37 Other Real Estate communities with 9,863 apartment homes.
From December 31, 2016 to December 31, 2017, on a net basis, our Same Store portfolio decreased by nine communities and decreased by 4,507
apartment homes. These changes consisted of:
•
•
•
•
•
•
the addition of three redeveloped apartment communities with 974 apartment homes that were classified as Same Store upon maintaining
stabilized operations for the entirety of both periods presented;
the addition of one acquired apartment community with 94 apartment homes that was classified as Same Store because we have now
owned it for the entirety of both periods presented;
the reduction of five apartment communities with 2,460 apartment homes for which we commenced redevelopment during the period;
the reduction of two apartment communities with 906 apartment homes we expected to sell during 2017;
the reduction of three apartment communities with 1,696 apartment homes sold during the period; and
the reduction of three apartment communities with 513 apartment homes held for sale.
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As of December 31, 2017, our Other Real Estate communities included:
•
•
•
•
15 apartment communities with 6,386 apartment homes in redevelopment or development;
2 apartment communities with 578 apartment homes recently acquired;
4 apartment communities with 604 apartment homes owned that receive forms of government rental assistance; and
16 apartment communities with 2,295 apartment homes that do not meet the definition of Same Store because they are either subject to
agreements that limit the amount by which we may increase rents or have not reached or maintained a stabilized level of occupancy as of
the beginning of a two-year comparable period, often due to a casualty event.
Prior to 2017, five of the Other Real Estate communities were classified as part of our former Affordable segment. The results of operations for
these communities are reflected in the comparable periods in the tables below.
Our Real Estate segment results for the years ended December 31, 2017 and 2016, as presented below, are based on the apartment community
classifications as of December 31, 2017.
(in thousands)
Rental and other property revenues:
Same Store communities
Other Real Estate communities
Total
Property operating expenses:
Same Store communities
Other Real Estate communities
Total
Proportionate property net operating income:
Same Store communities
Other Real Estate communities
Total
Year Ended December 31,
2017
2016
$ Change
% Change
$
$
587,562 $
266,929
854,491
569,522 $
222,065
791,587
167,356
97,830
265,186
166,134
85,502
251,636
420,206
169,099
589,305 $
403,388
136,563
539,951 $
18,040
44,864
62,904
1,222
12,328
13,550
16,818
32,536
49,354
3.2 %
20.2 %
7.9 %
0.7 %
14.4 %
5.4 %
4.2 %
23.8 %
9.1 %
For the year ended December 31, 2017 compared to 2016, our Real Estate segment’s proportionate property net operating income increased $49.4
million, or 9.1%.
Same Store proportionate property net operating income increased by $16.8 million, or 4.2%. This increase was primarily attributable to an $18.0
million, or 3.2%, increase in rental and other property revenues due to higher average revenues ($59 per effective home), comprised primarily of
increases in rental rates. Renewal rents (the rent paid by an existing resident who renewed her lease compared to the rent she previously paid) were
up 4.6% for the year ended December 31, 2017, and new lease rents (the rent paid by a new resident compared to the rent paid by the previous
resident of the same apartment home) were up 0.6%, resulting in a weighted average increase of 2.5%. The increase in Same Store rental and other
property revenues was partially offset by a $1.2 million, or 0.7%, increase in property operating expenses, primarily due to increases in real estate
taxes. During the year ended December 31, 2017 compared to 2016, controllable operating expenses, which exclude utility costs, real estate taxes and
insurance, decreased by $1.0 million, or 1.3%.
The proportionate property net operating income of Other Real Estate communities increased by $32.5 million, or 23.8%, due to:
•
•
redevelopment and lease-up activities during the year ended December 31, 2017, which helped contribute to incremental property net
operating income of $20.9 million compared to 2016; and
higher property net operating income of $11.6 million from other communities, including the effect of our increased ownership interest in
the Palazzo communities from our June 2017 reacquisition of the 47% limited partner interest in the related joint venture.
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As of December 31, 2016, as defined by our segment performance metrics, our Real Estate portfolio consisted of 95 Same Store apartment
communities with 28,684 apartment homes and 34 Other Real Estate communities with 7,531 apartment homes.
As of December 31, 2016, our Other Real Estate communities included:
•
•
•
•
13 apartment communities with 4,725 apartment homes in redevelopment or development;
3 apartment communities with 672 apartment homes recently acquired;
4 apartment communities with 604 apartment homes owned that receive forms of government rental assistance; and
14 apartment communities with 1,530 apartment homes that do not meet the definition of Same Store because they are either subject to
agreements that limit the amount by which we may increase rents or have not reached or maintained a stabilized level of occupancy as of
the beginning of a two-year comparable period, often due to a casualty event.
Our Real Estate segment results for the years ended December 31, 2016 and 2015, as presented below, are based on the apartment community
classifications as of December 31, 2016, including the five Other Real Estate communities that were classified as part of our former Affordable
segment until 2017, and excluding amounts related to apartment communities sold or classified as held for sale during 2017.
(in thousands)
Rental and other property revenues:
Same Store communities
Other Real Estate communities
Total
Property operating expenses:
Same Store communities
Other Real Estate communities
Total
Proportionate property net operating income:
Same Store communities
Other Real Estate communities
Total
Year Ended December 31,
2016
2015
$ Change
% Change
$
$
604,663 $
186,924
791,587
577,159 $
159,920
737,079
181,077
70,559
251,636
179,186
61,603
240,789
423,586
116,365
539,951 $
397,973
98,317
496,290 $
27,504
27,004
54,508
1,891
8,956
10,847
25,613
18,048
43,661
4.8 %
16.9 %
7.4 %
1.1 %
14.5 %
4.5 %
6.4 %
18.4 %
8.8 %
For the year ended December 31, 2016 compared to 2015, our Real Estate segment’s proportionate property net operating income increased $43.7
million, or 8.8%.
Same Store proportionate property net operating income increased by $25.6 million, or 6.4%. This increase was primarily attributable to a $27.5
million, or 4.8%, increase in rental and other property revenues due to higher average revenues ($85 per effective home), comprised primarily of
increases in rental rates. Renewal rents (the rent paid by an existing resident who renewed her lease compared to the rent she previously paid) were
up 5.7% for the year ended December 31, 2016, and new lease rents (the rent paid by a new resident compared to the rent paid by the previous
resident of the same apartment home) were up 2.4%, resulting in a weighted average increase of 4.0%. The increase in Same Store rental and other
property revenues was partially offset by a $1.9 million, or 1.1%, increase in property operating expenses, primarily due to increases in real estate
taxes, personnel costs and repairs and maintenance, partially offset by lower utilities expenses and insurance costs. During the year ended
December 31, 2016 compared to 2015, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, increased by $1.4
million, or 1.7%.
The proportionate property net operating income of Other Real Estate communities increased by $18.0 million during the year ended December
31, 2016 compared to 2015. This increase is attributable to the following:
•
•
•
$7.8 million increase due to the net operating income stabilization of three redeveloped communities;
$3.7 million due to lease-up activities at acquired and redeveloped apartment communities, partially offset by decreases due to
apartment homes taken out of service for redevelopment; and
$6.5 million from other communities, including apartment communities we acquired in 2015 and market rate increases at four apartment
communities that were approved in 2016 by the Department of Housing and Urban Development.
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Non-Segment Real Estate Operations
Operating income amounts not attributed to our Real Estate segment include offsite costs associated with property management, casualty
losses, and the results of apartment communities sold or held for sale, reported in consolidated amounts, which we do not allocate to our Real
Estate segment for purposes of evaluating segment performance (see Note 12 to the consolidated financial statements in Item 8).
For the years ended December 31, 2017, 2016 and 2015, casualty losses totaled $8.2 million, $5.6 million and $7.0 million, respectively. Casualty
losses were elevated during the year ended December 31, 2017, primarily due to hurricane damage. Casualty losses were elevated during the year
ended December 31, 2015, primarily due to losses resulting from property damage and snow removal costs associated with the severe snow storms
in the Northeast.
For the years ended December 31, 2017, 2016 and 2015, apartment communities previously in our Real Estate portfolio that were sold or classified
as held for sale as of December 31, 2017 generated net operating income of $26.5 million, $46.8 million and $68.8 million, respectively.
Asset Management Results
As further discussed in Note 2 to the consolidated financial statements in Item 8, we provide asset management and other services to certain
consolidated partnerships that own apartment communities that qualify for low-income housing tax credits and are structured to provide for the
pass-through of tax credits and tax deductions to their partners.
Contribution from Asset Management included in our consolidated financial statements includes: fees and other amounts paid to us from the net
operating income of partnerships served by our Asset Management business less interest expense incurred on non-recourse property debt
obligations of the partnerships; income associated with delivery of tax credits to the third-party investors in the partnerships (including amounts
received during the period and amounts received in previous periods); and transactional revenue and other income less asset management
expenses (including certain allocated offsite costs related to the operation of this business).
The contribution from Asset Management for the years ended December 31, 2017, 2016 and 2015, is presented in the table below.
(in thousands)
Net operating income of partnerships served by the Asset Management business
Interest expense on non-recourse property debt of partnerships
Amount available for payment of Asset Management fees
Tax credit income, net
Asset management expenses
Transactional revenue and other income
Contribution from the Asset Management business
Year Ended December 31,
2017
2016
2015
$
$
43,745 $
(13,031 )
30,714
10,049
(5,934 )
5,208
40,037 $
$
43,161
(13,387 )
29,774
16,546
(5,804 )
8,290
48,806
$
41,887
(12,984 )
28,903
22,819
(6,770 )
3,146
48,098
For the periods presented above, the contribution from the Asset Management business fluctuated for the reasons discussed below.
•
•
•
Increases in the amount available for payment of Asset Management fees generated by the partnerships were primarily attributed to
increases in rental income due to higher rates, partially offset by the loss of net operating income from communities sold and higher
operating expenses, including personnel and repairs and maintenance costs.
Tax credit income, net, decreased primarily due to the delivery of substantially all of the tax credits on various partnerships and our 2016
acquisition of an investor limited partner’s interest in one of the tax credit partnerships (and their rights to undelivered tax credits) prior to
the end of the tax credit delivery period. Following the purchase, we recognized tax benefits in our results of operations, which largely
offset the tax credit income we otherwise would have recognized.
Transactional revenues for the year ended December 31, 2017 includes $2.4 million in fees earned in connection with the disposition of real
estate and for the year ended December 31, 2016 includes a $3.6 million fee earned for assisting a third-party property owner in a mark-up-
to-market renewal related to an affordable community we previously owned. Other income, for each of the years presented, includes results
related to the Napico business, which is further described under the Other, net heading below.
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We expect the contribution to our net income from the Asset Management business to decline in future years as we continue to deliver the final
tax credits for these partnerships and, as part of our plan to exit the Asset Management business, the partnerships sell the underlying apartment
communities.
Depreciation and Amortization
For the year ended December 31, 2017 compared to 2016, depreciation and amortization expense increased by $33.1 million primarily due to
renovated apartment homes placed in service after their completion, a full year of depreciation following the 2016 completion of our One Canal
development and 2016 acquisition of Indigo, and other capital additions, partially offset by decreases associated with apartment communities sold.
For the year ended December 31, 2016 compared to 2015, depreciation and amortization expense increased by $26.8 million primarily due to
renovated apartment homes placed in service after their completion, the completion of our One Canal and Vivo developments, and our 2016
acquisition of Indigo and other capital additions, partially offset by decreases associated with apartment communities sold.
General and Administrative Expenses
In recent years, we have worked toward simplifying our business, which allowed us to reduce overhead and other costs. This simplification and
our scale reductions have allowed us to reduce our offsite costs, which consist of general and administrative expenses, property management
expenses and investment management expenses, by $11.6 million, or 15.1%, over the last three years.
For the year ended December 31, 2017 compared to 2016, general and administrative expenses decreased $3.1 million, primarily due to lower
personnel and related costs including incentive compensation, professional services, technology costs and other corporate costs.
For the year ended December 31, 2016 compared to 2015, general and administrative expenses, excluding incentive compensation, decreased by
approximately $0.2 million. Inclusive of incentive compensation, general and administrative expenses increased $0.5 million, primarily due to our
performance against key performance indicators in 2016 as compared to 2015.
Other Expenses, Net
Other expenses, net includes franchise taxes, costs associated with our risk management activities, partnership administration expenses and
certain non-recurring items.
For the year ended December 31, 2017 compared to 2016, other expenses, net decreased by $2.9 million. The decrease was primarily due to the
2016 recognition of estimated future environmental clean-up and abatement costs associated with the matters discussed in Note 5 to the
consolidated financial statements in Item 8, partially offset by legal costs we incurred related to a challenge to the title of a property we acquired in
2014.
For the year ended December 31, 2016 compared to 2015, other expenses, net increased by $3.9 million. The increase was primarily due to the
2016 environmental costs discussed above, partially offset by lower legal and related costs.
Provision for Real Estate Impairment Loss
In January 2018, we agreed to sell our interests in the entities owning the La Jolla Cove property in settlement of legal actions filed in 2014 by a
group of disappointed buyers who had hoped to acquire the property. As a result of the settlement, we recognized in our 2017 results a gross
impairment loss of $35.8 million, $25.6 million of which relates to the establishment of a deferred tax liability assumed in connection with our
acquisition of the business entities. Upon closing of the transaction, the tax liability will be assumed by the buyer, resulting in no economic loss to
Aimco. The remaining $10.2 million loss is offset by cash distributions paid to us during our ownership and avoided legal costs for continued
litigation. On an economic basis, we agreed to sell these entities at roughly our purchase price, adjusted for retained cash distributions and avoided
legal costs.
We recognized no provisions for impairment losses during the years ended December 31, 2016 or 2015.
Interest Expense
For the year ended December 31, 2017 compared to 2016, interest expense, which includes the amortization of debt issuance costs and
amortization of deferred financing costs, decreased by $1.8 million, or 0.9%. The decrease was primarily due to lower average outstanding balances
on non-recourse property debt for our Real Estate apartment communities and lower interest rates, resulting in an $11.9 million reduction in interest
expense. These decreases were partially offset by higher amounts outstanding on corporate borrowings (including our term loan and incremental
line borrowings used to temporarily fund the reacquisition of
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the Palazzo limited partner interests) and a decrease in capitalized interest associated with our redevelopment and development activities.
For the year ended December 31, 2016 compared to 2015, interest expense decreased by $3.3 million, or 1.7%. The decrease was primarily
attributed to lower average outstanding balances from our repayment of non-recourse property debt and to a lesser extent from a lower average cost
of debt on property loans refinanced during the year, resulting in an $8.1 million reduction in interest expense, and a $4.9 million reduction of
interest expense on debt related to apartment community dispositions. These decreases were partially offset by increased interest expense on debt
associated with apartment community acquisitions and on One Canal, the construction of which was completed during 2016 and for which we
ceased interest capitalization, and higher average borrowings on our revolving credit facility.
Other, Net
Other, net includes our equity in the income or loss of unconsolidated real estate partnerships, and the results of operations related to the
Napico business, which we accounted for under the profit sharing method prior to the derecognition of the final property during 2017.
For the year ended December 31, 2017 compared to 2016, net income of the Napico business increased by $2.1 million. For the year ended
December 31, 2016 compared to 2015, net income of the Napico business increased by $5.4 million. As discussed in Note 3 to the consolidated
financial statements in Item 8, in 2017 we derecognized the assets and liabilities related to the final Napico property, and in 2016 we partially
derecognized the assets and liabilities of the Napico business, resulting in gains that contributed to the increase in other, net in both years.
Income Tax Benefit
Certain of our operations, including property management and risk management, are conducted through TRS entities. Additionally, some of our
apartment communities are owned through TRS entities.
Our income tax benefit calculated in accordance with GAAP includes: (a) historic tax credits that offset income tax obligations of our TRS
entities; (b) income taxes associated with the income or loss of our TRS entities, for which the tax consequences have been realized or will be
realized in future periods; and (c) low income housing tax credits that offset REIT taxable income, primarily from retained capital gains. Income taxes
related to these items (before gains on dispositions) are included in income tax benefit in our consolidated statements of operations.
Income tax benefit for the periods presented also reflects GAAP taxes associated with income and gains related to the Napico business, which
was partially deconsolidated in 2016 and for which the final property was deconsolidated in 2017.
For the year ended December 31, 2017 compared to 2016, income tax benefit increased by $6.9 million, from $25.2 million to $32.1 million. The
increase is primarily due to higher tax benefit associated with low-income housing tax credits from our September 2016 acquisition of the limited
partner interests in a tax credit partnership, higher net operating losses at the TRS entities (including the La Jolla Cove impairment loss discussed
above) and the $0.5 million net tax benefit we recognized as a result of the December 2017 tax reform legislation (as further discussed in Note 9 to the
consolidated financial statements in Item 8). These increases were partially offset by a decrease in historic tax credits associated with the
redevelopment of certain apartment communities, including the timing of final certification on one redevelopment in 2016.
For the year ended December 31, 2016 compared to 2015, income tax benefit decreased by $2.3 million, primarily due to lower net losses
recognized by apartment communities owned by our TRS entities, partially offset by higher historic tax credits associated with the redevelopment of
certain apartment communities and higher tax benefit associated with low-income housing tax credits from our acquisition of the limited partner
interests in a tax credit partnership.
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Gain on Dispositions of Real Estate, Net of Tax
The table below summarizes dispositions of apartment communities from our Real Estate portfolio and of consolidated partnerships served by
our Asset Management business during the years ended (dollars in millions):
Number of apartment communities sold
Real Estate
Gross proceeds $
Net proceeds (1) $
Gain on disposition, net of tax $
Asset Management
Number of apartment communities sold
Gross proceeds $
Net proceeds (1) $
Gain on disposition, net of tax $
2017
December 31,
2016
2015
5
397.0
385.3
298.0
$
$
$
2
10.9
5.0
1.6
$
$
$
7
517.0
511.0
377.3
$
$
$
1
27.5
13.2
16.5
11
404.3
229.4
180.6
N/A
N/A
N/A
N/A
(1) Net proceeds are after repayment of debt, if any, net working capital settlements, payment of transaction costs and debt prepayment penalties, if
applicable.
The apartment communities sold from our Real Estate portfolio during 2017, 2016 and 2015 were primarily located outside of our primary markets
or in lower-rated locations within our primary markets and had average revenues per apartment home significantly below those of our retained
portfolio.
Noncontrolling Interests in Consolidated Real Estate Partnerships
Noncontrolling interests in consolidated real estate partnerships reflects the results of our consolidated real estate partnerships allocated to the
owners who are not affiliated with Aimco. The amounts of income or loss of our consolidated real estate partnerships that we allocate to owners not
affiliated with Aimco include their share of property management fees, interest on notes and other amounts that we charge to these partnerships.
For the years ended December 31, 2017, 2016 and 2015, we allocated net income of $9.1 million, $25.3 million, and $4.8 million, respectively, to
noncontrolling interests in consolidated real estate partnerships. The amount of net income allocated to noncontrolling interests was driven by
three primary factors: the operations of the consolidated apartment communities; gains on the sale of apartment communities with noncontrolling
interest holders; and the results of operations of the Napico business, as further discussed below.
•
The amount of net income allocated to noncontrolling interests resulting from operations of the consolidated apartment communities was
$2.4 million, $4.4 million and $4.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. The decrease from 2016 to
2017 is primarily due to the June 30, 2017 reacquisition of our limited partner’s interest in the Palazzo joint venture.
• Gains on the sale of apartment communities allocated to noncontrolling interests totaled $7.3 million, $13.0 million and $6.0 million for the
years ended December 31, 2017, 2016 and 2015, respectively.
• As discussed in Note 3 to the consolidated financial statements in Item 8, we derecognized the Napico business in two transactions, which
occurred in 2016 and 2017. We allocated $8.1 million of the gain on sale and a $0.6 million net loss, respectively, to the noncontrolling
interest holders in connection with the 2017 and 2016 transactions. In 2015, we allocated a net loss of $5.4 million to the noncontrolling
interest holders from the results of Napico operations.
Net Income Attributable to Aimco Preferred Stockholders and the Aimco Operating Partnership’s Preferred Unitholders
Net income attributable to Aimco preferred stockholders and the Aimco Operating Partnership’s preferred unitholders decreased by $3.4 million
and $2.9 million, respectively, during the year ended December 31, 2017 as compared to 2016. These decreases were primarily due to Aimco’s
redemption of its Class Z Preferred Stock in 2016. In connection with the redemption, we wrote off previously deferred issuance costs of $1.3 million.
Additionally, the $0.7 million excess of the redemption value over the
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carrying amount was reflected in the net income attributable to Aimco Preferred Stockholders and Aimco Operating Partnership’s Preferred
Unitholders for the year ended December 31, 2016.
Net income attributable to Aimco preferred stockholders and the Aimco Operating Partnership’s preferred unitholders increased by $0.2 million
and $0.5 million, respectively, during the year ended December 31, 2016 as compared to 2015. These increases were primarily due to Aimco’s
redemption of its Class Z Preferred Stock described above, which resulted in $2.0 million of redemption related charges, partially offset by $1.1
million of lower dividends.
Critical Accounting Policies and Estimates
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.
Capitalized Costs
We capitalize costs, including certain indirect costs, incurred in connection with our capital additions activities, including redevelopments and
developments, other tangible apartment community improvements and replacements of existing apartment community components. Included in
these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all
capital additions activities at the apartment community level. We characterize as “indirect costs” an allocation of certain department costs, including
payroll, at the area operations and corporate levels that clearly relate to capital additions activities. We also capitalize interest, property taxes and
insurance during periods in which redevelopments and developments are in progress. We commence capitalization of costs, including certain
indirect costs, incurred in connection with our capital addition activities, at the point in time when activities necessary to get apartment communities
ready for their intended use begin. These activities include when apartment communities or apartment homes are undergoing physical construction,
as well as when apartment homes are held vacant in advance of planned construction, provided that other activities such as permitting, planning
and design are in progress. We cease the capitalization of costs when the apartment communities or components thereof are substantially complete
and ready for their intended use, which is typically when construction has been completed and apartment homes are available for occupancy. We
charge costs including ordinary repairs, maintenance and resident turnover costs to property operating expense, as incurred. Refer to the
discussion of investing activities within the Liquidity and Capital Resources section for a summary of costs capitalized during the periods
presented.
Impairment of Long-Lived Assets
Real estate and other long-lived assets to be held and used are stated at cost, less accumulated depreciation and amortization, unless the
carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of an apartment community may not be
recoverable, we make an assessment of its recoverability by comparing the carrying amount to our estimate of the undiscounted future cash flows,
excluding interest charges, of the apartment community. If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, we
recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the apartment community.
As part of our portfolio strategy, we seek to sell up to 10% of our portfolio annually and to reinvest the proceeds from such sales in accretive
uses such as capital enhancements, redevelopments, occasional developments, and selective acquisitions with projected Free Cash Flow internal
rates of return higher than expected from the communities being sold. As we execute this strategy, we evaluate alternatives to sell or reduce our
interest in apartment communities that do not align with our long-term investment strategy, although there is no assurance that we will sell or
reduce our investment in such apartment communities during the desired time frame. For any apartment communities that are sold or meet the
criteria to be classified as held for sale during the next 12 months, the reduction in the estimated holding period for these apartment communities
may result in impairment losses.
Non-GAAP Measures
Various of the key financial indicators we use in managing our business and in evaluating our financial condition and operating performance are
non-GAAP measures. Key non-GAAP measures we use are defined and described below, and for those non-GAAP financial measures used or
disclosed within this annual report, reconciliations of the non-GAAP financial measures to the most comparable financial measure computed in
accordance with GAAP are provided.
Funds from Operations, Pro forma Funds From Operations and Adjusted Funds From Operations are non-GAAP financial measures, which are
defined and further described below under the Funds From Operations and Adjusted Funds From Operations heading. Economic Income and Net
Asset Value are non-GAAP financial measures defined and further described below under the Economic Income heading.
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Free Cash Flow, or FCF, as calculated for our retained portfolio, represents an apartment community’s property net operating income, or NOI,
less spending for capital replacements, which represents our estimation of the capital additions made to replace capital assets consumed during our
ownership period (further discussed under the Funds From Operations and Adjusted Funds From Operations heading and the Liquidity and Capital
Resources heading). FCF margin represents an apartment community’s NOI less $1,200 per apartment home of assumed annual capital replacement
spending, as a percentage of the apartment community’s rental and other property revenues. Capital replacement spending is a method of
measuring the cost of capital asset usage during the period; therefore we believe that FCF is useful to investors as a supplemental measure of
apartment community performance because it takes into consideration costs incurred during the period to replace capital assets that have been
consumed during our ownership.
Funds From Operations and Adjusted Funds From Operations
Funds From Operations, or FFO, is a non-GAAP financial measure that we believe, when considered with the financial statements determined in
accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance
by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets
such as machinery, computers or other personal property. The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as
net income or loss computed in accordance with GAAP, excluding gains from sales of, and impairment losses recognized with respect to,
depreciable real estate, plus depreciation and amortization related to real estate, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine FFO. We calculate FFO
attributable to Aimco common stockholders (diluted) by subtracting, if dilutive, redemption or repurchase related preferred stock issuance costs
and dividends on preferred stock.
In addition to FFO, we compute Pro forma FFO and Adjusted FFO, or AFFO, which are also non-GAAP financial measures that we believe are
helpful to investors in understanding our performance. Pro forma FFO represents FFO attributable to Aimco common stockholders (diluted),
excluding preferred equity redemption-related amounts (adjusted for noncontrolling interests). Preferred equity redemption-related amounts (gains
or losses) are items that periodically affect our operating results and we exclude these items from our calculation of Pro forma FFO because such
amounts are not representative of our operating performance.
Additionally in 2017, we recognized a net tax benefit associated with the December 2017 tax reform legislation consisting of a benefit related to
the revaluation of net deferred tax liabilities of Aimco’s taxable REIT subsidiaries, partially offset by a valuation allowance related to deferred tax
assets. We excluded this net tax benefit from our computation of Pro forma FFO because this type of tax benefit occurs infrequently and is not
representative of our operating performance.
AFFO represents Pro forma FFO reduced by Capital Replacements (also adjusted for noncontrolling interests), which represents our estimation
of the capital additions made to replace capital assets consumed during our ownership period. When we make capital additions at an apartment
community, we evaluate whether the additions extend the useful life of an asset as compared to its condition at the time we purchased the apartment
community. We classify as Capital Improvements those capital additions that meet these criteria and we classify as Capital Replacements those that
do not. AFFO is a key financial indicator we use to evaluate our operational performance and is one of the factors that we use to determine the
amounts of our dividend payments.
FFO, Pro forma FFO and AFFO should not be considered alternatives to net income (loss), as determined in accordance with GAAP, as
indications of our performance. Although we use these non-GAAP measures for comparability in assessing our performance compared to other
REITs, not all REITs compute these same measures and those who do may not compute them in the same manner. Additionally, computation of
AFFO is subject to our definition of Capital Replacement spending. Accordingly, there can be no assurance that our basis for computing these non-
GAAP measures is comparable with that of other REITs.
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For the years ended December 31, 2017, 2016 and 2015, Aimco’s FFO, Pro forma FFO and AFFO are calculated as follows (in thousands):
Net income attributable to Aimco common stockholders (1)
Adjustments:
Real estate depreciation and amortization, net of noncontrolling partners’ interest
Gain on dispositions and other, net of noncontrolling partners’ interest
Income tax provision related to gain on disposition of real estate
Common noncontrolling interests in Aimco Operating Partnership’s share of above adjustments (2)
Amounts allocable to participating securities
FFO attributable to Aimco common stockholders – diluted
Revaluation of deferred tax accounts, net of common noncontrolling interests in Aimco Operating
Partnership and participating securities
Preferred equity redemption related amounts, net of common noncontrolling interests in Aimco
Operating Partnership and participating securities
Pro forma FFO attributable to Aimco common stockholders – diluted
Capital Replacements, net of common noncontrolling interests in Aimco Operating Partnership and
participating securities
AFFO attributable to Aimco common stockholders – diluted
Weighted average common shares outstanding – diluted (FFO, Pro forma FFO and
AFFO) (3)
Net income attributable to Aimco per common share – diluted
FFO per share – diluted
Pro Forma FFO per share – diluted
AFFO per share – diluted
2017
2016
2015
$
306,861 $
417,781
$
235,966
352,109
(262,583 )
(8,265 )
(3,810 )
(81 )
384,231 $
314,840
(381,131 )
6,374
2,782
88
360,734
$
288,611
(174,797 )
1,758
(5,548 )
(473 )
345,517
(498 )
—
—
—
383,733 $
1,877
362,611
$
658
346,175
(51,760 )
(55,289 )
(53,925 )
331,973 $
307,322
$
292,250
156,796
156,391
155,570
1.96 $
2.45 $
2.45 $
2.12 $
2.67
2.31
2.32
1.97
$
$
$
$
1.52
2.22
2.23
1.88
$
$
$
$
$
$
$
(1) Represents the numerator for calculating Aimco’s earnings per common share in accordance with GAAP (see Note 10 to the consolidated financial
statements in Item 8).
(2) During the years ended December 31, 2017, 2016 and 2015, the Aimco Operating Partnership had outstanding, on average, 7,422,334, 7,760,597 and
7,656,626 common OP Units.
(3) Represents the denominator for Aimco’s earnings per common share – diluted, calculated in accordance with GAAP.
Refer to the Executive Overview for discussion of our Pro forma FFO and AFFO results for 2017, as compared to their comparable periods in
2016.
Refer to the Liquidity and Capital Resources section for further information regarding our capital investing activities, including Capital
Replacements.
The Aimco Operating Partnership does not separately compute or report FFO, Pro forma FFO or AFFO. However, based on Aimco’s method for
allocation of such amounts to noncontrolling interests in the Aimco Operating Partnership, as well as the limited differences between Aimco’s and
the Aimco Operating Partnership’s net income amounts during the periods presented, FFO, Pro forma FFO and AFFO amounts on a per unit basis
for the Aimco Operating Partnership would be expected to be substantially the same as the corresponding per share amounts for Aimco.
Economic Income
Economic Income represents stockholder value creation as measured by the change in estimated NAV per share plus cash dividends per share.
We believe Economic Income is important to investors as it represents a measure of the total return we have earned for our stockholders. NAV, as
used in our calculation of Economic Income, is a non-GAAP measure and represents the estimated fair value of assets net of liabilities attributable
to Aimco’s common stockholders and the Aimco Operating Partnership’s common unitholders on a diluted basis. We believe NAV is considered
useful by some investors in real estate companies because the value of company assets can be readily estimated, even for non-earning assets such
as land or properties under development. NAV has the advantage of incorporating the investment decisions of thousands of real estate investors.
We believe it enhances comparability among companies that have differences in their accounting. While NAV is not identical to liquidation value in
that some costs and benefits are disregarded, it is often considered a floor with upside for value ascribed to the operating platform.
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NAV also provides an objective basis for the perceived quality and predictability of future cash flows as well as their expected growth as these are
factors considered by real estate investors.
Our estimated NAV per share and the quoted share price of Aimco Common Stock are not necessarily equal. Although we use Economic Income
and NAV for comparability in assessing our value creation compared to other REITs, not all REITs publish these measures and those who do may
not compute them in the same manner. Accordingly, there can be no assurance that our basis for computing these measures is comparable with that
of other REITs.
We report NAV on a semiannual basis, as of the end of the first and third quarters. Economic Income for 2017, was calculated using the change
in NAV per share between September 30, 2016 and 2017. NAV will fluctuate over time. This NAV information should not be relied upon as
representative of the amount a stockholder could expect to receive in a liquidation event, now or in the future. Certain assets are excluded as are
certain liabilities such as taxes and transaction costs associated with a liquidation. In addition, NAV is based on management’s subjective
judgments, assumptions and opinions as of the date of determination. We assume no obligation to revise or update NAV to reflect subsequent or
future events or circumstances. Our NAV estimate is subject to a variety of risks and uncertainties, many of which are beyond our control,
including, without limitation, those described in Item 1A. Risk Factors.
A reconciliation of NAV to Aimco’s total equity, which we believe is the most directly comparable GAAP measure, as of September 30, 2017, is
provided below (in millions, except per share data):
Total equity
Fair value adjustment for Real Estate portfolio
Less: consolidated real estate, at depreciated cost
Plus: fair value of real estate (1)
Stabilized portfolio fair value (2)
Non-stabilized portfolio fair value (3)
Total real estate at fair value
Adjustment to present real estate at fair value
Fair value adjustment for total indebtedness
Plus: consolidated total indebtedness, net related to Real Estate portfolio
Less: fair value of indebtedness related to real estate shown above (4)
Adjustment to present indebtedness at fair value
Plus: fair value of Asset Management business (5)
Adjustments to present other tangible assets, liabilities and preferred equity at fair value (6)
Estimated NAV
Total shares, units and dilutive share equivalents (7)
Estimated NAV per weighted average common share and unit - diluted
$
1,436
$
(5,543 )
$
10,059
2,741
12,800
4,162
(4,232 )
$
$
7,257
(70 )
213
(189 )
8,647
164
53
(1) We compute NAV by estimating the value of our communities, using methods we believe are appropriate based on the characteristics of the communities.
For purposes of estimating NAV, real estate at fair value disclosed above includes wholly owned apartment communities plus our proportionate share of
communities held by non-wholly owned entities (both consolidated and unconsolidated), and excludes the estimated fair value of communities that are part
of the Asset Management business. The value of Asset Management communities is factored into the valuation of the Asset Management portfolio as
described in footnote 5. A reconciliation of our consolidated apartment communities to those communities included in total real estate at fair value in the
table above is as follows:
Consolidated apartment communities as of September 30, 2017
Less: Consolidated communities in the Asset Management portfolio
Plus: Unconsolidated apartment communities
Apartment communities in total real estate at fair value for NAV
176
(39)
4
141
For valuation purposes at September 30, 2017, we segregated these 141 communities into the following categories: stabilized portfolio and non-
stabilized portfolio.
(2) As of September 30, 2017, our stabilized portfolio includes 123 communities that had reached stabilized operations and were not expected to be sold
within twelve months. We value this portfolio using a direct capitalization rate method based on the annualized proportionate property NOI for the three
months ended September 30, 2017, less a 2% management fee. Market property management fees range between 1.5% and 3.0% with larger, higher quality
portfolios at the lower end of that range. The weighted average estimated capitalization rate as applied to the annualized property NOI was 5.1%, which
we calculate on a property-by-property basis, based
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primarily on information published by a third-party. Community characteristics that we use to determine comparable market capitalization rates include:
the market in which the community is located; infill or suburban location within the market; property quality grade; and whether the community is
stabilized or value-add. We used this valuation method for approximately 79% of real estate fair value at September 30, 2017.
(3) The non-stabilized portfolio includes seven apartment communities under redevelopment at September 30, 2017 and two apartment communities in lease-
up. We valued these communities by discounting projected future cash flows. Key assumptions used to estimate the value of these communities include:
revenues, which are based on in-place rents, projected submarket rent growth to community stabilization based on projections published by third parties
and adjusted for the impacts of redevelopment; expenses, which are based on estimated operating costs adjusted for inflation and a management fee equal
to 2% of projected revenue; estimated remaining costs to complete construction; and a terminal value based on current market capitalization rates plus five
basis points per year from September 30, 2017 to community stabilization. Discount rates applied to estimated future cash flows of these communities
ranged between 6.00% and 7.15% depending on construction and lease-up progress. We used this valuation method for approximately 17% of the real
estate fair value at September 30, 2017. The non-stabilized portfolio also included nine apartment communities under contract for sale, which were valued
at sales contract price and represent approximately 4% of real estate fair value at September 30, 2017.
(4) We calculate the fair value of indebtedness related to real estate as the carrying value of our non-recourse property debt adjusted for the mark-to-market
liability on our fixed-rate property debt as of September 30, 2017, plus the outstanding balances on the revolving line of credit and term loan, which
approximate their fair value as of September 30, 2017. The mark-to-market has been computed using a money-weighted average interest rate of 4.15%,
which rate takes into account the timing of amortization and maturities, and a market rate of 3.75%, which rate takes into account the duration of the
existing property debt, the loan-to-value and debt service coverage, as well as timing of amortization and maturities. For purposes of estimating NAV, the
fair value of debt includes our proportionate share of debt related to non-wholly owned entities (both consolidated and unconsolidated), and excludes non-
recourse property debt obligations of consolidated partnerships of the Asset Management business, which is factored into the valuation of the Asset
Management business as described in footnote 5.
(5) We estimate our share of the fair value of the Asset Management business as the present value of the expected future cash flows of various low-income
housing tax credit partnerships using a 7% discount rate. As further discussed in Note 2 to the consolidated financial statements in Item 8, the future cash
flows we expect to receive include fees and other amounts to be paid from cash flows from the operation of the underlying communities and proceeds from
sale of the underlying communities after repayment of any associated property-level debt. The key assumptions used to estimate the future cash flows we
expect to receive include: operating cash flow, which is based on an estimate of contractual rents and expenses reflecting expected increases; the value of
the underlying apartment communities, which we value using a direct capitalization rate method similar to that described in footnote 2 above; and the
estimated sale date of the apartment communities, which is generally upon or shortly after the expiration of the tax credit compliance periods.
(6) Other tangible assets consist of cash, restricted cash, accounts receivable and other assets for which we reasonably expect to receive cash through the
normal course of operations or another future event. Other tangible liabilities consist of accounts payable, accrued liabilities and other tangible liabilities we
reasonably expect to settle in cash through the normal course of operations or another future event. Other tangible assets and liabilities were generally
valued at their carrying amounts and reduced by the noncontrolling interests’ portion of these amounts and exclude intangible assets and liabilities reflected
on our consolidated balance sheet. The fair value of our preferred stock is estimated as the closing share price on September 30, 2017, less accrued
dividends. Such accrued dividends are assumed to be accounted for in the closing share price and these amounts are also included in other tangible liabilities.
(7) Total shares, units and dilutive share equivalents represents Common Stock, OP Units, participating unvested restricted shares and the dilutive effect of
common stock equivalents outstanding as of September 30, 2017.
Leverage Ratios
As discussed under the Balance Sheet and Liquidity heading, as part of our leverage strategy, we target the ratio of Proportionate Debt and
Preferred Equity to Adjusted EBITDA to be below 7.0x and we target the ratio of Adjusted EBITDA to Adjusted Interest Expense and Preferred
Dividends to be greater than 2.5x. We believe these ratios are important measures as they are commonly used by investors and analysts to assess
the relative financial risk associated with balance sheets of companies within the same industry, and they are believed to be similar to measures
used by rating agencies to assess entity credit quality.
We calculate our leverage ratios based on the most recent three month amounts, annualized.
Proportionate Debt, as used in our leverage ratios, is a non-GAAP measure and includes our share of the long-term, non-recourse property debt
secured by apartment communities in the Real Estate portfolio, our term loan, and outstanding borrowings under our revolving credit facility,
reduced by our share of the cash and restricted cash of our consolidated and unconsolidated partnerships owning communities in our Real Estate
portfolio, and also by our investment in the subordinate tranches of a securitization trust that holds certain of our property debt (essentially, an
investment in our own non-recourse property loans).
In our Proportionate Debt computation, we increase our recorded debt by unamortized debt issue costs because these amounts represent cash
expended in earlier periods and do not reduce our contractual obligations, and we reduce our recorded debt obligations by the amounts of cash and
restricted cash on-hand (such restricted cash amounts being primarily restricted under the terms of
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our property debt agreements) assuming these amounts would be used to reduce our outstanding leverage. We further reduce our recorded debt by
the value of our investment in a securitization trust that holds certain of our property debt, as our payments of principal and interest associated with
such property debt will ultimately repay our investments in the trust.
We exclude from our leverage the non-recourse property debt obligations of consolidated partnerships served by our Asset Management
business. The non-recourse property debt obligations of these partnerships are not our obligations and have limited effect on the amount of fees
and other payments we expect to receive.
We believe Proportionate Debt is useful to investors as it is a measure of our net exposure to debt obligations. Proportionate Debt, as used in
our leverage ratios, is calculated as set forth in the table below.
Preferred Equity, as used in our leverage ratios, represents the redemption amounts for Aimco’s preferred stock and the Aimco Operating
Partnership’s preferred OP Units. Preferred Equity, although perpetual in nature, is another component of our overall leverage.
Adjusted EBITDA is a non-GAAP measure. We believe Adjusted EBITDA provides investors relevant and useful information because it allows
investors to view income from our operations on an unleveraged basis, before the effects of taxes, depreciation and amortization, gains or losses on
sales of and impairment losses related to real estate and various other items described below.
Adjusted EBITDA represents Aimco’s share of the consolidated amount of our net income, adjusted to exclude the effect of the following items
for the reasons set forth below:
• Adjusted Interest Expense, defined below, to allow investors to compare a measure of our earnings before the effects of our indebtedness
with that of other companies in the real estate industry;
•
•
•
•
preferred dividends, to allow investors to compare a measure of our performance before the effects of our capital structure and
indebtedness with that of other companies in the real estate industry;
income taxes, to allow investors to measure our performance independent of income taxes, which may vary significantly from other
companies within our industry due to leverage and tax planning strategies, among other factors;
depreciation and amortization, gains or losses on dispositions and impairment losses related to real estate, for similar reasons to those set
forth in our discussion of FFO, Pro forma FFO and AFFO in the preceding section; and
other items, including gains on dispositions of non-depreciable assets, as these are items that periodically affect our operations but that are
not necessarily representative of our ability to service our debt obligations.
While Adjusted EBITDA is a relevant measure of performance and is commonly used in leverage ratios, it does not represent net income as
defined by GAAP, and should not be considered as an alternative to net income in evaluating our performance. Further, our definition and
computation of Adjusted EBITDA may not be comparable to similar measures reported by other companies.
Adjusted Interest Expense, as calculated in our leverage ratios, is a non-GAAP measure that we believe is meaningful for investors and analysts
as it presents our share of current recurring interest requirements associated with leverage. Our calculation of Adjusted Interest Expense is set forth
in the table below. Adjusted Interest Expense represents our proportionate share of interest expense on non-recourse property debt encumbering
apartment communities in the Real Estate portfolio and interest expense on our term loan and revolving credit facility borrowings. We exclude from
our calculation of Adjusted Interest Expense:
•
•
•
debt prepayment penalties, which are items that, from time to time, affect our operating results, but are not representative of our scheduled
interest obligations;
the amortization of debt issue costs, as these amounts have been expended in previous periods and are not representative of our current or
prospective debt service requirements; and
the income we receive on our investment in the securitization trust that holds certain of our property debt, as this income is being generated
indirectly from interest we pay with respect to property debt held by the trust.
Preferred Dividends represents the preferred dividends paid on Aimco’s preferred stock and the preferred distributions paid on the Aimco
Operating Partnership’s preferred OP Units, exclusive of preferred equity redemption related amounts. We add Preferred Dividends to Adjusted
Interest Expense for a more complete picture of the interest and dividend requirements of our leverage, inclusive of perpetual preferred equity.
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Reconciliations of the most closely related GAAP measures to our calculations of Proportionate Debt, Preferred Equity, Adjusted EBITDA,
Adjusted Interest Expense and Preferred Dividends, as used in our leverage ratios, are as follows (in thousands):
Total indebtedness associated with Real Estate portfolio
Adjustments:
Debt issue costs related to non-recourse property debt
Debt issue costs related to term loan
Proportionate share adjustments related to debt obligations of consolidated and unconsolidated partnerships
Cash and restricted cash
Proportionate share adjustments related to cash and restricted cash held by consolidated and unconsolidated partnerships
Securitization trust investment and other
Proportionate Debt
Preferred stock
Preferred OP Units
Preferred Equity
Proportionate Debt and Preferred Equity
Net income attributable to Aimco Common Stockholders
Adjustments:
Adjusted Interest Expense
Income tax benefit
Depreciation and amortization, net of noncontrolling interest
Gain on dispositions and other, net of income taxes and noncontrolling partners’ interests
Preferred stock dividends
Net income attributable to noncontrolling interests in Aimco Operating Partnership
Pro forma adjustment (1)
Adjusted EBITDA
Annualized Adjusted EBITDA
December 31, 2017
3,861,770
17,932
499
(9,560)
(95,325)
1,271
(82,794)
3,693,793
125,000
101,537
226,537
3,920,330
Three Months Ended
December 31, 2017
262,097
42,219
(17,248)
97,418
(255,516)
2,149
14,374
(4,248)
141,245
564,980
$
$
$
$
$
$
$
(1) In our calculation of leverage ratios for the three months ended December 31, 2017, we adjusted our calculation of Adjusted EBITDA to reflect the
disposition of five apartment communities sold during the period as if they had closed on October 1, 2017, because the proceeds from these sales were used
to reduce leverage as of December 31, 2017.
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Interest expense
Interest expense related to non-recourse property debt obligations of consolidated partnerships served by our Asset Management
business
Interest expense attributable to Real Estate portfolio
Adjustments:
Proportionate share adjustments related to interest of consolidated and unconsolidated partnerships
Debt prepayment penalties and other non-interest items
Amortization of debt issue costs
Interest income earned on securitization trust investment
Adjusted Interest Expense
Preferred stock dividends
Preferred OP Unit distributions
Preferred Dividends
Adjusted Interest Expense and Preferred Dividends
Annualized Adjusted Interest Expense
Annualized Adjusted Interest Expense and Preferred Dividends
Liquidity and Capital Resources
Liquidity
Three Months Ended
December 31, 2017
49,193
(3,166)
46,027
(105)
(496)
(1,393)
(1,814)
42,219
2,149
1,938
4,087
46,306
168,876
185,224
$
$
$
$
$
Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flow from our operations.
Additional sources are proceeds from sales of apartment communities, proceeds from refinancings of existing property debt, borrowings under new
property debt, borrowings under our Credit Agreement, as defined below, including our revolving credit facility, and proceeds from equity
offerings.
Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding property debt, capital
expenditures, dividends paid to stockholders, distributions paid to noncontrolling interest partners and acquisitions of apartment communities. We
use our cash and cash equivalents and our cash provided by operating activities to meet short-term liquidity needs. In the event that our cash and
cash equivalents and cash provided by operating activities are not sufficient to cover our short-term liquidity needs, we have additional means,
such as short-term borrowing availability and proceeds from apartment community sales and refinancings. We may use our revolving credit facility
for working capital and other short-term purposes, such as funding investments on an interim basis. We expect to meet our long-term liquidity
requirements, such as debt maturities, redevelopment spending and apartment community acquisitions, through long-term borrowings (primarily
non-recourse), the issuance of equity securities (including OP Units), the sale of apartment communities and cash generated from operations.
As of December 31, 2017, our primary sources of liquidity were as follows:
• $60.5 million in cash and cash equivalents;
• $34.8 million of restricted cash, which consists primarily of escrows related to resident security deposits and reserves and escrows held by
lenders for capital additions, property taxes and insurance; and
• $521.3 million of available capacity to borrow under our revolving credit facility (which is more fully described below), after consideration of
outstanding borrowings of $67.2 million and $11.5 million of letters of credit backed by the facility.
At December 31, 2017, we also held unencumbered apartment communities with an estimated fair market value of approximately $1.8 billion. Each
of the amounts presented above exclude amounts attributable to partnerships served by our Asset Management business.
Leverage and Capital Resources
The availability of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through
changes in interest rates and access to financing. Currently, interest rates are low compared to historical levels and many lenders are active in the
market. However, any adverse changes in the lending environment could negatively affect our
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liquidity. We believe we have mitigated much of this exposure by reducing our short and intermediate term maturity risk through refinancing such
loans with long-dated, fixed-rate property debt. However, if property financing options become unavailable for our further debt needs, we may
consider alternative sources of liquidity, such as reductions in capital spending or proceeds from apartment community dispositions.
Two credit rating agencies rate our creditworthiness and both have rated our credit and outlook as BBB- (stable), an investment grade rating.
Our investment grade rating would be useful in accessing capital through the sale of bonds in private or public transactions. However, our intention
and historical practice has been to raise debt capital in the form of property-level, non-recourse, long-dated, fixed-rate, amortizing debt, the cost of
which is generally less than that of recourse debt and the terms of which also provide for greater balance sheet safety.
At December 31, 2017, approximately 86.7% of our leverage consisted of property-level, non-recourse, long-dated, amortizing debt.
Approximately 97.7% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates and
inflation. The weighted average maturity of our property-level debt was 7.2 years.
For property debt encumbering the communities in our Real Estate portfolio, $173.7 million of our unpaid principal balances mature during 2018,
of which $111.5 million was refinanced in January 2018 with ten-year, fixed-rate, non-recourse property debt. On average, 13.6% of our unpaid
principal balances will mature each year from 2019 through 2021.
While our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt, we have a Senior Secured Credit
Agreement with a syndicate of financial institutions, which we refer to as our Credit Agreement. Our Credit Agreement provides for $600.0 million of
revolving loan commitments. As of December 31, 2017, we had $67.2 million of outstanding borrowings under our revolving loan commitments,
representing 1.6% of our total leverage. The Credit Agreement provides us with an option to expand the aggregate loan commitments, subject to
customary conditions, by up to $200.0 million.
During 2017, we amended the Credit Agreement to add a $250.0 million term loan to fund partially our reacquisition of limited partner interests in
the Palazzo joint venture. The term loan represents 6.1% of our total leverage as of December 31, 2017, matures on June 30, 2018, has a one-year
extension option and bears interest at 30-day LIBOR plus 135 basis points.
As of December 31, 2017, our outstanding perpetual preferred equity represented approximately 5.5% of our total leverage. Our preferred
securities are perpetual in nature; however, for illustrative purposes, we compute the weighted average maturity of our total leverage assuming a 40-
year maturity on our preferred securities.
The combination of non-recourse property level debt, borrowings under our Credit Agreement and perpetual preferred equity that comprises our
total leverage, reduces our refunding and re-pricing risk. The weighted average maturity for our total leverage described above was 8.5 years as of
December 31, 2017.
Under the Credit Agreement, we have agreed to maintain Fixed Charge Coverage ratio of 1.40x, as well as other covenants customary for similar
revolving credit arrangements. For the year ended December 31, 2017, our Fixed Charge Coverage ratio was 2.01x, compared to ratio of 1.96x for the
year ended December 31, 2016. We expect to remain in compliance with this covenant during the next 12 months.
Changes in Cash and Cash Equivalents
The following discussion relates to changes in consolidated cash and cash equivalents due to operating, investing and financing activities,
which are presented in our consolidated statements of cash flows in Item 8 of this report.
Operating Activities
For the year ended December 31, 2017, our net cash provided by operating activities was $394.1 million. Our operating cash flow is affected
primarily by rental rates, occupancy levels and operating expenses related to our portfolio of apartment communities. Cash provided by operating
activities for the year ended December 31, 2017, increased by $16.4 million compared to 2016, due to improved operating results of our Same Store
communities and increased contribution from redevelopment and lease-up communities, partially offset by a decrease in the net operating income
associated with apartment communities we sold during 2016.
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Investing Activities
For the year ended December 31, 2017, net cash provided by investing activities of $14.7 million consisted primarily of $402.2 million in proceeds
from the sale of apartment communities, partially offset by capital expenditures.
For the years ended December 31, 2017, 2016 and 2015, we sold and acquired various apartment communities as further discussed in Note 3 to
the consolidated financial statements in Item 8.
Capital additions for our Real Estate segment totaled $338.0 million, $321.0 million and $340.3 million during the years ended December 31, 2017,
2016 and 2015, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of
apartment communities.
We categorize capital spending for communities in our Real Estate portfolio broadly into six primary categories:
•
•
•
•
•
•
capital replacements, which represent capital additions made to replace the portion of acquired apartment communities consumed during
our period of ownership;
capital improvements, which represent capital additions made to replace the portion of acquired apartment communities consumed prior to
our period of ownership;
capital enhancements, which may include kitchen and bath remodeling, energy conservation projects and investments in longer-lived
materials designed to reduce turnover and maintenance costs, all of which are generally lesser in scope than redevelopment additions and
do not significantly disrupt property operations;
redevelopment additions, which represent capital additions intended to enhance the value of the apartment community through the ability
to generate higher average rental rates, and may include costs related to entitlement, which enhance the value of a community through
increased density, and costs related to renovation of exteriors, common areas or apartment homes;
development additions, which represent construction and related capitalized costs associated with development of apartment
communities; and
casualty capital additions, which represent construction and related capitalized costs incurred in connection with the restoration of an
apartment community after a casualty event such as a severe snow storm, hurricane, tornado, flood or fire.
We exclude from these measures the amounts of capital spending related to apartment communities sold or classified as held for sale at the end
of the period, as well as amounts expended by consolidated partnerships served by our Asset Management business as such amounts generally do
not affect the amount of cash flow we expect to receive from the operation and ultimate disposition of these communities.
A summary of the capital spending for these categories, along with a reconciliation of the total for these categories to the capital expenditures
reported in the accompanying consolidated statements of cash flows for the years ended December 31, 2017, 2016 and 2015, are presented below
(dollars in thousands):
Real Estate
Capital replacements
Capital improvements
Capital enhancements
Redevelopment additions
Development additions
Casualty capital additions
Real Estate capital additions
Plus: additions related to consolidated Asset Management communities, apartment communities
sold or held for sale, and other adjustments
Consolidated capital additions
Plus: net change in accrued capital spending
Capital expenditures per consolidated statement of cash flows
41
2017
2016
2015
$
$
38,037 $
17,039
101,497
158,141
14,248
9,060
338,022
16,207
354,229
3,875
358,104 $
39,749
15,147
74,544
155,399
31,823
4,304
320,966
17,548
338,514
8,131
346,645
$
$
38,009
16,759
47,927
117,794
115,638
4,184
340,311
22,637
362,948
4,232
367,180
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For the years ended December 31, 2017, 2016 and 2015, we capitalized $7.6 million, $9.6 million and $11.7 million of interest costs, respectively,
and $36.0 million, $32.9 million and $28.2 million of other direct and indirect costs, respectively.
Redevelopment/Development
Information regarding our redevelopments and developments at December 31, 2017, is presented below (dollars in millions):
Apartment Homes
Approved for
Redevelopment or
Development
Estimated Net
Investment
Inception-to-
Date Net
Investment
Expected
Stabilized
Occupancy (1)
Expected NOI
Stabilization (1)
Under Redevelopment or Development
Bay Parc
Calhoun Beach Club
Flamingo South Beach
Palazzo at Park La Brea
Palazzo East at Park La Brea
Parc Mosaic
Park Towne Place
Saybrook Pointe
Yorktown
Location
Miami, FL
Minneapolis, MN
Miami, FL
Los Angeles, CA
Los Angeles, CA
Boulder, CO
Philadelphia, PA
San Jose, CA
Lombard, IL
$
15
275
N/A
389
611
226
942
324
292
$
20.0
28.7
9.7
24.5
28.0
117.0
176.0
18.3
25.7
(2)
(3)
(4)
2Q 2020
4Q 2020
4Q 2020
1Q 2019
1Q 2019
(5)
15.3
9.4
4.2
16.2
0.8
27.0
140.8
14.9
18.3
195.2
71.0
513.1
(2)
(3)
(4)
3Q 2021
1Q 2022
1Q 2022
2Q 2020
2Q 2020
(5)
2Q 2018
4Q 2018
Lease-up complete, NOI stabilization period
One Canal
The Sterling
Total
Boston, MA
Philadelphia, PA
310
534
3,918
$
195.2
71.5
714.6
$
(1) Redevelopments provide us with the flexibility to align the timing of completed apartment homes with market demand. As such, expected occupancy
stabilization and expected NOI Stabilization dates may change as market conditions evolve.
(2) This phase of redevelopment encompasses common areas, amenity improvements, residential homes on one floor and the creation of a new retail space.
(3) In response to market conditions, during 2017, we decided to pause redevelopment activities pertaining to apartment homes and will reassess an appropriate
time to resume such activity. Redevelopment of common areas, such as corridors, is ongoing and expected to be complete in early 2018.
(4) This phase of the redevelopment encompasses common areas and security system upgrades.
(5) In response to market conditions, during 2017, we decided to pause redevelopment activities and will reassess an appropriate time to resume redevelopment
activity.
Net investment represents the total actual or estimated investment, net of tax and other credits earned as a direct result of our redevelopment or
development of the community.
NOI Stabilization represents the period in which we expect the communities to achieve stabilized rents and operating costs, generally five
quarters after occupancy stabilization.
During the year ended December 31, 2017, we invested $172.4 million primarily in our ongoing redevelopment and development projects.
During the year ended December 31, 2017, we completed construction on the third tower of Park Towne Place in Center City, Philadelphia. As of
December 31, 2017, the first three towers combined were 89% leased with approximately 40 homes remaining to be leased at the third redeveloped
tower to reach occupancy stabilization. Based on these results, we decided to proceed with a $40 million redevelopment of the fourth and final
tower. We have completed de-leasing and commenced construction on this tower, and lease-up is scheduled to commence in the spring of 2018.
Also in Center City Philadelphia, during the year ended December 31, 2017, we completed redevelopment and the lease-up of the 534 apartment
homes at The Sterling and substantially completed the reconfiguration of the second floor commercial space, upgrades to the third and fourth floor
commercial space and upgrades to residential common areas.
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We have planned and entitled a new $117.0 million, 226 apartment home community to be known as Parc Mosaic, located in Boulder, Colorado
on the site of our Eastpointe community. As part of this plan, as of December 31, 2017, we completed the de-leasing of Eastpointe and commenced
demolition and construction. The site is two miles from the new Google campus and is across the street from Ball Aerospace’s Technology Campus
and Foothills Hospital. Building in Boulder is highly regulated and new supply is limited, notwithstanding higher enrollment at the University of
Colorado and increased employment generally.
Inclusive of the redevelopment and development projects discussed above, during the year ended December 31, 2017 we expanded our
redevelopment and development pipeline by $228.9 million. The total estimated net investment for these redevelopment and development
communities is $714.6 million, with a projected weighted average net operating income yield on these investments of 6.1% assuming untrended
rents. As of December 31, 2017, $513.1 million of this total has been funded.
We expect our total redevelopment and development spending to range from $120 million to $200 million for the year ending December 31, 2018.
Financing Activities
For the year ended December 31, 2017, our net cash used in financing activities of $393.3 million was primarily attributed to our reacquisition of
the limited partner interests in the Palazzo communities, dividends paid to common security holders, distributions paid to noncontrolling interests
and principal payments on property loans, partially offset by proceeds from the term loan, net borrowings on our revolving credit facility, and
proceeds from non-recourse property debt.
Net borrowings on our revolving credit facility primarily relate to the timing of property debt financing activities and apartment community
dispositions. Proceeds from non-recourse property debt borrowings during the year consisted of the closing of seven fixed-rate, non-recourse,
amortizing, property loans totaling $308.8 million. On a weighted basis, the term of these loans averaged 8.2 years and their interest rates averaged
3.48%, 121 basis points more than the corresponding 10-year Treasury rate at the time of pricing.
We like the discipline of financing our investments in real estate through the use of fixed-rate, amortizing, non-recourse property debt, as the
amortization gradually reduces our leverage and reduces our refunding risk, the fixed-rate provides a hedge against increases in interest rates, and
the non-recourse feature avoids entity risk.
Principal payments on property loans during the year totaled $409.2 million, consisting of $85.1 million of scheduled principal amortization and
repayments of $324.1 million.
Net cash used in financing activities also includes $260.8 million of payments to equity holders, as further detailed in the table below.
Equity and Partners’ Capital Transactions
The following table presents our dividend and distribution activity, which is included in our net cash used in financing activities during the year
ended December 31, 2017 (dollars in thousands):
Cash distributions paid by the Aimco Operating Partnership to holders of noncontrolling interests in consolidated real estate partnerships
$
Cash distributions paid by the Aimco Operating Partnership to preferred unitholders (1)
Cash distributions paid by the Aimco Operating Partnership to common unitholders (2)
Total cash distributions paid by the Aimco Operating Partnership
Cash distributions paid by Aimco to holders of noncontrolling interests in consolidated real estate partnerships
Cash distributions paid by Aimco to holders of OP Units
Cash dividends paid by Aimco to preferred stockholders
Cash dividends paid by Aimco to common stockholders
Total cash dividends and distributions paid by Aimco
$
$
$
(1) $8.6 million represented distributions to Aimco, and $7.8 million represented distributions paid to holders of OP Units.
(2) $225.4 million represented distributions to Aimco, and $10.6 million represented distributions paid to holders of OP Units.
2017
8,367
16,358
236,044
260,769
8,367
18,431
8,594
225,377
260,769
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Contractual Obligations
This table summarizes information contained elsewhere in this Annual Report on Form 10-K regarding payments due under contractual
obligations and commitments as of December 31, 2017 (in thousands):
Non-recourse property debt - Real Estate (1)
Revolving credit facility borrowings (2)
Term loan (3)
Interest related to long-term debt - Real Estate (4)
Office space lease obligations
Ground lease obligations (5)
Construction obligations (6)
Total
Total
3,563,041 $
67,160
250,000
785,945
5,676
86,409
91,125
4,849,356 $
$
$
Less than One
Year
1-3 Years
3-5 Years
More than Five
Years
248,540 $
—
250,000
163,403
2,203
1,179
78,232
743,557 $
915,257 $
—
—
251,541
2,013
2,793
12,893
1,184,497 $
1,064,282 $
67,160
—
131,621
1,460
3,100
—
1,267,623 $
1,334,962
—
—
239,380
—
79,337
—
1,653,679
(1) Includes scheduled principal amortization and maturity payments related to our non-recourse property debt secured by communities in our Real Estate
portfolio.
(2) Includes outstanding borrowings on our revolving credit facility assuming repayment at the contractual maturity date. Our revolving credit facility is subject
to an annual commitment fee (0.25% of aggregate commitments), which is not included in the amounts above.
(3) Represents the term loan that matures on June 30, 2018 and has a one-year extension option.
(4) Includes interest related to both fixed-rate and variable-rate non-recourse property debt, our variable-rate revolving credit facility borrowings, and our
variable-rate term loan. Interest related to variable-rate debt is estimated based on the rate effective at December 31, 2017. Refer to Note 4 to the
consolidated financial statements in Item 8 for a description of average interest rates associated with our debt.
(5) These ground leases expire in years ranging from 2063 to 2087.
(6) Represents estimated obligations pursuant to construction contracts related to our redevelopment, development and other capital spending. Refer to Note 5
to the consolidated financial statements in Item 8 for additional information regarding these obligations.
In addition to the amounts presented in the table above, at December 31, 2017, we had $125.0 million (liquidation value) of Aimco’s perpetual
preferred stock outstanding with an annual dividend yield of 6.9% and $101.5 million (liquidation value) of redeemable preferred OP Units of the
Aimco Operating Partnership outstanding with annual distribution yields ranging from 1.92% to 8.8%. The dividends and distributions that accrue
on the perpetual preferred stock and redeemable preferred OP Units are cumulative and are paid quarterly.
At December 31, 2017, communities owned by partnerships served by our Asset Management business were encumbered by $231.4 million of
non-recourse property debt, $43.3 million of which matures in the next five years. The partnerships’ future obligation for interest related to this debt
is $124.6 million, $52.3 million of which will be incurred over the next five years. The non-recourse property debt obligations of these partnerships
have limited effect on the amount of fees and other payments we expect to receive.
Additionally, we may enter into commitments to purchase goods and services in connection with the operations of our apartment communities.
Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.
Future Capital Needs
In addition to the items set forth in “Contractual Obligations” above, we expect to fund any future acquisitions, redevelopment, development
and other capital spending principally with proceeds from apartment community sales, short-term borrowings, debt and equity financing and
operating cash flows. Our near-term business plan does not contemplate the issuance of equity.
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Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our chief market risks are refunding risk, that is the availability of property debt or other cash sources to refund maturing property debt, and re-
pricing risk, that is the possibility of increases in base interest rates and credit risk spreads. We use predominantly long-dated, fixed-rate,
amortizing, non-recourse property debt in order to avoid the refunding and repricing risks of short-term borrowings. We use short-term debt
financing and working capital primarily to fund short-term uses and generally expect to refinance such borrowings with cash from operating
activities, proceeds from apartment community sales, long-term debt or equity financings. We make limited use of derivative financial instruments
and we do not use them for trading or other speculative purposes.
Market Risk Associated with Loans Secured by Our Real Estate Portfolio
As of December 31, 2017, on a consolidated basis, we had approximately $82.7 million of variable-rate property-level debt outstanding and $317.2
million of variable-rate borrowings under our Credit Agreement, including a $250.0 million term loan that matures on June 30, 2018. We estimate that
a change in 30-day LIBOR of 100 basis points with constant credit risk spreads would reduce or increase net income attributable to Aimco common
stockholders and the Aimco Operating Partnership’s common unitholders by approximately $3.8 million on an annual basis.
At December 31, 2017, our Real Estate segment had approximately $95.3 million in cash and cash equivalents and restricted cash, a portion of
which bears interest at variable rates, which may offset somewhat a change in rates on our variable-rate debt discussed above.
We estimate the fair value of debt instruments as described in Note 11 to the consolidated financial statements in Item 8. The estimated fair value
of indebtedness associated with the Real Estate portfolio was approximately $3.9 billion at December 31, 2017, inclusive of a $55.1 million mark-to-
market liability. The mark-to-market liability decreased by $9.8 million as compared to the mark-to-market liability at December 31, 2016.
If market rates for consolidated fixed-rate debt were higher by 100 basis points with constant credit risk spreads, the estimated fair value of debt
discussed above would decrease from $3.9 billion to $3.8 billion. If market rates for consolidated debt discussed above were lower by 100 basis
points with constant credit risk spreads, the estimated fair value of consolidated fixed-rate debt would increase from $3.9 billion in the aggregate to
$4.0 billion.
Market Risk Associated with Our Asset Management Business
The carrying value of non-recourse property debt of the partnerships served by our Asset Management business of $227.1 million and $236.4
million approximated its estimated fair value at December 31, 2017 and 2016, respectively. All of the non-recourse property debt of these partnership
is fixed-rate debt. We do not believe this indebtedness represents a market risk for Aimco because increases or decreases in the fair value of the
indebtedness are not expected to have a significant effect on the fees we expect to collect from these consolidated partnerships.
Item 8. Financial Statements and Supplementary Data
The independent registered public accounting firm’s reports, consolidated financial statements and schedule listed in the “Index to Financial
Statements” on page F-1 of this Annual Report are filed as part of this report and incorporated herein by this reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
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Item 9A. Controls and Procedures
Aimco
Disclosure Controls and Procedures
Aimco’s management, with the participation of Aimco’s chief executive officer and chief financial officer, has evaluated the effectiveness of its
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by
this report. Based on such evaluation, Aimco’s chief executive officer and chief financial officer have concluded that, as of the end of such period,
Aimco’s disclosure controls and procedures are effective.
Management’s Report on Internal Control Over Financial Reporting
Aimco’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our
principal executive and principal financial officers and effected by our Board of Directors, management and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our
management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Aimco’s internal control over financial reporting as of December 31, 2017. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-
Integrated Framework (2013 Framework).
Based on their assessment, management concluded that, as of December 31, 2017, Aimco’s internal control over financial reporting is effective.
Aimco’s independent registered public accounting firm has issued an attestation report on Aimco’s internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There has been no change in Aimco’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) during the fourth quarter of 2017 that has materially affected, or is reasonably likely to materially affect, Aimco’s internal control over financial
reporting.
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Apartment Investment and Management Company
Opinion on Internal Control over Financial Reporting
We have audited Apartment Investment and Management Company’s internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) (the COSO criteria). In our opinion, Apartment Investment and Management Company (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2017 and 2016, and the related consolidated statements of operations,
comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2017 and the related notes and financial
statement schedule listed in the accompanying Index to Financial Statements of the Company and our report dated February 28, 2018 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Denver, Colorado
February 28, 2018
/s/ ERNST & YOUNG LLP
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Table of Contents
The Aimco Operating Partnership
Disclosure Controls and Procedures
The Aimco Operating Partnership’s management, with the participation of the chief executive officer and chief financial officer of Aimco, who are
the equivalent of the Aimco Operating Partnership’s chief executive officer and chief financial officer, respectively, has evaluated the effectiveness
of the Aimco Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as
of the end of the period covered by this report. Based on such evaluation, the chief executive officer and chief financial officer of Aimco have
concluded that, as of the end of such period, the Aimco Operating Partnership’s disclosure controls and procedures are effective.
Management’s Report on Internal Control Over Financial Reporting
Management of the Aimco Operating Partnership is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or
under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other
personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our
management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Aimco Operating Partnership’s internal control over financial reporting as of December 31, 2017.
In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework (2013 Framework).
Based on their assessment, management concluded that, as of December 31, 2017, the Aimco Operating Partnership’s internal control over
financial reporting is effective.
The Aimco Operating Partnership’s independent registered public accounting firm has issued an attestation report on the Aimco Operating
Partnership’s internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There has been no change in the Aimco Operating Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) during the fourth quarter of 2017 that has materially affected, or is reasonably likely to materially affect, the Aimco
Operating Partnership’s internal control over financial reporting.
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The Partners of
AIMCO Properties, L.P.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Opinion on Internal Control over Financial Reporting
We have audited AIMCO Properties, L.P.’s internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the
COSO criteria). In our opinion, AIMCO Properties, L.P. (the Partnership) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Partnership as of December 31, 2017 and 2016, and the related consolidated statements of operations,
comprehensive income, partners’ capital and cash flows for each of the three years in the period ended December 31, 2017 and the related notes and
financial statement schedule listed in the accompanying Index to Financial Statements of the Partnership and our report dated February 28, 2018
expressed an unqualified opinion thereon.
Basis for Opinion
The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Denver, Colorado
February 28, 2018
/s/ ERNST & YOUNG LLP
49
Table of Contents
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Each member of the board of directors of Aimco also is a director of the general partner of the Aimco Operating Partnership. The officers of
Aimco are also the officers of the general partner of the Aimco Operating Partnership and hold the same titles. The information required by this item
for both Aimco and the Aimco Operating Partnership is presented jointly under the captions “Board of Directors and Executive Officers,”
“Corporate Governance Matters - Code of Ethics,” “Other Matters - Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate
Governance Matters - Meetings and Committees: Nominating and Corporate Governance Committee,” “Corporate Governance Matters - Meetings
and Committees: Audit Committee” and “Corporate Governance Matters - Meetings and Committees: Audit Committee Financial Expert” in the
proxy statement for Aimco’s 2018 annual meeting of stockholders and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item is presented under the captions “Compensation Discussion & Analysis,” “Compensation and Human
Resources Committee Report to Stockholders,” “Summary Compensation Table,” “Grants of Plan-Based Awards in 2017,” “Outstanding Equity
Awards at Fiscal Year-End 2017,” “Option Exercises and Stock Vested in 2017,” “Potential Payments Upon Termination or Change in Control” and
“Corporate Governance Matters - Director Compensation” in the proxy statement for Aimco’s 2018 annual meeting of stockholders and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item, for both Aimco and the Aimco Operating Partnership, is presented under the captions “Security
Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” in the
proxy statement for Aimco’s 2018 annual meeting of stockholders and is incorporated herein by reference. In addition, as of February 27, 2018,
Aimco, through its consolidated subsidiaries, held 95.4% of the Aimco Operating Partnership’s common partnership units outstanding.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is presented under the caption “Certain Relationships and Related Transactions” and “Corporate Governance
Matters - Independence of Directors” in the proxy statement for Aimco’s 2018 annual meeting of stockholders and is incorporated herein by
reference.
Item 14. Principal Accountant Fees and Services
The information required by this item is presented under the caption “Principal Accountant Fees and Services” in the proxy statement for
Aimco’s 2018 annual meeting of stockholders and is incorporated herein by reference.
Item 15. Exhibits and Financial Statement Schedules
PART IV
(a)(1)
(a)(2)
The financial statements listed in the Index to Financial Statements on Page F-1 of this report are filed as part of this report and
incorporated herein by reference.
The financial statement schedule listed in the Index to Financial Statements on Page F-1 of this report is filed as part of this report
and incorporated herein by reference.
(a)(3)
The Exhibit Index is incorporated herein by reference.
50
Table of Contents
EXHIBIT NO.
DESCRIPTION
INDEX TO EXHIBITS (1) (2)
3.1
3.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
Charter (Exhibit 3.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, is incorporated herein by
this reference)
Amended and Restated Bylaws (Exhibit 3.1 to Aimco’s Current Report on Form 8-K dated January 26, 2016, is incorporated herein by
this reference)
Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of July 29, 1994, as
amended and restated as of February 28, 2007 (Exhibit 10.1 to Aimco’s Annual Report on Form 10-K for the year ended December 31,
2006, is incorporated herein by this reference)
First Amendment to Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as
of December 31, 2007 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 31, 2007, is incorporated herein by this
reference)
Second Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership,
dated as of July 30, 2009 (Exhibit 10.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, is
incorporated herein by this reference)
Third Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated
as of September 2, 2010 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated September 3, 2010, is incorporated herein by this
reference)
Fourth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership,
dated as of July 26, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated July 26, 2011, is incorporated herein by this
reference)
Fifth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated
as of August 24, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated August 24, 2011, is incorporated herein by this
reference)
Sixth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated
as of December 31, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 31, 2011, is incorporated herein by this
reference)
Seventh Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership,
dated as of May 13, 2014 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated May 15, 2014, is incorporated herein by this
reference)
Eighth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership,
dated as of October 31, 2014 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated November 4, 2014, is incorporated herein by
this reference)
Ninth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated
as of August 16, 2016 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated August 16, 2016, is incorporated herein by this
reference)
Tenth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated
as of January 31, 2017 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated January 31, 2017, is incorporated herein by this
reference)
Second Amended and Restated Senior Secured Credit Agreement, dated as of June 30, 2017, among Aimco, the Aimco Operating
Partnership, AIMCO/Bethesda Holdings, Inc., the lenders party thereto, KeyBank N.A., as administrative agent, swing line lender and
a letter of credit issuer (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated June 30, 2017, is incorporated herein by this
reference)
Master Indemnification Agreement, dated December 3, 2001, by and among Aimco, the Aimco Operating Partnership., XYZ Holdings
LLC, and the other parties signatory thereto (Exhibit 10.2 to Aimco’s Current Report on Form 8-K, dated December 6, 2001, is
incorporated herein by this reference)
Tax Indemnification and Contest Agreement, dated December 3, 2001, by and among Aimco, National Partnership Investments, Corp.,
and XYZ Holdings LLC and the other parties signatory thereto (Exhibit 10.3 to Aimco’s Current Report on Form 8-K, dated December
6, 2001, is incorporated herein by this reference)
Employment Contract executed on December 21, 2017, by and between the Aimco Operating Partnership and Terry Considine (Exhibit
10.1 to Aimco’s Current Report on Form 8-K, dated December 21, 2017, is incorporated herein by this reference)*
2007 Stock Award and Incentive Plan (Appendix A to Aimco’s Proxy Statement on Schedule 14A filed with the Securities and
Exchange Commission on March 20, 2007 is incorporated herein by this reference)*
Form of Restricted Stock Agreement (2007 Stock Award and Incentive Plan) (Exhibit 10.2 to Aimco’s Current Report on Form 8-K,
dated April 30, 2007, is incorporated herein by this reference)*
Form of Non-Qualified Stock Option Agreement (2007 Stock Award and Incentive Plan) (Exhibit 10.3 to Aimco’s Current Report on
Form 8-K, dated April 30, 2007, is incorporated herein by this reference)*
51
Table of Contents
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
21.1
23.1
23.2
31.1
31.2
31.3
31.4
32.1
32.2
32.3
32.4
99.1
99.2
101
2007 Employee Stock Purchase Plan (Appendix B to Aimco’s Proxy Statement on Schedule 14A filed with the Securities and Exchange
Commission on March 20, 2007, is incorporated herein by this reference)*
Apartment Investment and Management Company 2015 Stock Award and Incentive Plan (as amended and restated January 31, 2017)
(Exhibit 10.2 to Aimco’s Current Report on Form 8-K, dated January 31, 2017, is incorporated herein by this reference)*
Form of Performance Restricted Stock Agreement (2015 Stock Award and Incentive Plan) (Exhibit 10.24 to Aimco’s Annual Report on
Form 10-K for the year ended December 31, 2015, is incorporated herein by this reference)*
Form of Restricted Stock Agreement (2015 Stock Award and Incentive Plan) (Exhibit 10.25 to Aimco’s Annual Report on Form 10-K
for the year ended December 31, 2015, is incorporated herein by this reference)*
Form of Non-Qualified Stock Option Agreement (2015 Stock Award and Incentive Plan) (Exhibit 10.26 to Aimco’s Annual Report on
Form 10-K for the year ended December 31, 2015, is incorporated herein by this reference)*
Form of LTIP Unit Agreement (2015 Stock Award and Incentive Plan) (Exhibit 10.3 to Aimco’s Current Report on Form 8-K, dated
January 31, 2017, is incorporated herein by this reference)*
Form of Performance Vesting LTIP Unit Agreement (2015 Stock Award and Incentive Plan) (Exhibit 10.4 to Aimco’s Current Report on
Form 8-K, dated January 31, 2017, is incorporated herein by this reference)*
Form of Non-Qualified Stock Option Agreement (2015 Stock Award and Incentive Plan) (Exhibit 10.26 to Aimco’s Annual Report on
Form 10-K for the year ended December 31, 2016, is incorporated herein by this reference)*
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm - Aimco
Consent of Independent Registered Public Accounting Firm - Aimco Operating Partnership
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 - Aimco
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 - Aimco
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 - Aimco Operating Partnership
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 - Aimco Operating Partnership
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Aimco
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Aimco
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Aimco
Operating Partnership
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Aimco
Operating Partnership
Agreement regarding disclosure of long-term debt instruments - Aimco
Agreement regarding disclosure of long-term debt instruments - Aimco Operating Partnership
XBRL (Extensible Business Reporting Language). The following materials from Aimco’s and the Aimco Operating Partnership’s
combined Annual Report on Form 10-K for the year ended December 31, 2017, formatted in XBRL: (i) consolidated balance sheets; (ii)
consolidated statements of operations; (iii) consolidated statements of comprehensive income; (iv) consolidated statements of equity
and consolidated statements of partners’ capital; (v) consolidated statements of cash flows; (vi) notes to the consolidated financial
statements; and (vii) financial statement schedule (3)
(1) Schedule and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon
request.
(2) The Commission file numbers for exhibits is 001-13232 (Aimco) and 0-24497 (the Aimco Operating Partnership), and all such exhibits remain
available pursuant to the Records Control Schedule of the Securities and Exchange Commission.
(3) As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act
of 1933 and Section 18 of the Securities Exchange Act of 1934.
* Management contract or compensatory plan or arrangement
Item 16. Form 10-K Summary
None.
52
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By:
/s/ TERRY CONSIDINE
Terry Considine
Chairman of the Board and
Chief Executive Officer
Date: February 28, 2018
AIMCO PROPERTIES, L.P.
By:
AIMCO-GP, Inc., its General Partner
By:
/s/ TERRY CONSIDINE
Terry Considine
Chairman of the Board and
Chief Executive Officer
Date: February 28, 2018
53
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
each registrant and in the capacities and on the dates indicated.
Signature
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Title
Date
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, Inc., its General Partner
/s/ TERRY CONSIDINE
Terry Considine
/s/ PAUL BELDIN
Paul Beldin
/s/ ANDREW HIGDON
Andrew Higdon
/s/ THOMAS L. KELTNER
Thomas L. Keltner
/s/ J. LANDIS MARTIN
J. Landis Martin
/s/ ROBERT A. MILLER
Robert A. Miller
/s/ KATHLEEN M. NELSON
Kathleen M. Nelson
/s/ MICHAEL A. STEIN
Michael A. Stein
/s/ NINA A. TRAN
Nina A. Tran
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
Chairman of the Board and
Chief Executive Officer
(principal executive officer)
Executive Vice President and
Chief Financial Officer
(principal financial officer)
Senior Vice President and
Chief Accounting Officer
(principal accounting officer)
Director
Director
Director
Director
Director
Director
54
Table of Contents
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
INDEX TO FINANCIAL STATEMENTS
Financial Statements:
Apartment Investment and Management Company:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
AIMCO Properties, L.P.:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Partners’ Capital
Consolidated Statements of Cash Flows
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-9
F-10
F-11
F-12
F-13
F-14
Notes to the Consolidated Financial Statements of Apartment Investment and Management Company and AIMCO Properties, L.P.
F-16
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation
F-42
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or
notes thereto.
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Apartment Investment and Management Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Apartment Investment and Management Company (the Company) as of
December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three
years in the period ended December 31, 2017, and the related notes and the financial statement schedule listed in the accompanying Index to
Financial Statements (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2018
expressed an unqualified opinion thereon.
Adoption of New Accounting Standard
As discussed in Note 2 to the consolidated financial statements, the Company changed its accounting for the income tax consequences of
intercompany transfers of assets effective January 1, 2017.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 1994.
Denver, Colorado
February 28, 2018
/s/ ERNST & YOUNG LLP
F-2
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
As of December 31, 2017 and 2016
(In thousands, except share data)
Table of Contents
ASSETS
Buildings and improvements
Land
Total real estate
Accumulated depreciation
Net real estate
Cash and cash equivalents
Restricted cash
Other assets
Assets held for sale
Assets of partnerships served by Asset Management business:
Real estate, net
Cash and cash equivalents
Restricted cash
Other assets
Total assets
LIABILITIES AND EQUITY
Non-recourse property debt secured by Real Estate communities, net
Term loan, net
Revolving credit facility borrowings
Total indebtedness associated with Real Estate portfolio
Accrued liabilities and other
Liabilities of partnerships served by Asset Management business:
Non-recourse property debt, net
Accrued liabilities and other
Deferred income
Total liabilities
Preferred noncontrolling interests in Aimco Operating Partnership (Note 7)
Commitments and contingencies (Note 5)
Equity:
Perpetual Preferred Stock (Note 6)
Common Stock, $0.01 par value, 500,787,260 shares authorized, 157,189,447 and 156,888,381 shares
issued/outstanding at December 31, 2017 and 2016, respectively
Additional paid-in capital
Accumulated other comprehensive income
Distributions in excess of earnings
Total Aimco equity
Noncontrolling interests in consolidated real estate partnerships
Common noncontrolling interests in Aimco Operating Partnership
Total equity
Total liabilities and equity
See notes to the consolidated financial statements.
$
$
$
2017
2016
$
6,174,149
1,753,604
7,927,753
(2,522,358)
5,405,395
60,498
34,827
272,739
17,959
$
$
224,873
16,288
30,928
15,533
6,079,040
3,545,109
249,501
67,160
3,861,770
200,540
227,141
19,812
12,487
4,321,750
101,537
6,106,298
1,824,819
7,931,117
(2,421,357)
5,509,760
45,821
36,405
293,768
—
245,648
15,423
33,501
52,492
6,232,818
3,630,276
—
17,930
3,648,206
218,937
236,426
62,630
18,452
4,184,651
103,201
125,000
125,000
1,572
3,900,042
3,603
(2,367,073)
1,663,144
(1,716)
(5,675)
1,655,753
6,079,040
$
$
1,569
4,051,722
1,011
(2,385,399)
1,793,903
151,121
(58)
1,944,966
6,232,818
F-3
Table of Contents
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands, except per share data)
2017
2016
2015
REVENUES:
Rental and other property revenues attributable to Real Estate
$
Rental and other property revenues of partnerships served by Asset Management business
Tax credit and transaction revenues
Total revenues
OPERATING EXPENSES:
Property operating expenses attributable to Real Estate
Property operating expenses of partnerships served by Asset Management business
Depreciation and amortization
General and administrative expenses
Other expenses, net
Provision for real estate impairment loss (Note 3)
Total operating expenses
Operating income
Interest income
Interest expense
Other, net
Income before income taxes and gain on dispositions
Income tax benefit (Note 9)
Income before gain on dispositions
Gain on dispositions of real estate, net of tax
Net income
Noncontrolling interests:
$
918,148
74,046
13,243
1,005,437
$
899,891
74,640
21,323
995,854
318,939
35,440
366,184
43,657
11,353
35,881
811,454
193,983
8,332
(194,615)
7,694
15,394
32,126
47,520
299,559
347,079
317,957
36,956
333,066
46,784
14,295
—
749,058
246,796
7,797
(196,389)
6,071
64,275
25,208
89,483
393,790
483,273
Net income attributable to noncontrolling interests in consolidated real estate partnerships
(9,084)
(25,256)
Net income attributable to preferred noncontrolling interests in Aimco Operating
Partnership
Net income attributable to common noncontrolling interests in Aimco Operating
Partnership
Net income attributable to noncontrolling interests
Net income attributable to Aimco
Net income attributable to Aimco preferred stockholders
Net income attributable to participating securities
Net income attributable to Aimco common stockholders
Net income attributable to Aimco per common share – basic
Net income attributable to Aimco per common share – diluted
Weighted average common shares outstanding – basic
Weighted average common shares outstanding – diluted
(7,764)
(7,239)
(14,457)
(31,305)
315,774
(8,594)
(319)
(20,368)
(52,863)
430,410
(11,994)
(635)
306,861
$
417,781
$
1.96
$
1.96
$
2.68
$
2.67
$
156,323
156,796
156,001
156,391
$
$
$
883,020
73,934
24,356
981,310
324,579
37,537
306,301
46,310
10,368
—
725,095
256,215
6,949
(199,685)
387
63,866
27,524
91,390
180,593
271,983
(4,776)
(6,943)
(11,554)
(23,273)
248,710
(11,794)
(950)
235,966
1.52
1.52
155,177
155,570
See notes to the consolidated financial statements.
F-4
Table of Contents
Net income
Other comprehensive income:
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands)
2017
2016
2015
$
347,079
$
483,273
$
271,983
Unrealized (losses) gains on interest rate swaps
(173 )
221
Losses on interest rate swaps reclassified into interest expense from accumulated other
comprehensive income
Unrealized gains on debt securities classified as available-for-sale
Other comprehensive income
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Aimco
1,480
1,507
2,814
349,893
(31,527 )
1,586
5,855
7,662
490,935
(53,474 )
$
318,366
$
437,461
$
(1,299 )
1,678
214
593
272,576
(23,450 )
249,126
See notes to the consolidated financial statements.
F-5
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands)
Preferred Stock
Common Stock
Amount
Shares
Issued
Shares
Issued Amount
6,391 $ 186,126 146,403 $ 1,464
—
94
(27,000 )
—
9,430
—
—
—
Accumulated Other
Comprehensive
Income (Loss)
Distributions in
Excess of
Earnings
Total
Aimco
Equity
Noncontrolling
Interests
(6,456 ) $
—
—
(2,649,542 ) $ 1,227,735 $
—
(695 )
366,580
(27,000 )
214,370
—
—
Total
Equity
$ 1,442,105
366,580
(27,000 )
Table of Contents
Balances at December 31, 2014
Issuance of Common Stock
Repurchase of Preferred Stock
Redemption of Aimco Operating
Partnership units
Amortization of share-based
compensation cost
Effect of changes in ownership for
consolidated entities
Change in accumulated other
comprehensive income
Other, net
Net income
Distributions to noncontrolling interests
Common Stock dividends
Preferred Stock dividends
Balances at December 31, 2015
Redemption of Preferred Stock
Redemption of Aimco Operating
Partnership units
Amortization of share-based
compensation cost
Effect of changes in ownership for
consolidated entities
Change in accumulated other
comprehensive income
Other, net
Net income
Distributions to noncontrolling interests
Common Stock dividends
Preferred Stock dividends
Balances at December 31, 2016
Redemption of Aimco Operating
Partnership units
Amortization of share-based
compensation cost
Contributions from noncontrolling
interests
Effect of changes in ownership for
consolidated entities
Cumulative effect of a change in
accounting principle
Change in accumulated other
comprehensive income
Other, net
Net income
Distributions to noncontrolling interests
Common Stock dividends
Preferred Stock dividends
Balances at December 31, 2017
Additional
Paid-in
Capital
$ 3,696,143 $
366,486
695
—
7,096
(6,008 )
—
247
—
—
—
—
4,064,659
1,307
—
8,610
(26,171 )
—
3,317
—
—
—
—
4,051,722
—
8,638
—
(160,586 )
—
—
268
—
—
—
—
$ 3,900,042 $
—
—
—
—
—
—
—
27
—
—
—
—
—
—
—
—
—
—
—
466
—
—
—
—
—
—
—
5
—
—
—
—
—
—
—
—
6,391 159,126 156,326 1,563
(1,391 )
—
(34,126 )
—
—
—
—
—
—
—
—
31
—
—
—
—
—
—
—
—
—
—
—
—
—
6
—
—
—
—
—
—
—
—
5,000 125,000 156,888 1,569
—
531
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
18
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
—
—
5,000 $ 125,000 157,189 $ 1,572
—
283
—
—
—
—
—
—
—
416
—
—
—
—
—
(6,040 )
—
—
—
—
7,051
—
—
—
—
—
1,011
—
—
—
—
—
—
—
—
—
(4,181 )
(4,181 )
7,096
(6,008 )
—
7,096
4,189
(1,819 )
—
100
248,710
—
(184,391 )
(11,099 )
416
352
248,710
—
(184,391 )
(11,099 )
(2,596,917 ) 1,622,391
(34,799 )
(1,980 )
177
—
16,330
(89,371 )
—
—
141,514
—
593
352
265,040
(89,371 )
(184,391 )
(11,099 )
1,763,905
(34,799 )
—
—
—
(10,819 )
(10,819 )
8,610
—
8,610
—
(26,171 )
10,107
(16,064 )
—
—
430,410
—
(206,898 )
(10,014 )
7,051
3,323
430,410
—
(206,898 )
(10,014 )
(2,385,399 ) 1,793,903
611
—
45,624
(35,974 )
—
—
151,063
7,662
3,323
476,034
(35,974 )
(206,898 )
(10,014 )
1,944,966
—
—
—
—
(11,882 )
(11,882 )
8,638
—
613
3,401
9,251
3,401
—
(160,586 )
(152,189 )
(312,775 )
(62,682 )
(62,682 )
(3,028 )
(65,710 )
2,592
—
—
—
—
—
3,603 $
—
—
315,774
—
(226,172 )
(8,594 )
2,592
271
315,774
—
(226,172 )
(8,594 )
(2,367,073 ) $ 1,663,144 $
2,814
271
339,315
(19,132 )
(226,172 )
222
—
23,541
(19,132 )
—
—
(8,594 )
(7,391 ) $ 1,655,753
See notes to the consolidated financial statements.
F-6
Table of Contents
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2017
2016
2015
$
347,079
$
483,273
$
271,983
Depreciation and amortization
Gain on dispositions of real estate, net of tax
Provision for real estate impairment loss
Income tax benefit
Share-based compensation expense
Amortization of debt issue costs and other
Other, net
Changes in operating assets and operating liabilities:
Accounts receivable and other assets
Accounts payable, accrued liabilities and other
Total adjustments
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate and deposits related to purchases of real estate
Capital expenditures
Proceeds from dispositions of real estate
Purchases of corporate assets
Changes in restricted cash
Other investing activities
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt
Principal repayments on non-recourse property debt
Proceeds from term loan
Net borrowings (repayments) on revolving credit facility
Proceeds from issuance of Common Stock
Redemptions of Preferred Stock
Payment of dividends to holders of Preferred Stock
Payment of dividends to holders of Common Stock
Payment of distributions to noncontrolling interests
Purchases and redemptions of noncontrolling interests
Other financing activities
Net cash used in financing activities
366,184
(299,559 )
35,881
(32,126 )
7,877
5,666
(7,694 )
(13,375 )
(15,794 )
47,060
394,139
(20,372 )
(358,104 )
402,162
(8,899 )
1,506
(1,589 )
14,704
312,434
(409,167 )
250,000
49,230
—
—
(8,594 )
(225,377 )
(26,799 )
(327,815 )
(7,213 )
(393,301 )
333,066
(393,790 )
—
(25,208 )
7,629
5,060
(6,071 )
(20,680 )
(5,555 )
(105,549 )
377,724
(290,729 )
(346,645 )
535,513
(7,540 )
1,374
10,254
(97,773 )
417,714
(371,947 )
—
(9,070 )
—
(34,799 )
(10,014 )
(206,279 )
(35,706 )
(26,485 )
7,090
(269,496 )
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
15,542
61,244
76,786
$
10,455
50,789
61,244
$
$
306,301
(180,593 )
—
(27,524 )
6,640
5,186
(387 )
619
(22,334 )
87,908
359,891
(169,447 )
(367,180 )
367,571
(6,665 )
(429 )
5,253
(170,897 )
352,602
(514,294 )
—
(85,330 )
366,580
(27,000 )
(11,099 )
(184,082 )
(57,401 )
(4,517 )
(2,635 )
(167,176 )
21,818
28,971
50,789
See notes to the consolidated financial statements.
F-7
Table of Contents
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands)
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid
Cash paid for income taxes
Non-cash transactions associated with the acquisition or disposition of real estate:
Non-recourse property debt assumed by buyer in connection with the disposition of real
estate
Issuance of preferred OP Units in connection with acquisition of real estate
Other non-cash investing and financing transactions:
Accrued capital expenditures (at end of period)
Accrued dividends on TSR restricted stock and LTIP awards (at end of period) (Note 8)
2017
2016
2015
$
$
196,438
7,401
$
200,278
2,152
207,087
2,033
—
—
31,719
1,720
—
17,000
35,594
927
6,068
—
43,725
309
See notes to the consolidated financial statements.
F-8
Table of Contents
The Partners of
AIMCO Properties, L.P.
Opinion on the Financial Statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of AIMCO Properties, L.P. (the “Partnership”) as of December 31, 2017 and
2016, the related consolidated statements of operations, comprehensive income, partners' capital, and cash flows for each of the three years in the
period ended December 31, 2017, and the related notes and the financial statement schedule listed in the accompanying Index to Financial
Statements (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Partnership at December 31, 2017 and 2016, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Partnership's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28,
2018 expressed an unqualified opinion thereon.
Adoption of New Accounting Standard
As discussed in Note 2 to the consolidated financial statements, the Partnership changed its accounting for the income tax consequences of
intercompany transfers of assets effective January 1, 2017.
Basis for Opinion
These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the
Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ ERNST & YOUNG LLP
We have served as the Partnership’s auditor since 1994.
Denver, Colorado
February 28, 2018
F-9
AIMCO PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2017 and 2016
(In thousands)
Table of Contents
ASSETS
Buildings and improvements
Land
Total real estate
Accumulated depreciation
Net real estate
Cash and cash equivalents
Restricted cash
Other assets
Assets held for sale
Assets of partnerships served by Asset Management business:
Real estate, net
Cash and cash equivalents
Restricted cash
Other assets
Total assets
LIABILITIES AND PARTNERS’ CAPITAL
Non-recourse property debt secured by Real Estate communities, net
Term loan, net
Revolving credit facility borrowings
Total indebtedness associated with Real Estate portfolio
Accrued liabilities and other
Liabilities of partnerships served by Asset Management business:
Non-recourse property debt, net
Accrued liabilities and other
Deferred income
Total liabilities
Redeemable preferred units (Note 7)
Commitments and contingencies (Note 5)
Partners’ Capital:
Preferred units (Note 7)
General Partner and Special Limited Partner
Limited Partners
Partners’ capital attributable to the Aimco Operating Partnership
Noncontrolling interests in consolidated real estate partnerships
Total partners’ capital
Total liabilities and partners’ capital
See notes to the consolidated financial statements.
F-10
2017
2016
$
$
$
$
6,174,149
1,753,604
7,927,753
(2,522,358 )
5,405,395
60,498
34,827
272,739
17,959
224,873
16,288
30,928
15,533
6,079,040
3,545,109
249,501
67,160
3,861,770
200,540
227,141
19,812
12,487
4,321,750
101,537
$
$
125,000
1,538,144
(5,675 )
1,657,469
(1,716 )
1,655,753
6,079,040
$
$
6,106,298
1,824,819
7,931,117
(2,421,357 )
5,509,760
45,821
36,405
293,768
—
245,648
15,423
33,501
52,492
6,232,818
3,630,276
—
17,930
3,648,206
218,937
236,426
62,630
18,452
4,184,651
103,201
125,000
1,668,903
(58 )
1,793,845
151,121
1,944,966
6,232,818
Table of Contents
AIMCO PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
As of December 31, 2017, 2016 and 2015
(In thousands, except per unit data)
2017
2016
2015
REVENUES:
Rental and other property revenues attributable to Real Estate
$
Rental and other property revenues of partnerships served by Asset Management business
Tax credit and transaction revenues
Total revenues
OPERATING EXPENSES:
Property operating expenses attributable to Real Estate
Property operating expenses of partnerships served by Asset Management business
Depreciation and amortization
General and administrative expenses
Other expenses, net
Provision for real estate impairment loss (Note 3)
Total operating expenses
Operating income
Interest income
Interest expense
Other, net
Income before income taxes and gain on dispositions
Income tax benefit (Note 9)
Income before gain on dispositions
Gain on dispositions of real estate, net of tax
Net income
Net income attributable to noncontrolling interests in consolidated real estate partnerships
Net income attributable to the Aimco Operating Partnership
Net income attributable to the Aimco Operating Partnership’s preferred unitholders
Net income attributable to participating securities
Net income attributable to the Aimco Operating Partnership’s common unitholders
Net income attributable to the Aimco Operating Partnership per common unit – basic
Net income attributable to the Aimco Operating Partnership per common unit – diluted
Weighted average common units outstanding – basic
Weighted average common units outstanding – diluted
$
918,148
74,046
13,243
1,005,437
$
899,891
74,640
21,323
995,854
318,939
35,440
366,184
43,657
11,353
35,881
811,454
193,983
8,332
(194,615 )
7,694
15,394
32,126
47,520
299,559
347,079
(9,084 )
337,995
(16,358 )
(337 )
317,957
36,956
333,066
46,784
14,295
—
749,058
246,796
7,797
(196,389 )
6,071
64,275
25,208
89,483
393,790
483,273
(25,256 )
458,017
(19,233 )
(635 )
$
$
$
321,300
$
438,149
$
1.96
$
1.96
$
2.68
$
2.67
$
163,746
164,218
163,761
164,151
883,020
73,934
24,356
981,310
324,579
37,537
306,301
46,310
10,368
—
725,095
256,215
6,949
(199,685 )
387
63,866
27,524
91,390
180,593
271,983
(4,776 )
267,207
(18,737 )
(950 )
247,520
1.52
1.52
162,834
163,227
See notes to the consolidated financial statements.
F-11
Table of Contents
Net income
Other comprehensive income:
AIMCO PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands)
2017
2016
2015
$
347,079
$
483,273
$
271,983
Unrealized (losses) gains on interest rate swaps
(173 )
221
Losses on interest rate swaps reclassified into interest expense from accumulated other
comprehensive income
Unrealized gains on debt securities classified as available-for-sale
Other comprehensive income
Comprehensive income
Comprehensive income attributable to noncontrolling interests
1,480
1,507
2,814
349,893
(9,185 )
1,586
5,855
7,662
490,935
(25,516 )
Comprehensive income attributable to the Aimco Operating Partnership
$
340,708
$
465,419
$
(1,299 )
1,678
214
593
272,576
(4,932 )
267,644
See notes to the consolidated financial statements.
F-12
Table of Contents
AIMCO PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands)
Balances at December 31, 2014
Issuance of common partnership units to Aimco
Redemption of preferred units held by Aimco
Redemption of partnership units held by non-Aimco partners
Amortization of Aimco share-based compensation
Effect of changes in ownership for consolidated entities
Change in accumulated other comprehensive income
Other, net
Net income
Distributions to noncontrolling interests
Distributions to common unitholders
Distributions to preferred unitholders
Balances at December 31, 2015
Redemption of preferred units held by Aimco
Redemption of partnership units held by non-Aimco partners
Amortization of Aimco share-based compensation
Effect of changes in ownership for consolidated entities
Change in accumulated other comprehensive income
Other, net
Net income
Distributions to noncontrolling interests
Distributions to common unitholders
Distributions to preferred unitholders
Balances at December 31, 2016
Redemption of partnership units held by non-Aimco partners
Amortization of Aimco share-based compensation
Contributions from noncontrolling interests
Effect of changes in ownership for consolidated entities
Cumulative effect of a change in accounting principle
Change in accumulated other comprehensive income
Other, net
Net income
Distributions to noncontrolling interests
Distributions to common unitholders
Distributions to preferred unitholders
Balances at December 31, 2017
General Partner
and Special
Limited Partner
Limited
Partners
Partners’
Capital
Attributable to
the Partnership
Noncontrolling
Interests
Total
Partners’
Capital
$ 1,442,105
366,580
$
1,041,609
366,580
—
—
7,096
(6,008 )
416
352
248,710
—
(184,391 )
(11,099 )
1,463,265
(673 )
—
8,610
(26,171 )
7,051
3,323
430,410
—
(206,898 )
(10,014 )
1,668,903
—
8,638
—
(160,586 )
(62,682 )
2,592
271
315,774
—
(226,172 )
(8,594 )
(18,926 ) $
—
—
(4,181 )
—
10,739
21
—
11,554
—
(9,058 )
—
(9,851 )
—
(10,819 )
—
10,107
351
—
20,368
—
(10,214 )
—
(58 )
(11,882 )
613
—
4,867
(3,028 )
121
—
14,457
—
(10,765 )
—
(5,675 ) $
$
1,208,809
366,580
(27,000 )
(4,181 )
7,096
4,731
437
352
260,264
—
(193,449 )
(11,099 )
1,612,540
(34,799 )
(10,819 )
8,610
(16,064 )
7,402
3,323
450,778
—
(217,112 )
(10,014 )
1,793,845
(11,882 )
9,251
—
(155,719 )
(65,710 )
2,713
271
330,231
—
(236,937 )
(8,594 )
1,657,469
$
233,296
—
—
—
—
(6,550 )
156
—
4,776
(80,313 )
—
—
151,365
—
—
—
—
260
—
25,256
(25,760 )
—
—
151,121
—
—
3,401
(157,056 )
—
101
—
9,084
(8,367 )
—
—
(27,000 )
(4,181 )
7,096
(1,819 )
593
352
265,040
(80,313 )
(193,449 )
(11,099 )
1,763,905
(34,799 )
(10,819 )
8,610
(16,064 )
7,662
3,323
476,034
(25,760 )
(217,112 )
(10,014 )
1,944,966
(11,882 )
9,251
3,401
(312,775 )
(65,710 )
2,814
271
339,315
(8,367 )
(236,937 )
$
1,538,144
$
(8,594 )
(1,716 ) $ 1,655,753
Preferred
Units
$
$
186,126
—
(27,000 )
—
—
—
—
—
—
—
—
—
159,126
(34,126 )
—
—
—
—
—
—
—
—
—
125,000
—
—
—
—
—
—
—
—
—
—
—
125,000
$
See notes to the consolidated financial statements.
F-13
Table of Contents
AIMCO PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2017
2016
2015
$
347,079
$
483,273
$
271,983
Depreciation and amortization
Gain on dispositions of real estate, net of tax
Provision for real estate impairment loss
Income tax benefit
Share-based compensation expense
Amortization of debt issue costs and other
Other, net
Changes in operating assets and operating liabilities:
Accounts receivable and other assets
Accounts payable, accrued liabilities and other
Total adjustments
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate and deposits related to purchases of real estate
Capital expenditures
Proceeds from dispositions of real estate
Purchases of corporate assets
Changes in restricted cash
Other investing activities
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt
Principal repayments on non-recourse property debt
Proceeds from term loan
Net borrowings (repayments) on revolving credit facility
Proceeds from issuance of common partnership units to Aimco
Redemption of preferred units from Aimco
Payment of distributions to preferred units
Payment of distributions to General Partner and Special Limited Partner
Payment of distributions to Limited Partners
Payment of distributions to noncontrolling interests
Purchases of noncontrolling interests in consolidated real estate partnerships
Other financing activities
Net cash used in financing activities
366,184
(299,559 )
35,881
(32,126 )
7,877
5,666
(7,694 )
(13,375 )
(15,794 )
47,060
394,139
(20,372 )
(358,104 )
402,162
(8,899 )
1,506
(1,589 )
14,704
312,434
(409,167 )
250,000
49,230
—
—
(16,358 )
(225,377 )
(10,667 )
(8,367 )
(314,269 )
(20,760 )
(393,301 )
333,066
(393,790 )
—
(25,208 )
7,629
5,060
(6,071 )
(20,680 )
(5,555 )
(105,549 )
377,724
(290,729 )
(346,645 )
535,513
(7,540 )
1,374
10,254
(97,773 )
417,714
(371,947 )
—
(9,070 )
—
(34,799 )
(17,253 )
(206,279 )
(10,214 )
(18,253 )
(13,941 )
(5,454 )
(269,496 )
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
15,542
61,244
76,786
$
10,455
50,789
61,244
$
$
306,301
(180,593 )
—
(27,524 )
6,640
5,186
(387 )
619
(22,334 )
87,908
359,891
(169,447 )
(367,180 )
367,571
(6,665 )
(429 )
5,253
(170,897 )
352,602
(514,294 )
—
(85,330 )
366,580
(27,000 )
(18,042 )
(184,082 )
(6,701 )
(43,757 )
(320 )
(6,832 )
(167,176 )
21,818
28,971
50,789
See notes to the consolidated financial statements.
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AIMCO PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2017, 2016 and 2015
(In thousands)
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid
Cash paid for income taxes
Non-cash transactions associated with the acquisition or disposition of real estate:
Non-recourse property debt assumed by buyer in connection with the disposition of real
estate
Issuance of preferred OP Units in connection with acquisition of real estate
Other non-cash investing and financing transactions:
Accrued capital expenditures (at end of period)
Accrued dividends on TSR restricted stock and LTIP awards (at end of period) (Note 8)
2017
2016
2015
$
$
196,438
7,401
$
200,278
2,152
207,087
2,033
—
—
31,719
1,818
—
17,000
35,594
927
6,068
—
43,725
309
See notes to the consolidated financial statements.
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Note 1 — Organization
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-
administered and self-managed real estate investment trust, or REIT. AIMCO Properties, L.P., or the Aimco Operating Partnership, is a Delaware
limited partnership formed on May 16, 1994, to conduct our business, which is focused on the ownership, management, redevelopment and limited
development of quality apartment communities located in some of the largest markets in the United States.
Aimco, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, owns a majority of the ownership interests in the Aimco
Operating Partnership. Aimco conducts all of its business and owns all of its assets through the Aimco Operating Partnership. Interests in the
Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as OP Units. OP Units include common partnership
units, which we refer to as common OP Units, as well as partnership preferred units, which we refer to as preferred OP Units. As of December 31,
2017, after eliminations for units held by consolidated subsidiaries, the Aimco Operating Partnership had 164,617,537 common partnership units
outstanding. As of December 31, 2017, Aimco owned 157,189,447 of the common partnership units (95.5% of the common partnership units) of the
Aimco Operating Partnership and Aimco had outstanding an equal number of shares of its Class A Common Stock, which we refer to as Common
Stock.
Except as the context otherwise requires, “we,” “our” and “us” refer to Aimco, the Aimco Operating Partnership and their consolidated
subsidiaries, collectively.
As of December 31, 2017, we owned an equity interest in 136 apartment communities with 36,904 apartment homes in our Real Estate portfolio.
Our Real Estate portfolio, which comprises our reportable segment, is diversified by both price point and geography and consists of market rate
apartment communities in which we own a substantial interest. We consolidated 132 of these apartment communities with 36,762 apartment homes.
As of December 31, 2017, we also held nominal ownership positions in partnerships that own 46 low-income housing tax credit apartment
communities with 6,898 apartment homes. We provide services to these partnerships and receive fees and other payments in return. Our
relationship with these partnerships is different than real estate ownership and is better described as an asset management business, or Asset
Management. In accordance with accounting principles generally accepted in the United States of America, or GAAP, we are required to
consolidate partnerships owning an aggregate of 39 apartment communities with 6,211 apartment homes.
Note 2 — Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
Aimco’s accompanying consolidated financial statements include the accounts of Aimco, the Aimco Operating Partnership, and their
consolidated subsidiaries. The Aimco Operating Partnership’s consolidated financial statements include the accounts of the Aimco Operating
Partnership and its consolidated subsidiaries. All significant intercompany balances have been eliminated in consolidation.
Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are reflected in Aimco’s accompanying balance
sheets as noncontrolling interests in Aimco Operating Partnership. Interests in partnerships consolidated into the Aimco Operating Partnership that
are held by third parties are reflected in our accompanying balance sheets as noncontrolling interests in consolidated real estate partnerships. The
assets of real estate partnerships consolidated by the Aimco Operating Partnership must first be used to settle the liabilities of such consolidated
real estate partnerships. These consolidated real estate partnerships’ creditors do not have recourse to the general credit of the Aimco Operating
Partnership.
As used herein, and except where the context otherwise requires, “partnership” refers to a limited partnership or a limited liability company and
“partner” refers to a partner in a limited partnership or a member of a limited liability company.
Acquisition of Real Estate and Related Depreciation and Amortization
We generally recognize the acquisition of apartment communities or interests in partnerships that own apartment communities at cost. The
related transaction costs are generally included in the cost of the acquired apartment community.
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We allocate the cost of apartment communities acquired based on the relative fair value of the assets acquired and liabilities assumed. We
determine the fair value of tangible assets, such as land, buildings, furniture, fixtures and equipment, generally using valuation techniques that
consider comparable market transactions, replacement costs and other available information. We determine the fair value of identified intangible
assets (or liabilities), which typically relate to in-place leases, using valuation techniques that consider the terms of the in-place leases, current
market data for comparable leases and our experience in leasing similar communities. The intangible assets or liabilities related to in-place leases are
comprised of: (a) the value of the above- and below-market leases in-place, measured over the period, including probable lease renewals for below-
market leases, that the leases are expected to remain in effect; (b) the estimated unamortized portion of avoided leasing commissions and other costs
that ordinarily would be incurred to originate the in-place leases; and (c) the value associated with leased apartment homes during an estimated
absorption period (estimates of rental revenue that would not have been earned had leased apartment homes been vacant at the time of acquisition
assuming lease-up periods based on market demand and stabilized occupancy levels).
Depreciation for all tangible assets is calculated using the straight-line method over their estimated useful lives. Acquired buildings and
improvements are depreciated over a useful life based on the age, condition and other physical characteristics of the apartment community. At
December 31, 2017, the weighted average depreciable life of our buildings and improvements was approximately 28 years. Furniture, fixtures and
equipment associated with apartment communities are depreciated over five years.
The above- and below-market lease intangibles are amortized to rental revenue over the expected remaining terms of the associated leases, which
include reasonably assured renewal periods. Other intangible assets related to in-place leases are amortized to depreciation and amortization over
the expected remaining terms of the associated leases.
At December 31, 2017 and 2016, deferred income in our consolidated balance sheets included below-market lease amounts totaling $9.1 million
and $10.4 million, respectively, which are net of accumulated amortization of $34.4 million and $33.1 million, respectively. During the years ended
December 31, 2017, 2016 and 2015, we included amortization of below-market leases of $1.3 million, $1.7 million and $1.7 million, respectively, in rental
and other property revenues in our consolidated statements of operations.
At December 31, 2017, our below-market leases had a weighted average amortization period of 6.2 years and estimated aggregate amortization for
each of the five succeeding years as follows (in thousands):
2018
2019
2020
2021
2022
Estimated Amortization
$1,128
998
886
811
763
Capital Additions and Related Depreciation
We capitalize costs, including certain indirect costs, incurred in connection with our capital additions activities, including redevelopments,
developments, other tangible apartment community improvements and replacements of existing apartment community components. Included in
these capitalized costs are payroll costs associated with time spent by site employees in connection with capital additions activities at the
apartment community level. We characterize as “indirect costs” an allocation of certain department costs, including payroll, at the area operations
and corporate levels that clearly relate to capital additions activities. We also capitalize interest, property taxes and insurance during periods in
which redevelopments, developments and construction projects are in progress. We begin capitalization of costs, including certain indirect costs,
incurred in connection with our capital addition activities, upon commencement of activities necessary to get apartment communities ready for their
intended use. These activities include when apartment communities or apartment homes are undergoing physical construction, as well as when
apartment homes are held vacant in advance of planned construction, provided that other activities such as permitting, planning and design are in
progress. We cease the capitalization of costs when the apartment communities are substantially complete and ready for their intended use, which
is typically when construction has been completed and apartment homes are available for occupancy. Costs, including ordinary repairs,
maintenance and resident turnover costs, are charged to property operating expense as incurred.
We depreciate capitalized costs using the straight-line method over the estimated useful life of the related improvement, which is generally 5, 15
or 30 years. All capitalized site payroll costs and indirect costs are allocated to capital additions proportionately, based on direct costs and
depreciated over the estimated useful lives of such capital additions.
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Certain homogeneous items that are purchased in bulk on a recurring basis, such as carpeting and appliances, are depreciated using group
methods that reflect the average estimated useful life of the items in each group. Except in the case of apartment community casualties, where the
net book value of the lost asset is written off in the determination of casualty gains or losses, we generally do not recognize any loss in connection
with the replacement of an existing apartment community component because normal replacements are considered in determining the estimated
useful lives used in connection with our composite and group depreciation methods.
For the years ended December 31, 2017, 2016 and 2015, we capitalized to buildings and improvements $7.6 million, $9.6 million and $11.7 million
of interest costs, respectively, and $36.0 million, $32.9 million and $28.2 million of other direct and indirect costs, respectively.
Impairment of Long-Lived Assets
Real estate and other long-lived assets to be held and used are stated at cost, less accumulated depreciation and amortization, unless the
carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of an apartment community may not be
recoverable, we make an assessment of its recoverability by comparing the carrying amount to our estimate of the undiscounted future cash flows,
excluding interest charges, of the apartment community. If the carrying amount exceeds the aggregate undiscounted future cash flows, we recognize
an impairment loss to the extent the carrying amount exceeds the estimated fair value of the apartment community.
Cash Equivalents
We classify highly liquid investments with an original maturity of three months or less as cash equivalents. We maintain cash equivalents in
financial institutions in excess of insured limits. We have not experienced any losses in these accounts in the past and believe that we are not
exposed to significant credit risk because our accounts are deposited with major financial institutions.
Restricted Cash
Restricted cash includes capital replacement reserves, completion repair reserves, bond sinking fund amounts, tax and insurance escrow
accounts held by lenders and resident security deposits.
Other Assets
At December 31, 2017 and 2016, other assets was comprised of the following amounts (dollars in thousands):
Investments in securitization trust that holds Aimco property debt
Accumulated unrecognized deferred tax expense from intercompany transfers
Deferred tax asset, net (Note 9)
Intangible assets, net
Prepaid expenses, commissions, real estate taxes and insurance
Software, equipment and leasehold improvements
Investments in unconsolidated real estate partnerships
Accounts receivable, net
Deferred expenses, deposits, notes receivable and other
Other assets per consolidated balance sheets
2017
2016
$
$
82,794
—
32,227
38,701
36,508
20,048
12,636
11,417
38,408
272,739
$
$
76,063
62,468
5,076
39,039
37,082
22,209
12,496
13,042
26,293
293,768
As discussed under the Accounting Pronouncements Adopted in the Current Year heading, on January 1, 2017, we recognized a cumulative
effect adjustment to retained earnings and partners’ capital, which reduced to zero the accumulated unrecognized deferred tax expense from
intercompany transfers.
The table above excludes other assets of partnerships served by our Asset Management business, which are presented separately on our
consolidated balance sheet.
Investments in Securitization Trust that holds Aimco Property Debt
We hold investments in a securitization trust that primarily holds certain of our property debt. These investments were initially recognized at
their purchase price and the discount to the face value is being accreted into interest income over the expected term of the securities. We have
designated these investments as available for sale securities and we measure these investments at fair
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value with changes in their fair value, other than the changes attributed to the accretion described above, recognized as an adjustment of
accumulated other comprehensive income or loss within equity and partners’ capital. Refer to Note 11 for further information regarding these debt
securities.
Intangible Assets
At December 31, 2017 and 2016, other assets included goodwill associated with our reportable segment of $37.8 million. We perform an annual
impairment test of goodwill by evaluating qualitative factors to determine the likelihood that goodwill may be impaired. We primarily consider the
fair value of our real estate portfolio and the fair value of our debt relative to their carrying values. As a result of the qualitative analysis, we do not
believe our goodwill is impaired as of the date of our annual test.
During the years ended December 31, 2016 and 2015, we allocated $4.5 million and $1.2 million, respectively, of goodwill related to our reportable
segments to the carrying amounts of the apartment communities sold or classified as held for sale. The amounts of goodwill allocated to these
apartment communities were based on the relative fair values of the apartment communities sold or classified as held for sale. As further discussed
under the Accounting Pronouncements Adopted in the Current Year heading, commencing in 2017 we no longer allocate goodwill to the carrying
amounts of apartment communities sold or classified as held for sale that do not meet the definition of a business.
Capitalized Software Costs
Purchased software and other costs related to software purchased or developed for internal use are capitalized during the application
development stage and are amortized using the straight-line method over the estimated useful life of the software, generally three to five years. For
the years ended December 31, 2017, 2016 and 2015, we capitalized software purchase and development costs totaling $2.0 million, $3.4 million and
$3.6 million, respectively. At December 31, 2017 and 2016, other assets included $9.1 million and $12.6 million of net capitalized software,
respectively. During the years ended December 31, 2017, 2016 and 2015, we recognized amortization of capitalized software of $5.5 million, $7.2
million and $6.9 million, respectively, which is included in depreciation and amortization in our consolidated statements of operations.
Investments in Unconsolidated Real Estate Partnerships
We own general and limited partner interests in partnerships that either directly, or through interests in other real estate partnerships, own
apartment communities. We generally account for investments in real estate partnerships that we do not consolidate under the equity method.
Under the equity method, we recognize our share of the earnings or losses of the entity for the periods presented, inclusive of our share of any
impairments and disposition gains recognized by and related to such entities, and we present such amounts within other, net in our consolidated
statements of operations.
The excess of the cost of the acquired partnership interests over the historical carrying amount of partners’ equity or deficit is generally ascribed
to the fair values of land and buildings owned by the partnerships. We amortize the excess cost related to the buildings over the related estimated
useful lives. Such amortization is recorded as an adjustment of the amounts of earnings or losses we recognize from such unconsolidated real estate
partnerships.
Deferred Costs
We defer lender fees and other direct costs incurred in obtaining new financing and amortize the amounts over the terms of the related loan
agreements. Amortization of these costs is included in interest expense. Debt issue costs associated with our revolving credit facility are included in
other assets on our consolidated balance sheets. Debt issue costs associated with non-recourse property debt and our term loan are presented as a
direct deduction from the related liabilities on our consolidated balance sheets.
We defer leasing commissions and other direct costs incurred in connection with successful leasing efforts and amortize the costs over the
terms of the related leases. Amortization of these costs is included in depreciation and amortization.
Noncontrolling Interests in Consolidated Real Estate Partnerships
We report the unaffiliated partners’ interests in the net assets of our consolidated real estate partnerships as noncontrolling interests in
consolidated real estate partnerships within consolidated equity and partners’ capital. Noncontrolling interests in consolidated real estate
partnerships consist primarily of equity interests held by limited partners in consolidated real estate partnerships that have finite lives. We generally
attribute to noncontrolling interests their share of income or loss of consolidated partnerships based on their proportionate interest in the results of
operations of the partnerships, including their share of losses even if such attribution results in a deficit noncontrolling interest balance within our
equity and partners’ capital accounts.
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The terms of the related partnership agreements generally require the partnerships to be liquidated following the sale of the underlying real
estate. As the general partner in these partnerships, we ordinarily control the execution of real estate sales and other events that could lead to the
liquidation, redemption or other settlement of noncontrolling interests.
Changes in our ownership interest in consolidated real estate partnerships generally consist of our purchase of an additional interest in or the
sale of our entire interest in a consolidated real estate partnership. The effect on our equity and partners’ capital of our purchase of additional
interests in consolidated real estate partnerships during the years ended December 31, 2017, 2016 and 2015, is shown in our consolidated statements
of equity and partners’ capital. The effect on our equity and partners’ capital of sales of consolidated real estate or sales of our entire interest in
consolidated real estate partnerships is reflected in our consolidated financial statements as gains on disposition of real estate and accordingly the
effect on our equity and partners’ capital is reflected within the amount of net income allocated to us and to noncontrolling interests. Upon our
deconsolidation of a real estate partnership following the sale of our partnership interests or liquidation of the partnership following sale of the
related apartment community, we derecognize any remaining noncontrolling interest of the associated partnership previously recorded in our
consolidated balance sheets.
Noncontrolling Interests in Aimco Operating Partnership
Noncontrolling interests in Aimco Operating Partnership consist of common OP Units and preferred OP Units. Holders of preferred OP Units
participate in the Aimco Operating Partnership’s income or loss only to the extent of their preferred distributions. Within Aimco’s consolidated
financial statements, after provision for Preferred OP Unit distributions, the Aimco Operating Partnership’s income or loss is allocated to the holders
of common partnership units based on the weighted average number of common partnership units (including those held by Aimco) outstanding
during the period. During the years ended December 31, 2017, 2016 and 2015, the holders of common OP Units had a weighted average ownership
interest in the Aimco Operating Partnership of 4.5%, 4.7% and 4.7%, respectively. See Note 7 for further information regarding the items comprising
noncontrolling interests in the Aimco Operating Partnership.
Revenue Recognition
Our apartment communities have operating leases with apartment residents with terms averaging 12 months. We recognize rental revenue related
to these leases, net of any concessions, on a straight-line basis over the term of the lease. We recognize revenues from asset management and other
services when the related fees are earned and realized or realizable.
Asset Management Business
We are the general partner in certain low-income housing tax credit partnerships, which are structured to provide for the pass-through of tax
credits and deductions to their partners. The tax credits are generally realized ratably over the first ten years of the tax credit arrangement and are
subject to the partnership’s compliance with applicable laws and regulations for a period of 15 years. We hold nominal ownership positions in these
partnerships, generally less than one percent. At inception, each investor agreed to fund capital contributions to the partnerships and we received a
syndication fee from the partnerships upon the investors’ admission to the partnership. In our role, we provide asset management and other
services to these partnerships and we receive fees and other payments in return. To the extent amounts due to us are not paid currently, the
balances accrue and are satisfied from the partnerships’ future operating or liquidating cash flow.
Capital contributions received by the partnerships from tax credit investors represent, in substance, consideration that we receive in exchange
for our obligation to deliver tax credits and other tax benefits to the investors. We record these contributions as deferred income in our consolidated
balance sheets upon receipt, and we recognize these amounts as revenue in our consolidated statements of operations when our obligation to the
investors is relieved upon delivery of the tax benefits.
We consolidate the low-income housing tax credit partnerships in which we are the sole general partner, as further discussed in Note 13. When
the contractual arrangements obligate us to deliver tax benefits to the investors, and entitle us through fee arrangements to receive substantially all
available cash flow from the partnerships, we recognize the income or loss generated by the underlying real estate based on our economic interest
in the partnerships’ current period results, which is approximately 100% and represents the allocation of cash available for distribution we would
receive from a hypothetical liquidation at the book value of the partnership’s net assets. Our economic interest in these partnerships will be 100%
until the limited partners become entitled to an allocation of distributable cash (generally upon sale of the underlying real estate). Our economic
interest generally differs from our legal interest.
Insurance
We believe our insurance coverages insure our apartment communities adequately against the risk of loss attributable to fire, earthquake,
hurricane, tornado, flood and other perils. In addition, we have third-party insurance coverage (after self-insured
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retentions) that defray the costs of large workers’ compensation, health and general liability exposures. We accrue losses based upon our estimates
of the aggregate liability for uninsured losses incurred using certain actuarial assumptions followed in the insurance industry and based on our
experience.
Share-Based Compensation
We issue various forms of share-based compensation, including stock options and restricted stock awards with service conditions and/or
market conditions. We recognize share-based employee compensation based on the fair value on the grant date and recognize compensation cost
over the awards’ requisite service periods. We reduce compensation cost related to forfeited awards in the period of forfeiture. See Note 8 for
further discussion of our share-based compensation.
Income Taxes
Aimco has elected to be taxed as a REIT under the Internal Revenue Code commencing with its taxable year ended December 31, 1994, and it
intends to continue to operate in such a manner. Aimco’s current and continuing qualification as a REIT depends on its ability to meet the various
requirements imposed by the Internal Revenue Code, which are related to organizational structure, distribution levels, diversity of stock ownership
and certain restrictions with regard to owned assets and categories of income. If Aimco qualifies for taxation as a REIT, it will generally not be
subject to United States federal corporate income tax on its taxable income that is currently distributed to stockholders. This treatment substantially
eliminates the “double taxation” (at the corporate and stockholder levels) that generally results from an investment in a corporation.
Even if Aimco qualifies as a REIT, it may be subject to United States federal income and excise taxes in various situations, such as on our
undistributed income. Aimco also will be required to pay a 100% tax on any net income on non-arm’s length transactions between it and a TRS
(described below) and on any net income from sales of apartment communities that were held for sale in the ordinary course. The state and local tax
laws may not conform to the United States federal income tax treatment, and Aimco may be subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business. Any taxes imposed on us reduce our operating cash flow and net income.
Certain of our operations or a portion thereof, including property management and risk management, are conducted through taxable REIT
subsidiaries, which are subsidiaries of the Aimco Operating Partnership, and each of which we refer to as a TRS. A TRS is a subsidiary C-
corporation that has not elected REIT status and as such is subject to United States federal corporate income tax. We use TRS entities to facilitate
our ability to offer certain services and activities to our residents and investment partners that cannot be offered directly by a REIT. We also use
TRS entities to hold investments in certain apartment communities.
For our TRS entities, deferred income taxes result from temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for United States federal income tax purposes, and are measured using the enacted tax rates and laws that
are expected to be in effect when the differences reverse. We reduce deferred tax assets by recording a valuation allowance when we determine,
based on available evidence, that it is more likely than not that the assets will not be realized. As further discussed under the Accounting
Pronouncements Adopted in the Current Year heading within this note, commencing in 2017, we recognize the tax consequences associated with
intercompany transfers between the Aimco Operating Partnership and TRS entities when such transactions occur. Refer to Note 9 for further
information about our income taxes.
Comprehensive Income or Loss
As discussed under the preceding Investments in Securitization Trust that holds Aimco Property Debt heading, we have investments that are
measured at fair value with unrealized gains or losses recognized as an adjustment of accumulated other comprehensive loss within equity and
partners’ capital. Additionally, as discussed in Note 11, we recognize changes in the fair value of our cash flow hedges as an adjustment of
accumulated other comprehensive loss within equity and partners’ capital. The amounts of consolidated comprehensive income for the years ended
December 31, 2017, 2016 and 2015, along with the corresponding amounts of such comprehensive income attributable to Aimco, the Aimco
Operating Partnership and to noncontrolling interests, are presented within the accompanying consolidated statements of comprehensive income.
Earnings per Share and Unit
Aimco and the Aimco Operating Partnership calculate earnings (loss) per share and unit based on the weighted average number of shares of
Common Stock or common partnership units, participating securities, common stock or common unit equivalents and dilutive convertible securities
outstanding during the period. The Aimco Operating Partnership considers both common partnership units and equivalents, which have identical
rights to distributions and undistributed earnings, to be common units for purposes of the earnings per unit computations. See Note 10 for further
information regarding earnings per share and unit computations.
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Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts included in the financial statements and accompanying notes thereto. Actual results could differ from those
estimates.
Reclassifications
Certain items included in the 2016 and 2015 financial statements have been reclassified to conform to the current presentation.
Accounting Pronouncements Adopted in the Current Year
During 2017, we elected to adopt early the new accounting standard that revised the GAAP definition of a business. Under the new standard
we expect apartment communities will no longer be considered businesses; therefore, transaction costs incurred related to the acquisition of real
estate operations will be capitalized as a cost of the acquisition. Additionally, we will no longer allocate goodwill to sales of apartment communities
for purposes of calculating gain or loss upon sale. We have applied the new standard prospectively to transactions occurring after adoption, which
did not have a significant effect on our financial condition or results of operations.
Effective January 1, 2017, we adopted a new standard issued by the Financial Accounting Standards Board, or FASB, that simplifies the
accounting for the income tax consequences of intercompany transfers of assets. Previously, the recognition within the statement of operations of
income tax expense or benefit resulting from an intercompany transfer of assets did not occur until the assets affect GAAP income or loss, for
example, through depreciation, impairment or upon the sale of the asset to a third-party. Under the new standard, we are required to recognize the
income tax expense or benefit from an intercompany transfer of assets when the transfer occurs. We have applied this change on a modified
retrospective basis and recognized a cumulative effect adjustment to retained earnings and partners’ capital of $65.7 million as of January 1, 2017,
representing accumulated unrecognized tax expense from intercompany transfers between the Aimco Operating Partnership and TRS entities. Such
amounts were included in other assets within our consolidated balance sheets at December 31, 2016.
Also effective January 1, 2017, we adopted guidance that simplifies the accounting for share-based compensation. Under prior practice, tax
benefits in excess of those associated with compensation cost recognized in accordance with GAAP, or windfalls, were recorded in equity and tax
deficiencies were recorded in equity until previous windfalls had been recovered and then recognized in earnings. Under the new guidance, all of
the tax effects related to share-based compensation are recognized through earnings. This guidance is applied to all windfalls and tax deficiencies
resulting from settlements occurring after January 1, 2017. The new guidance also requires windfalls to be recorded in the period the related
transaction triggering tax consequences occurs, such as an exercise of stock options or vesting of restricted shares. This change in timing of
recognition has been applied on a modified retrospective basis. We did not record a cumulative effect adjustment to opening retained earnings on
the date of adoption as there were no accumulated windfalls recorded in equity. Compared to prior periods, we may experience incremental volatility
in income tax benefit or expense resulting from the recognition in earnings of windfall benefits or deficiencies upon the exercise of stock options and
vesting of restricted shares.
Recent Accounting Pronouncements
The FASB has issued new standards that affect accounting for revenue from contracts with customers and are effective for us on January 1,
2018. The new revenue standards establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with
customers and supersede most current GAAP applicable to revenue recognition. The core principle of the new guidance is that revenue should
only be recognized when an entity has transferred control of goods or services to a customer and for an amount reflecting the consideration to
which the entity expects to be entitled for such exchange. We have completed our analysis of the effect this guidance will have on our consolidated
financial statements and have determined we will not recognize a cumulative effect adjustment upon adoption. We do not anticipate changes to the
timing or amount of revenue we recognize on an ongoing basis as substantially all of our revenue is earned from leases and is subject to the current
lease standard until the adoption of the new lease standard, which is discussed below.
The FASB has also issued a new standard on lease accounting, which is effective for us on January 1, 2019. Under the new lease standard,
lessor accounting will be largely unchanged, but lessees will be required to recognize a right of use asset and a lease liability for virtually all leases,
with such leases classified as either operating or finance. The new standard must be adopted using a modified retrospective method, which requires
application of the new guidance at the beginning of the earliest comparative period presented and provides for certain practical expedients, which
we anticipate electing. We do not anticipate significant changes in the timing of income from our leases with residents. However, in circumstances
where we are a lessee, in primarily a limited population of ground leases and leases for corporate office space, we will be required to recognize right
of use assets and related lease liabilities on our consolidated balance sheets. We do not anticipate the adoption of this standard will have a material
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effect on our financial condition or results of operations. We are in the process of determining the amount of the right of use assets and related
lease liabilities that will be recognized upon adoption.
During 2016, the FASB also issued an Accounting Standards Update that is intended to reduce diversity in the classification and presentation
of changes in restricted cash in the statement of cash flows and is effective for us on January 1, 2018. The new standard requires that the statement
of cash flows describe the changes in the combined balances of cash and cash equivalents and restricted cash during the period. The guidance is
required to be applied retrospectively to each period presented in the financial statements. We currently present transfers between restricted and
unrestricted cash accounts as operating, investing and financing activities depending upon the required or intended purpose for the restricted
funds, and cash receipts and payments directly with third parties to or from restricted cash accounts are presented on the statement of cash flows
as a net change in restricted cash and classified similarly to transfers between restricted and unrestricted cash. We expect that the primary change
to our statement of cash flows will be the presentation of activity in the restricted cash accounts combined with similar activity in unrestricted
accounts.
Note 3 — Significant Transactions
Reacquisition of Limited Partner Interest in Palazzo Joint Venture
During the year ended December 31, 2017, we reacquired for $451.5 million, the 47% noncontrolling limited partner interest in the Palazzo joint
venture, which owns three communities with a total of 1,382 apartment homes located in Los Angeles, California. We assumed $140.5 million of the
noncontrolling interest partner’s share of existing non-recourse property-level debt and paid $311.0 million in cash consideration, which was funded
by short term borrowings. We now own all of the interests in the Palazzo joint venture and its underlying apartment communities. Prior to the
transaction, we consolidated into our financial statements the joint venture and underlying apartment communities, therefore this transaction has
been accounted for as an equity transaction. In accordance with GAAP, we recognized the $155.6 million of consideration paid in excess of the
noncontrolling interest balance as a reduction of additional paid-in capital within Aimco’s equity and the Aimco Operating Partnership’s partners’
capital.
Acquisitions of Apartment Communities
During the year ended December 31, 2016, we purchased a 463-apartment community in Redwood City, California that was in the final stages of
construction at the time of acquisition. At closing, we paid $303.0 million in cash and issued $17.0 million of 6.0% Class Ten preferred OP Units to
the seller. The purchase price, plus $1.8 million of capitalized transaction costs, was allocated as follows: $26.9 million to land; $292.7 million to
buildings and improvements (including construction in progress); and $2.2 million to furniture and fixtures.
In February 2018, we purchased a 748-apartment home community in Fairfax County, Virginia for $160.0 million. Based on the timing of this
acquisition, we have not completed our purchase price allocation.
Dispositions of Apartment Communities and Assets Held for Sale
Summarized information regarding apartment communities sold during the years ended December 31, 2017, 2016 and 2015 is set forth in the table
below (dollars in thousands):
Real Estate portfolio:
Apartment communities sold
Apartment homes sold
Gain on disposition, net of tax
Consolidated partnerships served by the Asset Management business:
Apartment communities sold
Apartment homes sold
Gain on disposition, net of tax
2017
2016
2015
5
2,291
297,944
2
252
1,615
7
3,045
377,280
1
296
16,510
11
3,855
180,593
—
—
—
The apartment communities sold from our Real Estate portfolio during 2017, 2016 and 2015 were predominantly located outside of our primary
markets or in lower-rated locations within our primary markets and had average revenues per apartment home significantly below those of our
retained portfolio.
In January 2018, we agreed to sell our interests in the entities owning the La Jolla Cove property in settlement of legal actions filed in 2014 by a
group of disappointed buyers who had hoped to acquire the property. As a result of the settlement, we recognized
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in our 2017 results of operations a gross impairment loss of $35.8 million, $25.6 million of which relates to the establishment of a deferred tax liability
assumed in connection with our acquisition of the business entities. Upon closing of the transaction, the tax liability will be assumed by the buyer,
resulting in no economic loss to Aimco.
In addition to the apartment communities we sold during the periods presented, from time to time we may be marketing for sale certain apartment
communities that are inconsistent with our long-term investment strategy. At the end of each reporting period, we evaluate whether such
communities meet the criteria to be classified as held for sale. As of December 31, 2017, we had three apartment communities with 513 apartment
homes in our Real Estate portfolio that were classified as held for sale. In January 2018, we sold these apartment homes for a gain on disposition of
$51.0 million, net of tax, and gross proceeds of $71.9 million resulting in $64.6 million of net proceeds to Aimco. Proceeds from the sales were
primarily used to repay outstanding borrowings under our Credit Agreement.
Napico Disposition
In 2012, we sold the Napico business. The transaction was primarily seller-financed, and the associated notes were scheduled to be repaid from
the operation and liquidation of the Napico business and were collateralized by the buyer’s interests in the portfolio. During 2016, the buyer paid in
full the seller-financed notes as well as an agreed upon final payment representing future contingent consideration that may have been due under
the terms of the sale. As a result, we derecognized the net assets and liabilities of the Napico business with the exception of the amounts related to
one community in which we had continuing involvement in the form of a legal interest in the community and a guarantee related to property-level
debt. We recognized a gain of $5.2 million in other, net on our consolidated statement of operations for the year ended December 31, 2016. We also
wrote off a deficit balance in noncontrolling interests in consolidated real estate partnerships associated with the Napico business of $8.1 million,
which is recorded in net income attributable to noncontrolling interests in consolidated real estate partnerships for the year ended December 31,
2016.
In 2017, the owner refinanced the mortgage related to the final community, resulting in the release of our remaining guarantee, which allowed us
to transfer the nominal general partner interest in the community to the buyer. In connection with the transfer, we reduced other assets and accrued
liabilities and other by $34.5 million and $38.4 million, respectively, and recognized a gain of $7.1 million, net of tax, in other, net in our consolidated
financial statements for the year ended December 31, 2017.
Note 4 — Non-Recourse Property Debt and Credit Agreement
Non-Recourse Property Debt (Real Estate Portfolio)
We finance apartment communities in our Real Estate portfolio primarily using property-level, non-recourse, long-dated, fixed-rate, amortizing
debt. The following table summarizes non-recourse property debt related to assets classified as held for use at December 31, 2017 and 2016 (in
thousands):
Fixed-rate property debt
Variable-rate property debt
Debt issue costs, net of accumulated amortization
Non-recourse property debt, net
2017
2016
$
$
$
3,480,378
82,663
(17,932 )
3,545,109
$
3,564,979
83,644
(18,347 )
3,630,276
Fixed-rate property debt matures at various dates through January 2055, and has interest rates that range from 2.73% to 8.05%, with a weighted
average interest rate of 4.64%. Principal and interest on fixed-rate debt are generally payable monthly or in monthly interest-only payments with
balloon payments due at maturity. At December 31, 2017, each of the fixed-rate loans payable related to apartment communities classified as held for
use were secured by one of 98 apartment communities that had an aggregate gross book value of $6.3 billion.
Variable-rate property debt matures at various dates through July 2033, and had interest rates that ranged from 1.00% to 3.06%, as of December
31, 2017, with a weighted average interest rate of 2.70% at December 31, 2017. Principal and interest on variable-rate debt are generally payable in
semi-annual installments with balloon payments due at maturity. As of December 31, 2017, our variable-rate property debt related to apartment
communities classified as held for use were each secured by seven apartment communities that had an aggregate gross book value of $204.2 million.
These non-recourse property debt instruments contain covenants common to the type of borrowing, and at December 31, 2017, we were in
compliance with all such covenants.
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As of December 31, 2017, the scheduled principal amortization and maturity payments for the non-recourse property debt related to apartment
communities classified as held for use were as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
Total
Credit Agreement
$
Amortization
Maturities
74,807 $
71,792
65,362
49,542
39,778
$
173,733
481,136
296,967
741,523
233,439
1,334,962
3,563,041
We have a senior secured credit agreement with a syndicate of financial institutions, which we refer to as the Credit Agreement. Our Credit
Agreement provides for $600.0 million of revolving loan commitments. Borrowings against the revolving loan commitments bear interest at a rate set
forth on a pricing grid, which rate varies based on our credit rating as assigned by specified rating agencies (LIBOR plus 1.20%, or, at our option, a
base rate plus 0.20% at December 31, 2017). The Credit Agreement matures on January 22, 2022. The Credit Agreement provides that we may make
distributions to our investors during any four consecutive quarters in an aggregate amount that does not exceed the greater of 95% of our Funds
From Operations for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain Aimco’s REIT status.
During 2017, we amended the Credit Agreement to add a $250.0 million term loan, which we used to fund a portion of the reacquisition of our
limited partner’s interest in the Palazzo joint venture. The term loan matures on June 30, 2018, includes a one-year extension option, subject to the
satisfaction of customary conditions, and bears interest at 30-day LIBOR plus 1.35%. We paid lender and other fees of $1.0 million in connection
with the term loan, which have been deferred and are amortized as additional interest using the effective interest method.
As of December 31, 2017 and 2016, we had $67.2 million and $17.9 million of outstanding borrowings under our revolving loan commitments,
respectively. The interest rate on our outstanding borrowings was 3.26% and 2.09% at December 31, 2017 and 2016, respectively. As of December
31, 2017, after outstanding borrowings and $11.5 million of undrawn letters of credit backed by the Credit Agreement, our available borrowing
capacity was $521.3 million.
Non-Recourse Property Debt (Asset Management Business)
The partnerships served by the Asset Management business finance apartment communities using property-level, non-recourse, long-dated,
fixed-rate, amortizing debt. The following table summarizes non-recourse property debt related to assets classified as held for use at December 31,
2017 and 2016 (in thousands):
Fixed-rate property debt
Debt issue costs, net of accumulated amortization
Non-recourse property debt, net
2017
2016
231,374
(4,233 )
$
227,141
$
241,024
(4,598 )
236,426
Fixed-rate property debt secured by these communities matures at various dates through February 2061, and has interest rates that range from
2.50% to 8.50%, with a weighted average interest rate of 5.11%. At December 31, 2017, each of the fixed-rate loans payable related to apartment
communities classified as held for use were secured by one of 39 apartment communities that had an aggregate gross book value of $551.1 million.
These non-recourse property debt instruments contain covenants common to the type of borrowing, and at December 31, 2017, the partnerships
served by our Asset Management business were in compliance with all such covenants.
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As of December 31, 2017, the scheduled payments for the non-recourse property debt related to apartment communities classified as held for use
were as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
Total
Note 5 — Commitments and Contingencies
Commitments
Scheduled Payments
$
$
5,959
6,192
9,317
17,090
4,714
188,102
231,374
In connection with our redevelopment, development and capital improvement activities, we have entered into various construction-related
contracts and we have made commitments to complete redevelopment of certain apartment communities, pursuant to financing or other
arrangements. As of December 31, 2017, our commitments related to these capital activities totaled approximately $91.1 million, most of which we
expect to incur during the next 12 months.
We enter into certain commitments for future purchases of goods and services in connection with the operations of our apartment communities.
Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.
Tax Credit Arrangements
For various consolidated partnerships served by our Asset Management business, we are required to manage the partnerships and related
apartment communities in compliance with various laws, regulations and contractual provisions that apply to historic and low-income housing tax
credit syndication arrangements. In some instances, noncompliance with applicable requirements could result in projected tax benefits not being
realized by the limited partners in these partnerships and would require a refund or reduction of investor capital contributions, which are reported as
deferred income in our consolidated balance sheets until such time as our obligation to deliver tax benefits is relieved. The remaining compliance
periods for the tax credit syndication arrangements range from less than one year to eight years. We do not anticipate that any material refunds or
reductions of investor capital contributions will be required in connection with these arrangements.
Legal Matters
In addition to the matters described below, we are a party to various legal actions and administrative proceedings arising in the ordinary course
of business, some of which are covered by our general liability insurance program, and none of which we expect to have a material adverse effect on
our consolidated financial condition, results of operations or cash flows.
Environmental
Various federal, state and local laws subject apartment community owners or operators to liability for management, and the costs of removal or
remediation, of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Such laws often
impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The
presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well
as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with
investigation and remediation actions. Moreover, private plaintiffs may potentially make claims for investigation and remediation costs they incur or
for personal injury, disease, disability or other infirmities related to the alleged presence of hazardous materials. In addition to potential
environmental liabilities or costs associated with our current apartment communities, we may also be responsible for such liabilities or costs
associated with communities we acquire or manage in the future, or apartment communities we no longer own or operate.
We are engaged in discussions with the Environmental Protection Agency, or EPA, and the Indiana Department of Environmental Management,
or IDEM, regarding contaminated groundwater in a residential area in the vicinity of an Indiana apartment community that has not been owned by
us since 2008. The contamination allegedly derives from a dry cleaner that operated on our former property, prior to our ownership. We have
undertaken a voluntary remediation of the dry cleaner contamination under IDEM’s
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oversight, and in previous years accrued our share of the then-estimated cleanup and abatement costs. In 2016, EPA listed our former community
and a number of residential communities in the vicinity on the National Priorities List, or NPL (i.e. as a Superfund site), and IDEM has formally
sought to terminate us from the voluntary remediation program. We continue discussions with both agencies on potential long-term solutions. We
have filed a formal appeal of the EPA listing and the IDEM termination of us from the voluntary remediation program. Although the outcome of
these processes are uncertain, we do not expect their resolution to have a material adverse effect on our consolidated financial condition, results of
operations or cash flows.
We also have been contacted by regulators and the current owner of a property in Lake Tahoe, California regarding environmental issues
allegedly stemming from the historic operation of a dry cleaner. An entity owned by us was the former general partner of a now-dissolved
partnership that previously owned a site that was used for dry cleaning. That entity and the current property owner have been remediating the dry
cleaner site since 2009, under the oversight of the Lahontan Regional Water Quality Control Board, or Lahontan. In May 2017, Lahontan issued a
final cleanup and abatement order that names four potentially-responsible parties, acknowledges that there may be additional responsible parties,
and requires the named parties to perform additional groundwater investigation and corrective actions with respect to onsite and offsite
contamination. We are appealing the final order while simultaneously complying with it. Although the outcome of this process is uncertain, we do
not expect its resolution to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement
obligations, as defined in GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection
with a planned construction project or apartment community casualty, we believe that the fair value of our asset retirement obligations cannot be
reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. Asset retirement obligations that
are reasonably estimable as of December 31, 2017, are immaterial to our consolidated financial condition, results of operations and cash flows.
Operating Leases
We are obligated under non-cancelable operating leases for office space. We are also obligated under non-cancelable operating leases for the
ground under certain of our apartment communities with remaining terms ranging from 46 years to 70 years. Approximate minimum annual rental
payments under operating leases are as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
Total
Office Lease
Obligations
Ground Lease
Obligations
Total Operating
Lease Obligations
$
$
2,203
1,050
963
832
628
—
5,676
$
$
1,179
1,279
1,514
1,550
1,550
79,337
86,409
$
$
3,382
2,329
2,477
2,382
2,178
79,337
92,085
Substantially all of the office space subject to the operating leases in the table above is for the use of our corporate offices and area operations.
Rent expense recognized totaled $3.0 million, $3.3 million and $3.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Rent
expense recognized for the ground leases totaled $1.8 million, $1.7 million and $0.9 million for the years ended December 31, 2017, 2016 and 2015,
respectively, and is included within interest expense in the accompanying statements of operations.
Note 6 — Aimco Equity
Preferred Stock
At December 31, 2017 and 2016, Aimco had a single class of perpetual preferred stock outstanding, its Class A Cumulative Preferred Stock, with
5,000,000 shares authorized, issued and outstanding and with a balance of $125.0 million as of December 31, 2017 and 2016.
Aimco’s Class A Preferred Stock has a $0.01 per share par value, is senior to Aimco’s Common Stock, has a liquidation preference per share of
$25.00 and is redeemable at our option on or after May 17, 2019. The holders of Preferred Stock are generally not entitled to vote on matters
submitted to stockholders. Dividends at an annual rate of 6.88% are subject to declaration by Aimco’s Board of Directors.
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During the year ended December 31, 2016, Aimco redeemed all of the outstanding shares of its Class Z Cumulative Preferred Stock at a
redemption value of $34.8 million. We reflected the $0.7 million excess of the redemption value over the carrying amount and $1.3 million of
previously deferred issuance costs as an adjustment of net income attributable to preferred stockholders for the year ended December 31, 2016.
During the year ended December 31, 2015, Aimco redeemed the remaining outstanding shares, or $27.0 million in liquidation preference, of its
Series A Community Reinvestment Act, or CRA, Preferred Stock. We reflected $0.7 million of issuance costs as an adjustment of net income
attributable to preferred stockholders for the year ended December 31, 2015.
In connection with these redemptions of Aimco preferred stock, the Aimco Operating Partnership redeemed from Aimco a number of Partnership
Preferred Units equal to the number of shares redeemed or repurchased by Aimco.
Common Stock
During the years ended December 31, 2017, 2016 and 2015, Aimco declared dividends per common share of $1.44, $1.32 and $1.18, respectively.
During the year ended December 31, 2015, Aimco issued 9,430,000 shares of its Common Stock, par value $0.01 per share, in an underwritten
public offering, for net proceeds per share of $38.90. The offering generated net proceeds to Aimco of $366.6 million, net of issuance costs. Aimco
contributed the net proceeds from the sale of Common Stock to the Aimco Operating Partnership in exchange for a number of common partnership
units equal to the number of shares of Common Stock issued.
Registration Statements
Aimco and the Aimco Operating Partnership have a shelf registration statement that provides for the issuance of debt and equity securities by
Aimco and debt securities by the Aimco Operating Partnership.
Note 7 — Partners’ Capital
Partnership Preferred Units Owned by Aimco
At December 31, 2017 and 2016, the Aimco Operating Partnership had outstanding preferred units in classes and amounts similar to Aimco’s
Preferred Stock described in Note 6, or Partnership Preferred Units. All of these Partnership Preferred Units were owned by Aimco during the
periods presented.
The Partnership Preferred Units are senior to the Aimco Operating Partnership’s common partnership units. The Partnership Preferred Units do
not have voting rights, except the right to approve certain changes to the Aimco Operating Partnership’s Partnership Agreement that would
adversely affect holders of such class of units. Distributions on Partnership Preferred Units are subject to being declared by the General Partner.
The Partnership Preferred Units are redeemable by the Aimco Operating Partnership only in connection with a concurrent redemption by Aimco of
the corresponding Aimco Preferred Stock held by unrelated parties.
As discussed in Note 6, during the years ended December 31, 2016 and 2015, Aimco completed various Preferred Stock redemptions. In
connection with these redemptions, the Aimco Operating Partnership redeemed from Aimco a corresponding number of Partnership Preferred Units.
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Redeemable Preferred OP Units
In addition to the Partnership Preferred Units owned by Aimco, the Aimco Operating Partnership has outstanding various classes of redeemable
Partnership Preferred Units owned by third parties, which we refer to as preferred OP Units. As of December 31, 2017 and 2016, the Aimco Operating
Partnership had the following classes of preferred OP Units (stated at their redemption values, in thousands, except unit and per unit data):
Class of Preferred Units
Percent
Per Unit
2017
2016
2017
2016
Distributions per Annum
Units Issued and Outstanding
Redemption Values
Class One
Class Two
Class Three
Class Four
Class Six
Class Seven
Class Nine
Class Ten
Total
8.75 % $
1.92 % $
7.88 % $
8.00 % $
8.50 % $
7.87 % $
6.00 % $
6.00 % $
8.00
0.48
1.97
2.00
2.13
1.97
1.50
1.50
90,000
17,750
1,338,524
644,954
780,036
27,960
243,112
680,000
3,822,336
90,000 $
17,750
1,341,289
644,954
780,036
27,960
306,890
680,000
3,888,879 $
8,229 $
444
33,462
16,124
19,501
699
6,078
17,000
101,537 $
8,229
444
33,532
16,124
19,501
699
7,672
17,000
103,201
Each class of preferred OP Units is currently redeemable at the holders’ option. The Aimco Operating Partnership, at its sole discretion, may
settle such redemption requests in cash or cause Aimco to issue shares of its Common Stock with a value equal to the redemption price. In the
event the Aimco Operating Partnership requires Aimco to issue shares of Common Stock to settle a redemption request, the Aimco Operating
Partnership would issue to Aimco a corresponding number of common partnership units. The Aimco Operating Partnership has a redemption policy
that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. Subject to certain conditions, the
Class Four and Class Six preferred OP Units may be converted into common OP Units.
These redeemable units are classified within temporary equity in Aimco’s consolidated balance sheets and within temporary capital in the Aimco
Operating Partnership’s consolidated balance sheets.
During the years ended December 31, 2017, 2016 and 2015, approximately 67,000, 69,000 and 700 preferred OP Units, respectively, were redeemed
in exchange for cash, and no preferred OP Units were redeemed in exchange for shares of Aimco Common Stock.
The Class Ten preferred OP Units were issued as partial consideration for an acquisition during the year ended December 31, 2016.
The following table presents a reconciliation of the Aimco Operating Partnership’s preferred OP Units during the years ended December 31,
2017, 2016 and 2015 (dollars in thousands):
2017
2016
2015
Balance at January 1
Preferred distributions
Redemption of preferred units and other
Issuance of preferred units
Net income
Balance at December 31
Common Partnership Units
$
$
103,201 $
(7,764 )
(1,664 )
—
7,764
101,537 $
$
87,926
(7,239 )
(1,725 )
17,000
7,239
103,201
$
87,937
(6,943 )
(11 )
—
6,943
87,926
In the Aimco Operating Partnership’s consolidated balance sheets, the common partnership units held by Aimco are classified within Partners’
Capital as General Partner and Special Limited Partner capital and the common OP Units are classified within Limited Partners’ capital. In Aimco’s
consolidated balance sheets, the common OP Units are classified within permanent equity as common noncontrolling interests in the Aimco
Operating Partnership.
Common partnership units held by Aimco are not redeemable whereas common OP Units are redeemable at the holders’ option, subject to certain
restrictions, on the basis of one common OP Unit for either one share of Common Stock or cash equal to the fair
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value of a share of Common Stock at the time of redemption. Aimco has the option to deliver shares of Common Stock in exchange for all or any
portion of the common OP Units tendered for redemption. When a limited partner redeems a common OP Unit for Common Stock, Limited Partners’
capital is reduced and the General Partner and Special Limited Partners’ capital is increased.
The holders of the common OP Units receive distributions, prorated from the date of issuance, in an amount equivalent to the dividends paid to
holders of Common Stock. During the years ended December 31, 2017, 2016 and 2015, the Aimco Operating Partnership declared distributions per
common unit of $1.44, $1.32 and $1.18, respectively.
During the years ended December 31, 2017, 2016 and 2015, approximately 98,000, 248,000 and 112,000 common OP Units, respectively, were
redeemed in exchange for cash, and no common OP Units were redeemed in exchange for shares of Common Stock.
Note 8 — Share-Based Compensation
We have a stock award and incentive program to attract and retain officers and independent directors. As of December 31, 2017, approximately
0.4 million shares were available for issuance under our 2015 Stock Award and Incentive Plan. The total number of shares available for issuance
under this plan may be increased by an additional 0.7 million shares to the extent of any forfeiture, cancellation, exchange, surrender, termination or
expiration of an award outstanding under our 2007 Stock Award and Incentive Plan. Awards under the 2015 plan may be in the form of incentive
stock options, non-qualified stock options and restricted stock, or other types of awards as authorized under the plan.
Our plans are administered by the Compensation and Human Resources Committee of Aimco’s Board of Directors. In the case of stock options,
the exercise price of the options granted may not be less than the fair market value of a share of Common Stock at the date of grant.
Total compensation cost recognized for stock based awards was $9.3 million, $8.6 million and $7.2 million for the years ended December 31, 2017,
2016 and 2015, respectively. Of these amounts, $1.4 million, $1.0 million and $0.5 million, respectively, were capitalized. At December 31, 2017, total
unvested compensation cost not yet recognized was $11.8 million. We expect to recognize this compensation over a weighted average period of
approximately 1.6 years.
We have granted five different types of awards that are outstanding as of December 31, 2017. We have granted stock options and restricted
stock awards that are subject to time-based vesting and require continuous employment, typically over a period of four years from the grant date,
and we refer to these awards as Time-Based Stock Options and Time-Based Restricted Stock, respectively. We have also granted stock options,
restricted stock awards and long-term incentive partnership units, or LTIP units, that vest conditioned on Aimco’s total shareholder return, or TSR,
relative to the NAREIT Apartment Index (60% weighting) and the MSCI US REIT Index (40% weighting) over a forward-looking performance period
of three years. We refer to these awards as TSR Stock Options, TSR Restricted Stock and TSR LTIP units. Earned TSR-based awards, if any, will
vest 50% on each of the third anniversary and fourth anniversary of the grant date, based on continued employment. The term of Time-Based Stock
Options and TSR Stock Options is generally ten years from the date of grant.
We recognize compensation cost associated with Time-Based awards ratably over the requisite service periods, which are typically four years.
We recognize compensation cost related to the TSR-based awards, which have graded vesting periods, over the requisite service period for each
separate vesting tranche of the award, commencing on the grant date. The value of the TSR-based awards take into consideration the probability
that the market condition will be achieved; therefore previously recorded compensation cost is not adjusted in the event that the market condition is
not achieved and awards do not vest.
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Stock Options
During the years ended December 31, 2017 and 2016, we granted TSR Stock Options, and during and prior to the year ended December 31, 2015,
we granted Time-Based Stock Options.
The following table summarizes activity for our outstanding stock options, for the years ended December 31, 2017, 2016 and 2015 (numbers of
options in thousands):
2017
2016
2015
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
675 $
184
(211 )
—
648 $
128 $
29.55
44.07
9.90
—
40.08
37.59
$
1,394
216
(934 )
(1 )
675
280
$
$
30.85
38.73
33.61
29.11
29.55
16.38
$
1,640
239
(484 )
(1 )
1,394
1,155
$
$
28.91
39.05
28.33
25.78
30.85
29.16
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at end of year
Exercisable at end of year
The intrinsic value of a stock option represents the amount by which the current price of the underlying stock exceeds the exercise price of the
option. As of December 31, 2017, options outstanding had an aggregate intrinsic value of $2.4 million and a weighted average remaining contractual
term of 7.9 years. Options exercisable at December 31, 2017, had an aggregate intrinsic value of $0.8 million and a weighted average remaining
contractual term of 6.7 years. The intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015, was $7.1
million, $11.1 million and $5.5 million, respectively.
The weighted average grant date fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 was $11.39, $9.94
and $6.97 per option, respectively.
Time-Based Restricted Stock Awards
The following table summarizes activity for Time-Based Restricted Stock awards for the years ended December 31, 2017, 2016 and 2015 (numbers
of shares in thousands):
2017
2016
2015
Number of
Shares
Weighted
Average
Grant-Date
Fair Value
Number of
Shares
Weighted
Average
Grant-Date
Fair Value
Number of
Shares
Weighted
Average
Grant-Date
Fair Value
Unvested at beginning of year
Granted
Vested
Forfeited
Unvested at end of year
249 $
45
(134 )
—
160 $
33.61
44.07
32.35
—
37.63
$
339
91
(181 )
—
249
$
29.96
40.03
29.99
—
33.61
$
513
145
(259 )
(60 )
339
$
26.34
39.39
27.54
32.29
29.96
The aggregate fair value of shares that vested during the years ended December 31, 2017, 2016 and 2015 was $6.0 million, $7.0 million and $10.4
million, respectively.
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TSR Restricted Stock Awards
The following table summarizes activity for TSR Restricted Stock awards for the years ended December 31, 2017, 2016 and 2015 (numbers of
shares in thousands):
2017
2016
2015
Weighted
Average
Grant-Date
Fair Value
Number of
Shares
Weighted
Average
Grant-Date
Fair Value
Number of
Shares
Number of
Shares
Weighted
Average
Grant-Date
Fair Value
214 $
39
—
253 $
39.66
46.39
—
40.70
123 $
91
—
214 $
39.72
39.59
—
39.66
— $
142
(19 )
123 $
—
39.72
39.72
39.72
Unvested at beginning of year
Granted
Forfeited
Unvested at end of year
TSR LTIP Units
The following table summarizes activity for TSR LTIP units for the years ended December 31, 2017 (numbers of units in thousands):
Unvested at beginning of year
Granted
Unvested at end of year
Determination of Grant-Date Fair Value of Awards
2017
Weighted
Average
Grant-Date
Fair Value
Number of
Units
— $
45
45 $
—
46.21
46.21
We estimated the fair value of TSR-based awards granted in 2017, 2016 and 2015 using a Monte Carlo model using the assumptions set forth in
the table below.
The risk-free interest rate reflects the annualized yield of a zero coupon U.S. Treasury security with a term equal to the expected term of the
option. The expected dividend yield reflects expectations regarding cash dividend amounts per share paid on Aimco’s Common Stock during the
expected term of the option. Expected volatility reflects an average of the historical volatility of Aimco’s Common Stock during the historical period
commensurate with the expected term of the options that ended on the date of grant, and the implied volatility is calculated from observed call
option contracts closest to the expected term. The derived vesting period of TSR Restricted Stock and TSR LTIP units was determined based on the
graded vesting terms. The expected term of the TSR-options was based on historical option exercises and post-vesting terminations. The midpoints
of our valuation assumptions for the 2017, 2016 and 2015 grants were as follows:
Grant date market value of a common share
Risk-free interest rate
Dividend yield
Expected volatility
Derived vesting period of TSR Restricted Stock and TSR LTIP units
Weighted average expected term of TSR Stock Options
2017
2016
2015
$
$
44.07
1.57 %
3.27 %
21.33 %
$
38.73
1.15 %
3.41 %
21.24 %
39.05
1.04 %
2.87 %
19.48 %
3.4 years
5.8 years
3.4 years
5.8 years
3.4 years
n/a
The grant date fair value for the Time-Based Restricted Stock awards reflects the closing price of a share of Aimco common stock on the grant
date.
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Note 9 — Income Taxes
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities of the TRS entities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax liabilities and assets are
as follows (in thousands):
Deferred tax liabilities:
Real estate and real estate partnership basis differences
Deferred tax assets:
Net operating, capital and other loss carryforwards
Accruals and expenses
Tax credit carryforwards
Management contracts and other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
December 31,
2017
2016
32,032
$
72,726
$
$
$
9,523
6,575
73,450
200
89,748
(25,489 )
$
32,227
$
8,873
7,537
65,559
300
82,269
(4,467 )
5,076
In December 2017, the U.S. Congress passed the Tax Cuts and Jobs Act, or the 2017 Act, which is effective for years beginning with 2018. The
2017 Act provides for a reduction in the federal income tax rate. In accordance with GAAP, we revalued our deferred tax assets and liabilities as of
December 31, 2017. We have not completed our accounting for the tax effects of enactment of the 2017 Act; however, we have made a reasonable
estimate of the effects on our existing deferred tax balances, resulting in our recognition of a net tax benefit of $15.9 million.
At December 31, 2017, we had federal and state net operating loss carryforwards, or NOLs, for which the deferred tax asset was approximately
$9.5 million, before a valuation allowance of $6.6 million. The NOLs expire in years 2018 to 2033. Subject to certain separate return limitations, we
may use these NOLs to offset a portion of state taxable income generated by our TRS entities.
As of December 31, 2017, we had low-income housing and rehabilitation tax credit carryforwards and corresponding deferred tax assets of
approximately $73.5 million for income tax purposes that expire in years 2024 to 2037. In light of the lower federal tax rate under the 2017 Act, our
TRS entities must generate more taxable income in future years to utilize tax credit carryforwards, which are recorded as deferred tax assets. As a
result, during the year ended December 31, 2017, we recognized a partial valuation allowance of $15.4 million against the deferred tax assets
associated with low-income housing and rehabilitation tax credit carryforwards.
At December 31, 2017, we had a real estate partnership basis difference of $4.4 million related to the 2017 impairment loss recognized related to
the La Jolla Cove property discussed in Note 3, for which we have recognized a full valuation allowance.
A reconciliation of the beginning and ending balance of our unrecognized tax benefits is presented below (in thousands):
Balance at January 1
Additions (reductions) based on tax positions related to prior years
Balance at December 31
2017
2016
2015
$
$
2,286 $
190
2,476 $
$
2,897
(611 )
2,286
$
2,286
611
2,897
Because the statute of limitations has not yet elapsed, our United States federal income tax returns for the year ended December 31, 2013 and
subsequent years and certain of our State income tax returns for the year ended December 31, 2013 and subsequent years are currently subject to
examination by the IRS or other taxing authorities. If recognized, the unrecognized benefit would affect the effective rate.
In 2014, the IRS initiated an audit of the Aimco Operating Partnership’s 2011 and 2012 tax years. This audit remains in process as of December
31, 2017. We do not believe the audit will have any material effect on our unrecognized tax benefits, financial condition or results of operations.
Our policy is to include any interest and penalties related to income taxes within the income tax line item in our consolidated statements of
operations.
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In accordance with the accounting requirements for stock-based compensation, we may recognize tax benefits in connection with the exercise of
stock options by employees of our TRS entities and the vesting of restricted stock awards. As of December 31, 2017, all cumulative excess tax
benefits from employee stock option exercises and vested restricted stock awards had been realized. As further discussed in the Accounting
Pronouncements Adopted in the Current Year heading in Note 2, in 2017 we began recognizing the tax effects related to stock-based compensation
through earnings in the period the compensation was recognized.
Significant components of the income tax benefit or expense are as follows and are classified within income tax benefit in income before gain on
dispositions and gain on dispositions of real estate, net of tax, in our consolidated statements of operations for the years ended December 31, 2017,
2016 and 2015 (in thousands):
Current:
Federal (1)
State
Total current
Deferred:
Federal
State
Revaluation of deferred taxes due to change in tax rate
Total deferred
Total benefit
Classification:
Income before gain on dispositions
Gain on dispositions of real estate
2017
2016
2015
(938 ) $
525
(413 )
$
5,038
2,916
7,954
1,310
1,357
2,667
(10,908 )
(3,621 )
(15,894 )
(30,423 )
(26,173 )
(623 )
—
(26,796 )
(30,836 ) $
(18,842 ) $
(32,126 ) $
1,290 $
(25,208 ) $
$
6,366
(27,382 )
(1,052 )
—
(28,434 )
(25,767 )
(27,524 )
1,757
$
$
$
$
(1) As a result of the 2017 Act, Alternative Minimum Tax credits that are not used will be refunded before 2022, therefore in 2017 we reclassified $2.7 million
in AMT credits from deferred tax assets to receivables, which is included in other assets on our consolidated balance sheet, resulting in a net current federal
tax benefit.
Consolidated income or loss subject to tax consists of pretax income or loss of our TRS entities and income and gains retained by the REIT. For
the years ended December 31, 2017, 2016 and 2015, we had consolidated net loss subject to tax of $55.6 million, net income subject to tax of $109.3
million and net loss subject to tax of $31.3 million, respectively.
The reconciliation of income tax attributable to operations computed at the United States statutory rate to income tax benefit is shown below
(dollars in thousands):
Tax (benefit) provision at United States statutory rates on
consolidated income or loss subject to tax
State income tax expense, net of federal tax (benefit) expense
Establishment of deferred tax asset related to partnership basis
difference (1)
Effect of permanent differences
Tax effect of intercompany transactions (2)
Tax credits
Tax reform revaluation (3)
Increase in valuation allowance (4)
Total income tax benefit
2017
2016
2015
Amount
Percent
Amount
Percent
Amount
Percent
$
(19,459 )
(1,769 )
35.0 % $
3.2 %
38,257
7,152
35.0 % $
6.5 %
(10,947 )
(361 )
(3,501 )
(1,629 )
—
(9,607 )
(15,894 )
21,023
(30,836 )
$
6.3 %
2.9 %
— %
17.3 %
28.6 %
(37.8 )%
55.5 % $
—
(132 )
(47,369 )
(16,750 )
—
—
(18,842 )
— %
(0.1 )%
(43.3 )%
(15.3 )%
— %
— %
(17.2 )% $
—
(27 )
(1,515 )
(13,583 )
—
666
(25,767 )
35.0 %
1.2 %
— %
0.1 %
4.8 %
43.4 %
— %
(2.1 )%
82.4 %
(1) Includes the establishment of a deferred tax asset related to partnership basis difference when it became apparent that it would reverse in the foreseeable
future. This deferred tax asset is fully reserved in the valuation allowance described below.
(2) 2016 and 2015 include the effect of intercompany asset transfers between the Aimco Operating Partnership and TRS entities, for which tax was deferred
and recognized as the assets affected GAAP income or loss, for example, through depreciation, impairment, or upon the sale of the asset to a third-party.
Effective January 1, 2017, we adopted a new accounting standard applicable to intercompany asset transfers. As a result, the accumulated unrecognized
deferred tax expense associated with historical intercompany transfers was recognized as a cumulative effect adjustment through retained earnings at that
time, as further described in Note 2.
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(3) Reflects revaluation of deferred tax assets and liabilities using the TRS entities’ lower effective tax rates resulting from the 2017 Act.
(4) Includes a $15.4 million valuation allowance against the deferred tax assets associated with rehabilitation tax credits due to the lower federal tax rate under
the 2017 Act.
Income taxes paid totaled approximately $7.4 million, $2.2 million and $2.0 million in the years ended December 31, 2017, 2016 and 2015,
respectively.
For income tax purposes, dividends paid to holders of Common Stock primarily consist of ordinary income, capital gains, qualified dividends and
unrecaptured Section 1250 gains, or a combination thereof. For the years ended December 31, 2017, 2016 and 2015, dividends per share held for the
entire year were estimated to be taxable as follows:
Ordinary income
Capital gains
Qualified dividends
Unrecaptured Section 1250 gain
Note 10 — Earnings per Share/Unit
2017
2016
2015
Amount
Percentage
Amount
Percentage
Amount
Percentage
$
$
0.75
0.51
0.02
0.16
1.44
51.5% $
35.7%
1.6%
11.2%
100.0% $
0.45
0.47
0.13
0.27
1.32
34.2% $
35.4%
9.9%
20.5%
100.0% $
0.36
0.37
0.17
0.28
1.18
30.2%
31.3%
14.5%
24.0%
100.0%
Aimco and the Aimco Operating Partnership calculate basic earnings per common share and basic earnings per common unit based on the
weighted average number of shares of Common Stock and common partnership units and participating securities outstanding, and calculate diluted
earnings per share and diluted earnings per unit taking into consideration dilutive common stock and common partnership unit equivalents and
dilutive convertible securities outstanding during the period.
Our common stock equivalents and common partnership unit equivalents include options to purchase shares of Common Stock, which, if
exercised, would result in Aimco’s issuance of additional shares and the Aimco Operating Partnership’s issuance to Aimco of additional common
partnership units equal to the number of shares purchased under the options. These equivalents also include unvested TSR Restricted Stock
awards that do not meet the definition of participating securities, which would result in the issuance of additional common shares and common
partnership units equal to the number of shares that vest. The effect of these securities was dilutive for the years ended December 31, 2017, 2016,
and 2015, and accordingly has been included in the denominator for calculating diluted earnings per share and unit during these periods.
Our Time-Based Restricted Stock awards receive dividends similar to shares of Common Stock and common partnership units prior to vesting
and our TSR LTIP units receive a percentage of the distributions paid to common partnership units prior to vesting. These dividends and
distributions are not forfeited in the event the awards do not vest. Therefore, the unvested restricted shares and units related to these awards are
participating securities. The effect of participating securities is included in basic and diluted earnings per share and unit computations using the
two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method.
At December 31, 2017, 2016 and 2015, there were 0.2 million, 0.2 million and 0.3 million shares of unvested participating restricted securities,
respectively.
As discussed in Note 7, the Aimco Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holders’
option. The Aimco Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of December 31, 2017,
these preferred OP Units were potentially redeemable for approximately 2.3 million shares of Common Stock (based on the period end market price),
or cash. The Aimco Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units,
subject to limited exceptions. Accordingly, we have excluded these securities from earnings per share and unit computations for the periods
presented above, and we expect to exclude them in future periods.
Note 11 — Fair Value Measurements
Recurring Fair Value Measurements
We measure at fair value on a recurring basis our investment in the securitization trust that holds certain of our property debt, which we classify
as available for sale (AFS) debt securities, and our interest rate swaps, both of which are classified within Level 2 of the GAAP fair value hierarchy.
Our investments classified as AFS are presented within other assets in the accompanying consolidated balance sheets. We hold several
positions in the securitization trust that pay interest currently and we also hold the first loss position in the securitization
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trust, which accrues interest over the term of the investment. We are accreting the discount to the $100.9 million face value of the investments into
interest income using the effective interest method over the remaining expected term of the investments, which as of December 31, 2017, was
approximately 3.4 years. Our amortized cost basis for these investments, which represents the original cost adjusted for interest accretion less
interest payments received, was $77.7 million and $72.5 million at December 31, 2017 and 2016, respectively. We estimated the fair value of these
investments to be $82.8 million and $76.1 million at December 31, 2017 and 2016, respectively.
We estimate the fair value of these investments using an income and market approach with primarily observable inputs, including yields and
other information regarding similar types of investments, and adjusted for certain unobservable inputs specific to these investments. The fair value
of the positions that pay interest currently typically moves in an inverse relationship with movements in interest rates. The fair value of the first loss
position is primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.
Certain consolidated partnerships served by our Asset Management business have entered into interest rate swap agreements, which limit
exposure to interest rate risk on the partnerships’ debt by effectively converting the interest from a variable rate to a fixed rate. We estimate the fair
value of interest rate swaps using an income approach with primarily observable inputs, including information regarding the hedged variable cash
flows and forward yield curves relating to the variable interest rates on which the hedged cash flows are based.
The following table sets forth a summary of changes in fair value in the interest rate swaps (in thousands):
Beginning balance
Realized (unrealized) losses included in interest expense
Realized losses on derecognition of interest rate swaps included in earnings
Losses on interest rate swaps reclassified into interest expense from accumulated other
comprehensive loss
Unrealized (losses) gains included in equity and partners’ capital
Ending balance
Year Ended December 31,
2017
2016
2015
$
$
(3,175) $
73
273
1,207
(173)
(1,795) $
(4,938) $
(44)
—
1,586
221
(3,175) $
(5,273)
(44)
—
1,678
(1,299)
(4,938)
Realized losses on derecognition of interest rate swaps included in earnings represents previously unrealized losses related to an interest rate
swap to which the partnership owning the final Napico property was a party. We wrote off the accumulated other comprehensive income related to
this swap in conjunction with the derecognition of the property’s assets and liabilities as discussed in Note 3.
As of December 31, 2017 and 2016, the remaining interest rate swaps, exclusive of the derecognized Napico interest rate swap, had aggregate
notional amounts of $22.0 million and $22.4 million, respectively. As of December 31, 2017, these swaps had a weighted average remaining term of
6.0 years. We have designated these interest rate swaps as cash flow hedges. The fair value of these swaps is presented within accrued liabilities
and other related to the Asset Management business within our consolidated balance sheets, and we recognize any changes in the fair value as an
adjustment of accumulated other comprehensive loss within equity and partners’ capital to the extent of their effectiveness.
If the forward rates at December 31, 2017, remain constant, we estimate that during the next 12 months, we would reclassify into earnings
approximately $0.3 million of the unrealized losses in accumulated other comprehensive loss. If market interest rates increase above the 3.26%
weighted average fixed rate under these interest rate swaps we will benefit from net cash payments due to us from our counterparty to the interest
rate swaps.
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Table of Contents
Fair Value Disclosures
We believe that the carrying values of the consolidated amounts of cash and cash equivalents, receivables and payables approximates their fair
value at December 31, 2017 and 2016, due to their relatively short-term nature and high probability of realization. The estimated fair value of total
indebtedness associated with our Real Estate portfolio was approximately $3.9 billion and $3.7 billion at December 31, 2017 and 2016, respectively,
as compared to carrying amounts of $3.9 billion and $3.6 billion, respectively. The carrying amounts of the non-recourse property debt of the
consolidated partnerships served by our Asset Management business approximated its estimated fair value at December 31, 2017 and December 31,
2016. We estimate the fair value of our consolidated debt using an income and market approach, including comparison of the contractual terms to
observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, collateral
quality and loan to value ratios on similarly encumbered apartment communities within our portfolio. We classify the fair value of our consolidated
debt within Level 3 of the GAAP valuation hierarchy based on the significance of certain of the unobservable inputs used to estimate their fair
values.
Note 12 — Business Segments
During the year ended December 31, 2017, we revised the information regularly reviewed by our chief executive officer, who is our chief
operating decision maker, to assess our operating performance. Apartment communities are classified as either part of our Real Estate portfolio or as
those owned by partnerships served by our Asset Management business.
Our chief operating decision maker uses proportionate property net operating income to assess the operating performance of our apartment
communities. Proportionate property net operating income reflects our share of rental and other property revenues less direct property operating
expenses, including real estate taxes, for consolidated apartment communities we own and manage. As of December 31, 2017, for segment
performance evaluation, our Real Estate segment included 132 consolidated apartment communities with 36,762 apartment homes and excluded four
apartment communities with 142 apartment homes that we neither manage nor consolidate.
As of December 31, 2017, through our Asset Management business we also held nominal ownership positions in consolidated partnerships that
own 46 low-income housing tax credit apartment communities with 6,898 apartment homes. Neither the results of operations nor the assets of these
partnerships and apartment communities are quantitatively material; therefore, we have one reportable segment, Real Estate. The results of
operations for the years ended December 31, 2016 and 2015, and the segment assets as of December 31, 2016, shown below have been revised to
reflect the change in our reportable segments.
The following tables present the revenues, net operating income and income before gain on dispositions of our Real Estate segment on a
proportionate basis (excluding amounts related to apartment communities sold or classified as held for sale as of December 31, 2017) for the years
ended December 31, 2017, 2016 and 2015 (in thousands):
Real Estate
Proportionate
Adjustments (1)
Corporate and
Amounts Not
Allocated to
Reportable
Segment (2)
Consolidated
Year Ended December 31, 2017:
Rental and other property revenues attributable to Real Estate
$
854,491
$
15,481 $
48,176
$
918,148
Rental and other property revenues of partnerships served by Asset
Management business
Tax credit and transaction revenues
Total revenues
Property operating expenses attributable to Real Estate
Property operating expenses of partnerships served by Asset
Management business
Other operating expenses not allocated to reportable
segment (3)
Total operating expenses
Operating income
Other items included in income before gain on
dispositions (4)
Income before gain on dispositions
—
—
854,491
265,186
—
—
265,186
589,305
—
—
15,481
4,887
—
—
4,887
10,594
74,046
13,243
135,465
48,866
35,440
457,075
541,381
(405,916)
74,046
13,243
1,005,437
318,939
35,440
457,075
811,454
193,983
$
—
589,305
$
—
10,594 $
(146,463)
(552,379) $
(146,463)
47,520
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Table of Contents
Year Ended December 31, 2016:
Rental and other property revenues attributable to Real Estate
$
791,587
$
28,509 $
79,795
$
899,891
Real Estate
Proportionate
Adjustments (1)
Corporate and
Amounts Not
Allocated to
Reportable
Segment (2)
Consolidated
Rental and other property revenues of partnerships served by Asset
Management business
Tax credit and transaction revenues
Total revenues
Property operating expenses attributable to Real Estate
Property operating expenses of partnerships served by Asset
Management business
Other operating expenses not allocated to reportable
segment (3)
Total operating expenses
Operating income
Other items included in income before gain on
dispositions (4)
Income before gain on dispositions
—
—
791,587
251,636
—
—
251,636
539,951
—
—
28,509
8,284
—
—
8,284
20,225
74,640
21,323
175,758
58,037
36,956
394,145
489,138
(313,380)
74,640
21,323
995,854
317,957
36,956
394,145
749,058
246,796
$
—
539,951
$
—
20,225 $
(157,313)
(470,693) $
(157,313)
89,483
Real Estate
Proportionate
Adjustments (1)
Corporate and
Amounts Not
Allocated to
Reportable
Segment (2)
Consolidated
Year Ended December 31, 2015:
Rental and other property revenues attributable to Real Estate
$
737,079
$
28,875 $
117,066
$
883,020
Rental and other property revenues of partnerships served by Asset
Management business
Tax credit and transaction revenues
Total revenues
Property operating expenses attributable to Real Estate
Property operating expenses of partnerships served by Asset
Management business
Other operating expenses not allocated to reportable
segment (3)
Total operating expenses
Operating income
Other items included in income before gain on
dispositions (4)
Income before gain on dispositions
—
—
737,079
240,789
—
—
240,789
496,290
—
—
28,875
8,857
—
—
8,857
20,018
73,934
24,356
215,356
74,933
37,537
362,979
475,449
(260,093)
73,934
24,356
981,310
324,579
37,537
362,979
725,095
256,215
$
—
496,290
$
—
20,018 $
(164,825)
(424,918) $
(164,825)
91,390
(1) Represents adjustments for the noncontrolling interests in consolidated real estate partnerships’ share of the results of consolidated apartment
communities in our Real Estate segment, which are included in the related consolidated amounts, but excluded from proportionate property net operating
income for our segment evaluation.
(2) Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any, and the operating
results of apartment communities owned by consolidated partnerships served by our Asset Management business. Corporate and Amounts Not Allocated
to Reportable Segment also includes property management expenses and casualty gains and losses (which are included in consolidated property operating
expenses), which are property related items that are not part of our segment performance measure.
(3) Other operating expenses not allocated to reportable segment consists of depreciation and amortization, general and administrative expenses and other
operating expenses including provision for real estate impairment loss, which are not included in our measure of segment performance.
(4) Other items included in income before gain on dispositions primarily consist of interest expense and income tax benefit.
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Table of Contents
The assets of our reportable segment and the consolidated assets not allocated to our segment are as follows (in thousands):
Real Estate
Corporate and other assets (1)
Total consolidated assets
December 31,
2017
2016
$
$
5,495,069
583,971
6,079,040
$
$
5,432,642
800,176
6,232,818
(1) Includes the assets of consolidated partnerships served by the Asset Management business and apartment communities sold or classified as held for sale as
of December 31, 2017.
For the years ended December 31, 2017, 2016 and 2015, capital additions related to our Real Estate segment totaled $338.0 million, $321.0 million
and $340.3 million, respectively.
Note 13 — Variable Interest Entities
Generally, a variable interest entity, or VIE, is a legal entity in which the equity investors do not have the characteristics of a controlling financial
interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.
A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to
remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the
partnership. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not
limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and
characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and
significance to our business activities and the business activities of the other investors. Significant judgments related to these determinations
include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
Aimco consolidates the Aimco Operating Partnership, which is a VIE for which Aimco is the primary beneficiary. Aimco, through the Aimco
Operating Partnership, consolidates all VIEs for which it is the primary beneficiary.
All of the VIEs we consolidate own interests in one or more apartment communities. VIEs that own apartment communities we classify as part of
our Real Estate segment are typically structured to generate a return for their partners through the operation and ultimate sale of the communities.
We are the primary beneficiary in the limited partnerships in which we are the sole decision maker and have a substantial economic interest.
Certain partnerships served by our Asset Management business own interests in low-income housing tax credit apartment communities that are
structured to provide for the pass-through of tax credits and tax deductions to their partners and are VIEs. We hold a nominal ownership position in
these partnerships, generally one percent or less. As general partner in these partnerships, we are the sole decision maker and we receive fees and
other payments in return for the asset management and other services we provide and thus share in the economics of the partnerships, and as such,
we are the primary beneficiary of these partnerships. The table below summarizes information regarding VIEs that are consolidated by the Aimco
Operating Partnership:
Real Estate portfolio:
VIEs with interests in apartment communities
Apartment communities held by VIEs
Apartment homes in communities held by VIEs
Consolidated partnerships served by the Asset Management business:
VIEs with interests in apartment communities
Apartment communities held by VIEs
Apartment homes in communities held by VIEs
F-39
December 31,
2017
2016
14
14
4,321
49
37
5,893
17
19
6,110
50
38
6,093
Table of Contents
Assets of the Aimco Operating Partnership’s consolidated VIEs must first be used to settle the liabilities of such consolidated VIEs. These
consolidated VIEs’ creditors do not have recourse to the general credit of the Aimco Operating Partnership. Assets and liabilities of VIEs are
summarized in the table below (in thousands):
Real Estate portfolio:
Assets
Net real estate
Cash and cash equivalents
Restricted cash
Liabilities
Non-recourse property debt
Accrued liabilities and other
Consolidated partnerships served by the Asset Management business:
Assets
Real estate, net
Cash and cash equivalents
Restricted cash
Liabilities
Non-recourse property debt
Accrued liabilities and other
December 31,
2017
2016
$
$
529,898
16,111
4,798
412,205
10,623
215,580
15,931
30,107
220,356
20,241
897,510
15,877
7,981
725,061
14,270
235,920
14,926
32,542
229,509
16,934
Note 14 — Unaudited Summarized Consolidated Quarterly Information
Aimco
Aimco’s summarized unaudited consolidated quarterly information for the years ended December 31, 2017 and 2016, is provided below (in
thousands, except per share amounts):
2017
Total revenues
Operating income
Net income
Net income attributable to Aimco common stockholders
Net income attributable to Aimco common stockholders per common
share - basic
Net income attributable to Aimco common stockholders per common
share - diluted
2016
Total revenues
Operating income
Net income
Net income attributable to Aimco common stockholders
Net income attributable to Aimco common stockholders per common
share - basic
Net income attributable to Aimco common stockholders per common
share - diluted
Quarter
First
Second
Third
Fourth
$
246,481
57,789
17,155
11,491
249,092 $
59,706
21,591
15,843
$
254,635
59,205
22,144
17,430
0.07
$
0.10 $
0.11
$
0.07
$
0.10 $
0.11
$
255,229
17,283
286,189
262,097
1.68
1.67
Quarter
First
Second
Third
Fourth
$
246,239
63,534
29,885
23,223
251,218 $
64,436
245,953
221,382
$
248,904
58,732
30,036
11,176
0.15
$
1.42 $
0.07
$
0.15
$
1.41 $
0.07
$
249,493
60,094
177,399
162,000
1.04
1.03
$
$
$
$
$
$
F-40
Table of Contents
The Aimco Operating Partnership
The Aimco Operating Partnership’s summarized unaudited consolidated quarterly information for the years ended December 31, 2017 and 2016,
is provided below (in thousands, except per unit amounts):
2017
Total revenues
Operating income
Net income
Net income attributable to the Partnership’s common unitholders
Net income attributable to the Partnership’s common unitholders per common unit -
basic
Net income attributable to the Partnership’s common unitholders per common unit -
diluted
2016
Total revenues
Operating income
Net income
Net income attributable to the Partnership’s common unitholders
Net income attributable to the Partnership’s common unitholders per common unit -
basic
Net income attributable to the Partnership’s common unitholders per common unit -
diluted
F-41
Quarter
First
Second
Third
Fourth
$
246,481
57,789
17,155
12,047
249,092 $
59,706
21,591
16,627
$
254,635
59,205
22,144
18,246
0.07
$
0.10 $
0.11
$
0.07
$
0.10 $
0.11
$
255,229
17,283
286,189
274,380
1.68
1.67
Quarter
First
Second
Third
Fourth
$
246,239
63,534
29,885
24,395
251,218 $
64,436
245,953
232,517
$
248,904
58,732
30,036
11,368
0.15
$
1.42 $
0.07
$
0.15
$
1.41 $
0.07
$
249,493
60,094
177,399
169,869
1.04
1.03
$
$
$
$
$
$
Table of Contents
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
SCHEDULE III: REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2017
(In Thousands Except Apartment Home Data)
(1)
Initial Cost
Apartment
Date
Year Apartment
Buildings and
(2)
Cost
Capitalized
Subsequent
to
December 31, 2017
Buildings and
(3)
Accumulated
Total
Cost
(4)
Apartment Community Name
Type
Consolidated
Location
Built
Homes
Land
Improvements Consolidation
Land
Improvements
Total
Depreciation
(AD)
Net of
AD
Encumbrances
Real Estate Segment:
100 Forest Place
High Rise
Dec 1997 Oak Park, IL
118-122 West 23rd Street
High Rise
Jun 2012 New York, NY
173 E. 90th Street
High Rise May 2004 New York, NY
182-188 Columbus Avenue
Mid Rise
Feb 2007 New York, NY
1045 on the Park Apartments
Homes
Mid Rise
Jul 2013 Atlanta, GA
1582 First Avenue
High Rise Mar 2005 New York, NY
21 Fitzsimons
Mid-Rise
Aug 2014 Aurora, CO
234 East 88th Street
Mid-Rise
Jan 2014 New York, NY
236-238 East 88th Street
High Rise
Jan 2004 New York, NY
237-239 Ninth Avenue
High Rise Mar 2005 New York, NY
240 West 73rd Street, LLC
High Rise
Sep 2004 New York, NY
2900 on First Apartments
Mid Rise
Oct 2008
Seattle, WA
306 East 89th Street
High Rise
Jul 2004 New York, NY
311 & 313 East 73rd Street
Mid Rise
Mar 2003 New York, NY
322-324 East 61st Street
High Rise Mar 2005 New York, NY
1987
1987
1910
1910
2012
1900
2008
1900
1900
1900
1900
1989
1930
1904
1900
3400 Avenue of the Arts
Mid Rise
Mar 2002 Costa Mesa, CA
1987
452 East 78th Street
High Rise
Jan 2004 New York, NY
1900
464-466 Amsterdam & 200-
210 W. 83rd Street
Mid Rise
Feb 2007 New York, NY
510 East 88th Street
High Rise
Jan 2004 New York, NY
514-516 East 88th Street
High Rise Mar 2005 New York, NY
518 East 88th Street
Mid-Rise
Jan 2014 New York, NY
707 Leahy
865 Bellevue
All Hallows
Garden
Apr 2007
Redwood City,
CA
Garden
Jul 2000 Nashville, TN
Garden
Jan 2006
San Francisco, CA 1976
Axiom Apartment Homes
Mid Rise
Apr 2015 Cambridge, MA
2015
Bank Lofts
Bay Parc
High Rise
Apr 2001 Denver, CO
High Rise
Sep 2004 Miami, FL
Bay Ridge at Nashua
Garden
Jan 2003 Nashua, NH
1920
2000
1984
Bayberry Hill Estates
Garden
Aug 2002 Framingham, MA 1971
Bayview
Garden
Jun 2005
San Francisco, CA 1976
Bluffs at Pacifica, The
Garden
Oct 2006
Pacifica, CA
Boston Lofts
Boulder Creek
High Rise
Apr 2001 Denver, CO
Garden
Jul 1994
Boulder, CO
1963
1890-
01-01
1973
Broadcast Center
Garden
Mar 2002 Los Angeles, CA
1990
Broadway Lofts
High Rise
Sep 2012
San Diego, CA
Burke Shire Commons
Garden
Mar 2001 Burke, VA
1909
1986
Calhoun Beach Club
High Rise
Dec 1998 Minneapolis, MN
1928
Canyon Terrace
Garden
Mar 2002 Saugus, CA
1984
Cedar Rim
Garden
Apr 2000 Newcastle, WA
1980
Charlesbank Apartment Homes Mid Rise
Sep 2013 Watertown, MA
2012
Chestnut Hall
High Rise
Oct 2006
Philadelphia, PA
1923
1910
1900
1900
1900
1973
1972
234 $
42
72
32
2,664 $
14,985
12,066
19,123
18,815 $
23,459
4,535
3,300
9,965 $ 2,664 $
6,520 14,985
7,725 12,066
5,282 19,123
28,780 $31,444 $
29,979
12,260
8,582
44,964
24,326
27,705
30
17
600
20
43
36
200
135
20
34
40
770
12
71
20
36
20
110
326
157
115
125
474
412
424
146
64
158
221
279
84
360
332
130
104
44
315
6,662
752
104,720
4,449
2,914
1,866
12,140
17,518
1,006
1,609
2,224
65,506
608
7,101
1,002
2,168
4,315
7,909
12,037
29,770
63,612
9,045
41,847
40,713
35,945
15,265
4,132
20,589
7,730
41,244
14,442
23,617
73,334
6,601
5,218
11,726
14,299
2,793
4,281
12,864
2,448
8,820
8,495
68,109
19,070
2,680
5,678
6,372
57,241
1,982
25,553
3,163
6,282
2,233
15,444
3,562
1,338
—
3,525
22,680
3,262
19,944
582
8,108
3,446
754
29,407
5,367
4,867
11,708
7,508
761
3,399
12,338
F-42
600
508
2,793
4,281
16,930 12,864
2,448
755
8,820
2,051
3,235
8,495
11,586 68,109
33,024 19,070
2,680
1,088
5,678
417
1,476
6,372
79,189 57,241
1,982
539
7,262
1,260
10,055
5,541
121,650 134,514
7,652
13,785
13,596
91,835
69,612
4,774
7,704
10,072
144,695 201,936
3,129
5,204
4,965
5,101
23,726
50,542
2,094
2,026
3,700
1,147
5,641 25,553
3,163
599
6,282
1,319
2,233
572
6,581 15,444
3,562
22,966
1,338
21,530
—
2,006
4,425
3,525
27,069 22,680
15,881
3,262
17,864 19,944
582
18,447
8,108
19,367
5,257
3,446
754
20,443
20,096 29,407
5,367
3,531
16,505
4,867
65,235 11,708
7,508
5,453
761
11,587
702
3,399
9,990 12,338
12,742
1,601
3,487
4,887
14,490
35,003
51,300
65,618
13,470
68,916
56,594
53,809
33,712
23,499
38,295
4,764
9,769
7,120
29,934
38,565
52,638
65,618
16,995
91,596
59,856
73,753
34,294
31,607
29,292
25,846
28,927
28,173
90,747
61,340
23,340
17,973
40,122
44,989
138,569 150,277
19,562
12,054
17,566
16,805
15,827
12,428
36,627
24,289
(14,718) $ 16,726 $
(7,532)
37,432
21,433
24,334
8,939
5,035
120,875
6,777
11,950
11,168
82,620
48,110
4,040
6,339
8,454
117,866
2,686
32,726
4,197
8,309
6,252
23,033
16,623
19,752
59,232
10,150
73,165
37,791
48,808
10,861
19,868
16,100
10,199
62,043
19,824
22,873
74,623
12,525
4,102
13,930
25,445
(2,893)
(3,371)
(1,116)
(506)
(13,639)
(875)
(1,835)
(2,428)
(9,215)
(21,502)
(734)
(1,365)
(1,618)
(84,070)
(443)
(5,569)
(567)
(1,460)
(868)
(6,901)
(21,942)
(32,886)
(6,386)
(6,845)
(18,431)
(22,065)
(24,945)
(23,433)
(11,739)
(13,192)
(18,728)
(28,704)
(3,516)
(22,116)
(75,654)
(7,037)
(13,464)
(1,897)
(11,182)
—
17,897
6,783
14,204
5,750
2,319
47,097
3,296
11,122
5,664
—
14,218
1,891
3,993
3,478
148,926
2,600
20,933
2,785
3,770
2,855
8,930
16,828
21,512
33,677
10,722
43,045
—
30,710
11,133
—
15,663
4,289
55,920
11,755
38,703
43,292
9,285
6,979
7,890
37,443
Table of Contents
(1)
Initial Cost
Apartment
Date
Year Apartment
Buildings and
(2)
Cost
Capitalized
Subsequent
to
December 31, 2017
Buildings and
(3)
Accumulated
Total
Cost
(4)
Apartment Community Name
Type
Consolidated
Location
Built
Homes
Land
Improvements Consolidation
Land
Improvements
Total
Depreciation
(AD)
Net of
AD
Encumbrances
Chestnut Hill Village
Garden
Apr 2000
Philadelphia, PA
1963
Chimneys of Cradle Rock
Garden
Jun 2004 Columbia, MD
1979
Columbus Avenue
Mid Rise
Sep 2003 New York, NY
Creekside
Garden
Jan 2000 Denver, CO
Crescent at West Hollywood,
The
Mid Rise
Mar 2002
West Hollywood,
CA
Elm Creek
Evanston Place
Farmingdale
Mid Rise
Dec 1997 Elmhurst, IL
High Rise
Dec 1997 Evanston, IL
Mid Rise
Oct 2000 Darien, IL
1880-
01-01
1974
1985
1987
1990
1975
Flamingo Towers
High Rise
Sep 1997 Miami Beach, FL
1960
Four Quarters Habitat
Garden
Jan 2006 Miami, FL
1976
Foxchase
Georgetown
Garden
Dec 1997 Alexandria, VA
1940
Garden
Aug 2002 Framingham, MA 1964
Georgetown II
Mid Rise
Aug 2002 Framingham, MA 1958
Heritage Park Escondido
Garden
Oct 2000 Escondido, CA
Heritage Park Livermore
Garden
Oct 2000 Livermore, CA
Heritage Village Anaheim
Garden
Oct 2000 Anaheim, CA
Hidden Cove
Hidden Cove II
Hillcreste
Hillmeade
Garden
Jul 1998
Escondido, CA
Garden
Jul 2007
Escondido, CA
Garden
Mar 2002 Century City, CA
1989
Garden
Nov 1994 Nashville, TN
Horizons West Apartments
Mid Rise
Dec 2006 Pacifica, CA
Hunt Club
Garden
Sep 2000 Gaithersburg, MD 1986
Hyde Park Tower
High Rise
Oct 2004 Chicago, IL
1990
Indian Oaks
Garden
Mar 2002 Simi Valley, CA
1986
Indigo
Island Club
Key Towers
Lakeside
La Salle
Latrobe
High Rise
Aug 2016
Redwood City,
CA
Garden
Oct 2000 Oceanside, CA
2016
1986
High Rise
Apr 2001 Alexandria, VA
1964
Garden
Oct 1999 Lisle, IL
1972
Garden
Oct 2000
San Francisco, CA 1976
High Rise
Jan 2003 Washington, DC
1980
Laurel Crossing
Garden
Jan 2006
San Mateo, CA
Lincoln Place (5)
Garden
Oct 2004 Venice, CA
Lodge at Chattahoochee, The Garden
Oct 1999
Sandy Springs,
GA
Malibu Canyon
Garden
Mar 2002 Calabasas, CA
Maple Bay
Mariner's Cove
Meadow Creek
Merrill House
Mezzo
Garden
Dec 1999
Virginia Beach,
VA
Garden
Mar 2002 San Diego, CA
Garden
Jul 1994
Boulder, CO
High Rise
Jan 2000
Falls Church, VA
1964
High Rise Mar 2015 Atlanta, GA
Monterey Grove
Garden
Jun 2008
San Jose, CA
Ocean House on Prospect
Mid Rise
Apr 2013 La Jolla, CA
One Canal
High Rise
Sep 2013 Boston, MA
Pacific Bay Vistas (5)
Garden
Mar 2001 San Bruno, CA
Pacifica Park
Garden
Jul 2006
Pacifica, CA
Palazzo at Park La Brea, The Mid Rise
Feb 2004 Los Angeles, CA
2002
Palazzo East at Park La Brea,
The
Mid Rise
Mar 2005 Los Angeles, CA
2005
Parc Mosaic
Garden
Dec 2014 Boulder, CO
1970
Park Towne Place
High Rise
Apr 2000
Philadelphia, PA
1959
1986
1988
1986
1983
1986
1986
1970
1971
1951
1970
1986
1971
1984
1968
2008
1999
1970
2016
1987
1977
49,316
8,108
9,450
12,698
10,215
30,878
25,546
15,174
48,808
17,199
96,062
13,168
4,057
7,565
10,209
8,541
17,616
6,530
47,216
16,070
6,377
13,149
14,927
15,801
296,116
28,654
7,050
27,937
19,567
9,103
17,756
10,439
16,370
53,438
16,141
66,861
24,533
10,831
34,178
21,939
18,805
15,873
62,460
6,579
125,464
136,503
—
47,301
821
198
59
328
130
400
190
240
1,305
336
2,113
207
72
196
167
196
334
118
315
288
78
336
155
254
463
592
140
568
145
175
418
795
312
698
414
500
332
159
94
224
53
310
308
104
521
611
140
942
6,469
2,040
35,527
3,189
15,765
8,987
3,232
11,763
32,427
2,379
15,496
12,351
4,577
1,055
—
1,832
3,043
12,849
35,862
2,872
8,887
17,859
4,731
24,523
26,932
18,027
1,526
5,840
1,866
3,459
49,474
128,332
2,335
69,834
2,597
—
1,435
1,836
4,292
34,325
12,528
—
28,694
12,970
48,362
72,578
15,300
10,472
F-43
42,678
1,005
6,469
2,040
8,604 35,527
3,189
6,879
9,096 15,765
8,987
31,161
13,094
3,232
9,514 11,763
317,464 32,427
27,711
2,379
43,269 15,496
3,280 12,351
4,577
1,642
1,055
2,284
—
1,889
1,832
1,985
10,386
3,043
5,093 12,849
12,220 35,862
2,872
19,270
2,298
8,887
13,136 17,859
4,731
11,493
8,551 24,523
878 26,932
15,611 18,027
1,526
7,355
5,840
22,369
1,866
19,145
13,498
3,459
14,730 49,474
334,559 44,197
91,994
9,113
18,054
19,577
98,463
11,153
53,581
22,766
35,076
19,311
71,026
62,039
41,872
38,640
24,688
36,451
366,272 398,699
44,910
47,289
139,331 154,827
28,799
16,448
10,276
5,699
10,904
9,849
12,098
12,098
12,358
10,526
31,045
28,002
24,472
11,623
95,298
59,436
38,212
35,340
17,562
8,675
44,144
26,285
31,151
26,420
48,875
24,352
296,994 323,926
62,292
44,265
15,931
14,405
56,146
50,306
40,578
38,712
26,060
22,601
32,486
81,960
344,998 389,195
16,477
2,335
32,597 69,834
32,847
35,182
86,035 155,869
2,597
18,032
—
9,980
1,435
8,739
1,836
8,031
1,039
4,292
7,585 34,325
14,936 12,528
178,996
—
37,025 23,354
7,766 12,970
40,851 48,362
16,160 72,578
11,748 15,300
303,898 10,472
36,770
34,173
76,841
76,841
34,707
33,272
20,698
18,862
39,509
35,217
63,849
29,524
33,741
46,269
194,869 194,869
99,485 122,839
27,315
14,345
166,315 214,677
152,663 225,241
11,748
27,048
351,199 361,671
(56,047 )
(3,814 )
(9,266 )
(12,738 )
(12,693 )
(30,121 )
(17,535 )
(12,231 )
(160,620 )
(24,508 )
(79,714 )
(7,575 )
(3,128 )
(6,589 )
(7,854 )
(6,665 )
(15,425 )
(5,362 )
(26,131 )
(19,327 )
(4,167 )
(14,636 )
(7,939 )
(11,896 )
(14,249 )
(28,228 )
(11,077 )
(32,466 )
(28,312 )
(12,042 )
(16,074 )
(95,770 )
(21,310 )
(41,216 )
(22,497 )
(36,154 )
(17,699 )
(10,460 )
(4,115 )
(11,678 )
(4,584 )
(12,378 )
(28,511 )
(5,667 )
(72,351 )
(66,415 )
—
(91,256 )
42,416
7,339
44,315
10,028
22,383
40,905
24,337
24,220
238,079
22,781
75,113
21,224
7,148
4,315
4,244
5,693
15,620
19,110
69,167
18,885
13,395
29,508
23,212
36,979
309,677
34,064
4,854
23,680
12,266
14,018
65,886
293,425
13,872
114,653
14,273
40,687
17,008
10,238
35,394
52,171
41,685
182,491
94,328
21,648
142,326
158,826
27,048
270,415
73,566
15,021
25,778
11,570
—
52,349
—
13,774
105,371
4,624
228,636
—
—
6,377
6,603
7,741
33,765
13,684
64,958
27,866
14,046
—
12,926
28,163
141,411
56,392
—
25,709
17,052
27,356
72,788
191,039
19,775
107,643
—
—
41,229
—
24,002
—
13,191
112,037
68,704
11,195
170,000
111,494
—
—
Table of Contents
(1)
Initial Cost
Apartment
Date
Year Apartment
Buildings and
(2)
Cost
Capitalized
Subsequent
to
December 31, 2017
Buildings and
(3)
Accumulated
Total
Cost
(4)
Apartment Community Name
Type
Consolidated
Location
Built
Homes
Land
Improvements Consolidation
Land
Improvements
Total
Depreciation
(AD)
Net of
AD
Encumbrances
Pathfinder Village
Garden
Jan 2006
Fremont, CA
Peachtree Park
Garden
Jan 1996 Atlanta, GA
1973
1969
Plantation Gardens
Garden
Oct 1999
Plantation, FL
1971
Post Ridge
Garden
Jul 2000 Nashville, TN
1972
Preserve at Marin
Mid Rise
Aug 2011
Corte Madera,
CA
1964
Ravensworth Towers
High Rise
Jun 2004 Annandale, VA 1974
River Club,The
Garden
Apr 2005 Edgewater, NJ
1998
Riverloft
Rosewood
High Rise
Oct 1999
Philadelphia, PA 1910
Garden
Mar 2002 Camarillo, CA
1976
Royal Crest Estates
Garden
Aug 2002 Warwick, RI
Royal Crest Estates
Garden
Aug 2002 Nashua, NH
Royal Crest Estates
Garden
Aug 2002
Royal Crest Estates
Garden
Aug 2002
Marlborough,
MA
North Andover,
MA
1972
1970
1970
1970
Savannah Trace
Saybrook Pointe
Garden
Mar 2001 Shaumburg, IL
1986
Garden
Dec 2014 San Jose, CA
1995
Shoreview
Garden
Oct 1999
San Francisco,
CA
Shenandoah Crossing
Garden
Sep 2000
Fairfax, VA
Springwoods at Lake Ridge
Garden
Jul 2002
Woodbridge,
VA
1976
1984
1984
St. George Villas
Garden
Jan 2006
St. George, SC
1984
Sterling Apartment Homes,
The
Garden
Oct 1999
Philadelphia, PA 1961
Stone Creek Club
Garden
Sep 2000
Germantown,
MD
1984
Timbers at Long Reach
Apartment Homes
Garden
Apr 2005 Columbia, MD
1979
Towers Of Westchester Park,
The
High Rise
Jan 2006
College Park,
MD
1972
Township At Highlands
Town
Home
Nov 1996 Centennial, CO
1985
Tremont
Mid Rise
Dec 2014 Atlanta, GA
2009
Twin Lake Towers
High Rise
Oct 1999 Westmont, IL
1969
Vantage Pointe
Mid Rise
Aug 2002
Swampscott,
MA
Villa Del Sol
Garden
Mar 2002 Norwalk, CA
1987
1972
Villas at Park La Brea, The
Garden
Mar 2002 Los Angeles, CA 2002
Villas of Pasadena
Mid Rise
Jan 2006
Pasadena, CA
1973
Vivo
High Rise
Jun 2015 Cambridge, MA 2015
Waterford Village
Garden
Aug 2002
Bridgewater,
MA
Waterways Village
Garden
Jun 1997 Aventura, FL
1971
1994
Waverly Apartments
Garden
Aug 2008 Brighton, MA
1970
Wexford Village
Garden
Aug 2002 Worcester, MA 1974
Willow Bend
Windrift
Garden
May 1998
Rolling
Meadows, IL
1969
Garden
Mar 2001 Oceanside, CA
1987
Windsor Park
Garden
Mar 2001
Woodbridge,
VA
Yacht Club at Brickell
High Rise
Dec 2003 Miami, FL
Yorktown Apartments
High Rise
Dec 1999 Lombard, IL
Other (6)
Total Real Estate Segment
Asset Management Business:
Arvada House
Beacon Hill
High Rise
Nov 2004 Arvada, CO
High Rise Mar 2002 Hillsdale, MI
Biltmore Towers
High Rise Mar 2002 Dayton, OH
Butternut Creek
Mid Rise
Jan 2006 Charlotte, MI
1987
1998
1971
1977
1980
1980
1980
246
303
372
150
126
219
266
184
152
492
902
473
588
368
324
156
640
180
40
534
240
178
303
161
78
399
96
120
250
92
91
588
180
103
264
328
404
220
357
364
—
19,595
4,684
3,773
1,883
18,179
3,455
30,579
2,120
12,430
22,433
68,230
25,178
51,292
13,960
32,842
1,476
18,200
5,587
107
8,871
13,593
2,430
15,198
1,536
5,274
3,268
4,748
7,476
8,630
9,693
6,450
29,110
4,504
7,920
6,349
2,717
24,960
4,279
31,362
3,055
75,903
14,838
11,713
19,443
6,712
30,132
17,157
30,638
11,286
8,060
24,095
45,562
28,786
36,808
20,731
84,457
19,071
57,198
7,284
1,025
14,497
13,347
24,563
5,120
83,631
3,639
6,689
30,432
4,081
4,309
13,521
19,595
4,684
3,773
1,883
18,179
3,455
30,579
2,120
12,430
22,433
68,230
29,335
25,060
44,006
11,832
113,763
20,796
37,327
41,718
12,141
28,404
59,083
48,930
29,744
47,779
13,715
131,942
24,251
67,906
43,838
24,571
50,837
127,313
(12,384)
(15,621)
(25,406)
(7,856)
(19,787)
(13,849)
(15,673)
(21,471)
(6,385)
(18,569)
(38,506)
36,546
14,123
22,373
5,859
112,155
10,402
52,233
22,367
18,186
32,268
88,807
11,388
25,178
40,174
65,352
(24,315)
41,037
24,271
11,147
19,633
20,752
24,350
3,069
400
51,292
13,960
32,842
1,476
18,200
5,587
107
8,871
61,079
31,878
104,090
39,823
81,548
10,353
1,425
112,371
45,838
136,932
41,299
99,748
15,940
1,532
(32,966)
(15,939)
(9,681)
(30,085)
(53,306)
(4,160)
(1,218)
79,405
29,899
127,251
11,214
46,442
11,780
314
38,136
1,337
—
5,218
37,034
20,789
—
9,378
16,095
—
—
30,841
42,110
23,202
63,540
18,461
59,748
—
336
55,365
117,562
172,927
181,798
(70,455)
111,343
146,650
9,347
12,181
22,029
9,773
18,011
18,763
10,089
4,861
48,871
6,818
35,974
28,101
11,064
11,347
17,939
15,437
17,590
15,970
32,214
18,162
10,474
7,230
13,593
16,577
30,170
(11,902)
1,283
2,430
13,464
15,894
(7,340)
12,858
15,198
34,887
50,085
(16,965)
8,471
2,335
36,186
1,663
4,040
7,116
3,963
5,089
5,644
13,340
5,912
2,595
22,524
19,948
5,686
13,762
50,494
7,948
1,536
5,274
3,268
4,748
7,476
8,630
9,693
6,450
29,110
4,504
7,920
6,349
2,717
24,960
4,279
31,362
3,055
40,022
18,244
20,346
54,949
11,752
8,901
55,987
10,781
41,063
33,745
24,404
17,259
20,534
37,961
37,538
21,656
45,976
68,656
18,422
19,780
25,620
58,217
16,500
16,377
64,617
20,474
47,513
62,855
28,908
25,179
26,883
40,678
62,498
25,935
77,338
71,711
58,444
(11,272)
(2,258)
(40,894)
(4,853)
(4,628)
(27,703)
(3,740)
(5,853)
(24,149)
(10,804)
(5,740)
(11,885)
(26,029)
(21,906)
(12,356)
(15,954)
(23,943)
(6,675)
18,268
8,554
33,120
8,508
23,362
17,323
11,647
11,749
36,914
16,734
41,660
38,706
18,104
19,439
14,998
14,649
40,592
13,579
61,384
47,768
51,769
—
12,405
23,836
13,965
—
29,851
3,385
10,813
14,477
9,299
20,796
36,024
13,456
11,770
—
33,838
39,408
17,338
45,303
29,010
—
36,249 1,878,960
3,249,698
2,924,451 1,753,604
6,174,149
7,927,753
(2,522,358) 5,405,395
3,563,041
88
198
230
100
405
1,094
1,814
505
3,314
7,044
6,411
3,617
2,475
6,271
13,688
4,163
405
1,094
1,814
505
5,789
13,315
20,099
7,780
6,194
14,409
21,913
8,285
(3,174)
(7,607)
(14,027)
(6,461)
3,020
6,802
7,886
1,824
3,806
6,512
9,863
4,042
F-44
Table of Contents
(1)
Initial Cost
Apartment
Date
Year Apartment
Buildings and
(2)
Cost
Capitalized
Subsequent
to
December 31, 2017
Buildings and
(3)
Accumulated
Total
Cost
(4)
Apartment Community Name
Type
Consolidated
Location
Built
Homes
Land
Improvements Consolidation
Land
Improvements
Total
Depreciation
(AD)
Net of
AD
Encumbrances
Carriage House
Mid Rise
Dec 2006 Petersburg, VA
Copperwood Apartments I
Garden
Apr 2006
Copperwood Apartments II
Garden
Oct 2005
The Woodlands,
TX
The Woodlands,
TX
Country Club Heights
Garden
Mar 2004 Quincy, IL
1885-
01-01
1980
1981
1976
Crevenna Oaks
Fountain Place
Hopkins Village
Ingram Square
Town
Home
Jan 2006 Burke, VA
1979
Mid Rise
Jan 2006 Connersville, IN 1980
Mid Rise
Sep 2003 Baltimore, MD
1979
Garden
Jan 2006
San Antonio, TX 1980
Kirkwood House
High Rise
Sep 2004 Baltimore, MD
1979
La Vista
Garden
Jan 2006 Concord, CA
1981
Loring Towers
High Rise
Oct 2002 Minneapolis, MN 1975
Loring Towers Apartments
High Rise
Sep 2003
Salem, MA
1973
New Baltimore
Mid Rise
Mar 2002
New Baltimore,
MI
Northpoint
Garden
Jan 2000 Chicago, IL
1980
1921
Panorama Park
Garden
Mar 2002 Bakersfield, CA
1982
Park Place
Parkways, The
Pleasant Hills
Mid Rise
Jun 2005
St Louis, MO
Garden
Jun 2004 Chicago, IL
Garden
Apr 2005 Austin, TX
1977
1925
1982
Plummer Village
Mid Rise
Mar 2002 North Hills, CA
1983
Riverwoods
High Rise
Jan 2006 Kankakee, IL
1983
Round Barn Manor
Garden
Mar 2002 Champaign, IL
1979
San Jose Apartments
Garden
Sep 2005
San Antonio, TX 1970
San Juan Del Centro
Mid Rise
Sep 2005 Boulder, CO
1971
South Bay Villa
Garden
Mar 2002 Los Angeles, CA 1981
Summit Oaks
Town
Home
Jan 2006 Burke, VA
1980
Tamarac Pines Apartments I Garden
Nov 2004 Woodlands, TX
1980
Tamarac Pines Apartments II Garden
Nov 2004 Woodlands, TX
1980
Terry Manor
Mid Rise
Oct 2005 Los Angeles, CA 1977
Tompkins Terrace
Garden
Oct 2002 Beacon, NY
1974
Van Nuys Apartments
High Rise Mar 2002 Los Angeles, CA 1981
Walnut Hills
High Rise
Jan 2006 Cincinnati, OH
1983
Washington Square West
Mid Rise
Sep 2004
Philadelphia, PA 1982
Whitefield Place
Garden
Apr 2005
San Antonio, TX 1980
Winter Gardens
High Rise Mar 2004 St Louis, MO
Woodland Hills
Garden
Oct 2005
Jackson, MI
1920
1980
Total Asset Management Business
Total
118
150
150
200
50
102
165
120
261
75
230
250
101
304
66
242
446
100
75
125
156
220
150
80
716
383
459
676
—
378
549
800
1,337
581
886
187
896
2,510
521
705
3,426
1,229
666
598
810
234
439
1,352
2,886
8,373
5,553
5,715
5,203
2,091
5,973
3,136
9,358
4,449
7,445
14,050
2,360
14,334
5,520
6,327
23,257
2,631
2,647
4,931
5,134
5,770
7,110
2,770
4,173
6,182
3,890
5,444
616
3,427
3,527
6,057
9,572
4,835
9,213
8,738
5,404
16,358
1,324
8,557
23,186
4,322
1,394
3,834
6,086
12,543
12,694
3,944
716
383
459
676
—
378
549
800
1,337
581
886
187
896
2,510
521
705
3,426
1,229
666
598
810
234
439
1,352
7,059
14,555
9,443
11,159
5,819
5,518
9,500
9,193
18,930
9,284
16,658
22,788
7,764
30,692
6,844
14,884
46,443
6,953
4,041
8,765
11,220
18,313
19,804
6,714
7,775
14,938
9,902
11,835
5,819
5,896
10,049
9,993
20,267
9,865
17,544
22,975
8,660
33,202
7,365
15,589
49,869
8,182
4,707
9,363
12,030
18,547
20,243
8,066
(4,390)
(12,789)
(6,160)
(6,957)
(3,686)
(2,725)
(4,799)
(6,468)
(10,453)
(4,793)
(9,269)
(12,437)
(4,999)
(23,479)
(4,299)
(11,702)
(29,364)
(4,581)
(3,069)
(4,467)
(5,222)
(11,656)
(12,108)
(5,716)
3,385
2,149
3,742
4,878
2,133
3,171
5,250
3,525
9,814
5,072
8,275
10,538
3,661
9,723
3,066
3,887
20,505
3,601
1,638
4,896
6,808
6,891
8,135
2,350
1,767
4,969
5,126
5,252
2,136
816
9,100
2,980
16,000
4,723
9,225
9,622
1,887
17,170
1,558
8,065
14,892
2,841
2,226
3,412
3,774
4,154
11,389
2,622
(3,571)
(4,287)
(4,863)
—
363
266
1,997
872
3,576
820
582
219
300
320
33,471
2,113
50
3,483
144
3,774
156
5,960
170
6,318
193
23,531
299
4,799
198
3,298
132
1,932
80
3,132
112
3,105
125
6,211
231,374
42,460 $1,912,431 $ 3,499,164 $ 3,192,638 $1,787,075 $ 6,691,802 $8,478,877 $ (2,848,609) $5,630,268 $ 3,794,415
2,371
2,679
2,961
3,940
9,988
25,256
5,581
5,084
2,134
5,084
3,170
224,873
5,942
6,966
7,824
13,286
22,617
48,757
12,428
17,230
5,815
8,345
8,432
551,124
5,942
6,603
7,558
11,289
21,745
45,181
11,608
16,648
5,596
8,045
8,112
517,653
5,311
2,775
3,195
5,848
6,827
21,226
5,608
11,169
3,151
3,072
3,875
249,466
631
3,828
4,363
5,441
14,918
23,955
6,000
5,479
2,445
4,973
4,237
268,187
—
363
266
1,997
872
3,576
820
582
219
300
320
33,471
(326,251)
(12,629)
(23,501)
(12,146)
(9,346)
(6,847)
(3,681)
(3,261)
(5,262)
(1) Date we acquired the apartment community or first consolidated the partnership that owns the apartment community.
(2) Includes costs capitalized since acquisition or date of initial consolidation of the partnership/apartment community.
(3) The aggregate cost of land and depreciable property for federal income tax purposes was approximately $3.7 billion at December 31, 2017.
(4) Encumbrances are presented before reduction for debt issuance costs.
(5) The current carrying value of the apartment community reflects an impairment loss recognized during prior periods.
(6) Other includes land parcels and certain non-residential properties held for future development. The current carrying value of land reflects an impairment loss recognized during the current period.
F-45
Table of Contents
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
SCHEDULE III: REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Years Ended December 31, 2017, 2016 and 2015
(In Thousands)
Real Estate Segment
Real Estate balance at beginning of year
Additions during the year:
Acquisitions
Capital additions
Deductions during the year:
Casualty and other write-offs (1)
Impairment of real estate
Amounts related to assets held for sale
Sales
Real Estate balance at end of year
Accumulated Depreciation balance at beginning of year
Additions during the year:
Depreciation
Deductions during the year:
Casualty and other write-offs (1)
Amounts related to assets held for sale
Sales
Accumulated depreciation balance at end of year
Asset Management Business
Real Estate balance at beginning of year
Additions during the year:
Capital additions
Deductions during the year:
Casualty and other write-offs (2)
Amounts related to assets held for sale
Sales
Real Estate balance at end of year
Accumulated Depreciation balance at beginning of year
Additions during the year:
Depreciation
Deductions during the year:
Casualty and other write-offs (2)
Amounts related to assets held for sale
Sales
Accumulated depreciation balance at end of year
2017
2016
2015
$
7,931,117 $
7,744,894
$
7,577,031
16,687
345,974
(106,590)
(35,881)
(38,208)
333,174
329,697
(170,744)
—
—
(185,346)
7,927,753 $
(305,904)
$
7,931,117
147,077
355,569
(66,844)
—
(7,036)
(260,903)
7,744,894
2,421,357 $
2,488,448
$
2,393,292
320,870
287,661
262,235
(106,521)
(20,383)
(92,965)
2,522,358 $
(169,098)
—
(185,654)
$
2,421,357
(66,246)
(4,427)
(96,406)
2,488,448
555,049 $
562,589
$
567,927
8,255
8,909
7,379
(1,711)
—
(10,469)
551,124 $
(2,116)
(2,801)
(11,532)
$
555,049
(12,717)
—
—
562,589
309,401 $
289,574
$
278,887
24,090
24,704
23,279
(2,480)
—
(4,760)
326,251 $
(68)
(1,525)
(3,284)
$
309,401
(12,592)
—
—
289,574
$
$
$
$
$
$
$
(1) Includes the write-off of fully depreciated assets totaling $106.4 million, $167.9 million and $65.1 million, during the years ended December 31, 2017,
2016 and 2015, respectively.
(2) Includes the write-off of fully depreciated assets totaling $1.8 million and $11.8 million, during the years ended December 31, 2017 and 2015,
respectively.
F-46
(Back To Top)
Section 2: EX-21.1 (EXHIBIT 21.1 2017)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
ENTITY NAME
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO-GP, INC.
AIMCO-LP TRUST
APARTMENT INVESTMENT AND MANAGEMENT COMPANY and AIMCO PROPERTIES, L.P.
AIMCO PROPERTIES, L.P.
AIMCO PALAZZO ACQUISITION, LLC
AIMCO BALAYE APARTMENTS I, LLC
LEXINGTON-OXFORD ASSOCIATES L.P.
TUJUNGA GARDENS LIMITED PARTNERSHIP
VAN NUYS PRESERVATION MT, L.P.
AIMCO SUBSIDIARY REIT I, LLC
RIVERCREST APARTMENTS, L.P.
AP XII TWIN LAKE TOWERS, LLC
CALMARK HERITAGE PARK II LIMITED PARTNERSHIP
CCIP STERLING, L.P.
CCIP STERLING, L.L.C.
CCP IV KNOLLWOOD, LLC
CEDAR RIM APARTMENTS, LLC
LAZY HOLLOW PARTNERS
FOUR QUARTERS HABITAT APARTMENTS ASSOCIATES, LTD.
NATIONAL PROPERTY INVESTORS III, LP
CPF CREEKSIDE, LLC
CHESTNUT HILL ASSOCIATES LIMITED PARTNERSHIP
PARK TOWNE PLACE ASSOCIATES LIMITED PARTNERSHIP
RAVENSWORTH ASSOCIATES, LLC
LAFAYETTE MANOR ASSOCIATES LIMITED PARTNERSHIP
RI-15 LIMITED PARTNERSHIP
RIVER LOFT APARTMENTS LIMITED PARTNERSHIP
AIMCO FOXCHASE, L.P.
AIMCO ELM CREEK, L.P.
NATIONAL BOSTON LOFTS ASSOCIATES, LLLP
NHP PARKWAY L.P.
WILLIAMSBURG LIMITED PARTNERSHIP
AIMCO SUNSET ESCONDIDO, L.L.C.
CHANTILLY PARTNERS LIMITED PARTNERSHIP
LAKE RIDGE-OXFORD ASSOCIATES LIMITED PARTNERSHIP
WESTRIDGE-OXFORD LIMITED PARTNERSHIP
AIMCO SCHAUMBURG-OXFORD, LLC
NASHUA-OXFORD-BAY ASSOCIATES LIMITED PARTNERSHIP
FARMINGDALE-OXFORD ASSOCIATES LIMITED PARTNERSHIP
WATERS LANDING PARTNERS, L.L.C.
OXFORD-COLUMBIA ASSOCIATES, A MARYLAND LIMITED PARTNERSHIP
NP BANK LOFTS ASSOCIATES, L.P.
Exhibit 21.1
STATE CODE
MD
DE
DE
DE
DE
DE
IN
CA
CA
DE
SC
DE
CA
PA
DE
DE
DE
CA
FL
DE
DE
DE
DE
DE
VA
DC
PA
DE
DE
CO
DE
IL
DE
VA
MD
MD
DE
MD
IL
MD
MD
CO
AIMCO/BLUFFS, L.L.C.
AIMCO/BRANDYWINE, L.P.
DE
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
HUNT CLUB PARTNERS, L.L.C.
AIMCO WATERWAYS VILLAGE, LLC
LARGO PARTNERS, L.L.C.
THE OAK PARK PARTNERSHIP LIMITED PARTNERSHIP
CHURCH STREET ASSOCIATES LIMITED PARTNERSHIP
SOUTHRIDGE-OXFORD LIMITED PARTNERSHIP
AIMCO PROPERTIES FINANCE PARTNERSHIP, L.P.
AIMCO HILLMEADE, LLC
AIMCO CALHOUN, L.L.C.
AIMCO KEY TOWERS, L.P.
AIMCO MAPLE BAY, L.L.C.
AIMCO MERRILL HOUSE, L.L.C.
AIMCO CHELSEA LAND, L.L.C.
AIMCO YORKTOWN, L.P.
AIMCO CALHOUN CLUB, L.L.C.
MAYER BEVERLY PARK LIMITED PARTNERSHIP
AIMCO CANYON TERRACE, L.P.
LA CRESCENT GARDENS LP
LA HILLCRESTE APARTMENTS LLC
LA INDIAN OAKS LP
AIMCO MALIBU CANYON, LLC
LINCOLN MARINERS ASSOCIATES LIMITED
CAMARILLO-ROSEWOOD ASSOCIATES LIMITED PARTNERSHIP
AIMCO VILLA DEL SOL, L.P.
LA LAKES LP
LA PARK LA BREA C LLC
AIMCO SAN BRUNO APARTMENTS PARTNERS, L.P.
BURKSHIRE COMMONS APARTMENTS PARTNERS, L.P.
AIMCO NORTH ANDOVER, L.L.C.
AIMCO VANTAGE POINTE, L.L.C.
AIMCO ROYAL CREST - NASHUA, L.L.C.
AIMCO GRANADA, L.L.C.
AIMCO WEXFORD VILLAGE, L.L.C.
AIMCO WARWICK, L.L.C.
AIMCO WEXFORD VILLAGE II, L.L.C.
LAKERIDGE-ISLAND CLUB APARTMENTS PARTNERS, L.P.
AIMCO 311/313 EAST 73RD STREET, LLC
AIMCO COLUMBUS AVE., LLC
MORTON TOWERS HEALTH CLUB, LLC
LORING TOWERS PRESERVATION LIMITED PARTNERSHIP
AIMCO YACHT CLUB AT BRICKELL, LLC
CCIP PLANTATION GARDENS, L.L.C.
BILTMORE APARTMENTS, LTD.
NORTHPOINT PRESERVATION LIMITED PARTNERSHIP
QUINCY AFFORDABLE HOUSING L.P.
AIMCO 88TH STREET/SECOND AVENUE PROPERTIES, LLC
STATE CODE
MD
DE
MD
IL
IL
MD
DE
DE
DE
DE
DE
DE
DE
DE
DE
CA
DE
DE
DE
DE
DE
CA
CA
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
OH
DE
IL
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
AIMCO 510 EAST 88TH STREET PROPERTY, LLC
AIMCO 452 EAST 78TH STREET PROPERTY, LLC
LA PARK LA BREA A LLC
WINTER GARDEN PRESERVATION, L.P.
AIMCO 173 EAST 90TH STREET, LLC
PARKWAYS PRESERVATION, L.P.
AIMCO 306 EAST 89TH STREET, LLC
AIMCO HYDE PARK TOWER, L.L.C.
BAY PARC PLAZA APARTMENTS, L.P.
AIMCO 240 WEST 73RD STREET CO-OWNER, LLC
AIMCO 240 WEST 73RD STREET, LLC
AIMCO VENEZIA, LLC
ARVADA HOUSE PRESERVATION LIMITED PARTNERSHIP
WATERFORD VILLAGE, L.L.C.
ROYAL CREST ESTATES (MARLBORO), L.L.C.
GEORGETOWN 20Y APARTMENTS, L.L.C.
BAYBERRY HILL, L.L.C.
AIMCO 322 EAST 61ST STREET, LLC
AIMCO 1582 FIRST AVENUE, LLC
AIMCO 237 NINTH AVENUE, LLC
AIMCO 514 EAST 88TH STREET, LLC
LA PARK LA BREA B LLC
PLEASANT HILL PRESERVATION, LP
WHITEFIELD PLACE PRESERVATION, LP
AIMCO RIVER CLUB, LLC
AIMCO CHESTNUT HALL LIMITED PARTNERSHIP
PARK PLACE PRESERVATION, L.P.
TERRY MANOR PRESERVATION, L.P.
WOODLAND HILLS PRESERVATION LIMITED PARTNERSHIP
PLUMMER VILLAGE PRESERVATION, L.P.
SOUTH BAY VILLA PRESERVATION, L.P.
MCZ/CENTRUM FLAMINGO II, L.L.C.
MCZ/CENTRUM FLAMINGO III, L.L.C.
AIMCO TOWNSHIP AT HIGHLANDS APARTMENTS, LLC
COPPERWOOD PRESERVATION, LP
TAMARAC PINES PRESERVATION, LP
AIMCO ESPLANADE AVENUE APARTMENTS, LLC
NEW BALTIMORE SENIOR PRESERVATION LIMITED PARTNERSHIP
ALL HALLOWS PRESERVATION, L.P.
BAYVIEW PRESERVATION, L.P.
LA SALLE PRESERVATION, L.P.
SHOREVIEW PRESERVATION, L.P.
CHC SAN JUAN DEL CENTRO PRESERVATION LP
CARRIAGE HOUSE PRESERVATION, L.P.
SAN JOSE PRESERVATION, L.P.
AIMCO 182-188 COLUMBUS AVENUE, LLC
STATE CODE
DE
DE
DE
MO
DE
DE
DE
DE
DE
DE
DE
DE
CO
DE
DE
DE
DE
DE
DE
DE
DE
DE
TX
TX
DE
DE
MO
CA
MI
CA
CA
DE
DE
DE
TX
TX
DE
MI
CA
CA
CA
CA
CO
DE
TX
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
AIMCO 464-466 AMSTERDAM 200-210 WEST 83RD STREET, LLC
AIMCO BUENA VISTA APARTMENTS, L.P.
AIMCO PATHFINDER VILLAGE APARTMENTS, L.P.
AIMCO SCOTCHOLLOW APARTMENTS, L.P.
AIMCO WESTCHESTER PARK, LLC
ROUND BARN MANOR PRESERVATION, L.P.
MONROE-OXFORD ASSOCIATES LIMITED PARTNERSHIP
LORING TOWERS SALEM PRESERVATION LIMITED PARTNERSHIP
AIMCO FRAMINGHAM, LLC
AIMCO HORIZONS WEST APARTMENTS, LLC
AIMCO LEAHY SQUARE APARTMENTS, LLC
FOUNTAIN PLACE PRESERVATION, L.P.
RIVERWOODS PRESERVATION, L.P.
TOMPKINS TERRACE PRESERVATION, L.P.
TOMPKINS TERRACE, INC.
LA VISTA PRESERVATION, L.P.
BUTTERNUT CREEK PRESERVATION LIMITED DIVIDEND HOUSING ASSOCIATION LIMITED PARTNERSHIP
VAN NUYS PRESERVATION, L.P.
PANORAMA PARK PRESERVATION, L.P.
CREVENNA OAKS PRESERVATION, L.P.
SUMMIT OAKS PRESERVATION, L.P.
WALNUT HILLS PRESERVATION, L.P.
AIMCO MONTEREY GROVE APARTMENTS TIC 2, LLC
AIMCO MONTEREY GROVE APARTMENTS, LLC
AIMCO WAVERLY, LLC
BROOKWOOD LIMITED PARTNERSHIP
JAMES-OXFORD LIMITED PARTNERSHIP
BEACON HILL PRESERVATION LIMITED DIVIDEND HOUSING ASSOCIATION LIMITED PARTNERSHIP
HOPKINS VILLAGE PRESERVATION LIMITED PARTNERSHIP
KIRKWOOD HOUSE PRESERVATION LIMITED PARTNERSHIP
INGRAM SQUARE PRESERVATION, L.P.
FLAMINGO SOUTH ACQUISITIONS, LLC
AIMCO MADERA VISTA, LLC
AIMCO MILAN, LLC
AIMCO BROADWAY LOFTS, L.P.
AIMCO PROSPECT 400 GP, LLC
AIMCO PROSPECT 400, L.P.
ST. GEORGE VILLAS LIMITED PARTNERSHIP
AIMCO PARK AND 12TH, LLC
AIMCO ROBIN DRIVE, L.P.
AIMCO PLEASANT STREET, LLC
AIMCO ONE CANAL, LLC
AIMCO 234 EAST 88TH ST, LLC
AIMCO 518 EAST 88TH ST, LLC
AIMCO 21 FITZSIMONS, LLC
STATE CODE
DE
DE
DE
DE
DE
DE
MD
MA
DE
DE
DE
DE
DE
DE
NY
CA
MI
CA
CA
DE
DE
DE
DE
DE
DE
IL
MD
MI
DE
DE
TX
DE
DE
DE
DE
DE
DE
SC
DE
DE
DE
DE
DE
DE
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
AIMCO TREMONT, LLC
AIMCO BRIAR RIDGE, L.P.
AIMCO EASTPOINTE, LLC
UNIVERSAL BOOT SHOPS, A CALIFORNIA GENERAL PARTNERSHIP
AIMCO 159 FIRST STREET, LLC
AIMCO MEZZO, LLC
COVE PROPERTIES, INC.
AIMCO 270 THIRD STREET, LLC
AIMCO INDIGO GP, LLC
AIMCO INDIGO, L.P.
POST RIDGE ASSOCIATES, LTD., LIMITED PARTNERSHIP
WASHINGTON SQUARE WEST PRESERVATION, L.P.
ACTC VI MANAGER, LLC
AHP ACQUISITION COMPANY, LLC
AIC REIT PROPERTIES LLC
AIMCO ALL HALLOWS, LLC
AIMCO ANGELES GP, LLC
AIMCO ARVADA HOUSE, LLC
AIMCO BAYVIEW, LLC
AIMCO BEACON HILL PRESERVATION GP, LLC
AIMCO BILTMORE, LLC
AIMCO BOSTON LOFTS, L.P.
AIMCO BRIAR RIDGE GP, LLC
AIMCO BROADWAY LOFTS GP, LLC
AIMCO BUENA VISTA APARTMENTS GP, LLC
AIMCO BURKSHIRE COMMONS GP, LLC
AIMCO BUTTERNUT CREEK PRESERVATION GP, LLC
AIMCO CALHOUN, INC.
AIMCO CANYON TERRACE GP, LLC
AIMCO CAPITAL HOLDINGS FUND VI, LLC
AIMCO CAPITAL HOLDINGS FUND VII, LLC
AIMCO CAPITAL TAX CREDIT FUND I, LIMITED PARTNERSHIP
AIMCO CAPITAL TAX CREDIT FUND II, LLC
AIMCO CAPITAL TAX CREDIT FUND III, LLC
AIMCO CAPITAL TAX CREDIT FUND IV, LLC
AIMCO CAPITAL TAX CREDIT FUND IX, LLC
AIMCO CAPITAL TAX CREDIT FUND V, LLC
AIMCO CAPITAL TAX CREDIT FUND VI, LLC
AIMCO CAPITAL TAX CREDIT FUND VII, LLC
AIMCO CAPITAL TAX CREDIT FUND VIII, LLC
AIMCO CAPITAL TAX CREDIT I, LLC
AIMCO CAPITAL TAX CREDIT MANAGEMENT II, LLC
AIMCO CAPITAL, LLC
AIMCO CARRIAGE HOUSE GP, LLC
AIMCO CASA DEL NORTE GP, LLC
AIMCO CASA DEL NORTE LP, LLC
STATE CODE
DE
DE
DE
CA
DE
DE
CA
DE
DE
DE
TN
DE
DE
ME
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
CA
DE
DE
DE
DE
DE
DE
DE
DE
CA
DE
DE
DE
DE
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
AIMCO CHESTNUT HALL GP, LLC
AIMCO CHESTNUT HILL GP, LLC
AIMCO CK PROPERTIES, LLC
AIMCO CLEARING ACCOUNT, LLC
AIMCO COPPERWOOD, LLC
AIMCO COUNTRY CLUB HEIGHTS, LLC
AIMCO CREVENNA OAKS GP, LLC
AIMCO EQUITY SERVICES, LLC
AIMCO FLAMINGO HEALTH CLUB, LLC
AIMCO FOUNTAIN PLACE PRESERVATION GP, LLC
AIMCO FOXCHASE GP, LLC
AIMCO GARDENS GP LLC
AIMCO GP LA, L.P.
AIMCO HEMET DEVCO, LLC
AIMCO HERMOSA TERRACE GP, LLC
AIMCO HERMOSA TERRACE LP, LLC
AIMCO HOLDINGS I, LLC
AIMCO HOLDINGS II, LLC
AIMCO HOLDINGS QRS, INC.
AIMCO HOLDINGS, L.P.
AIMCO HOPKINS VILLAGE PRESERVATION GP, LLC
AIMCO INDIO DEVCO, LLC
AIMCO INGRAM SQUARE PRESERVATION GP, LLC
AIMCO IPLP, L.P.
AIMCO KIRKWOOD HOUSE PRESERVATION SLP, LLC
AIMCO LA JOLLA TERRACE GP, LLC
AIMCO LA JOLLA TERRACE LP, LLC
AIMCO LA QRS, INC.
AIMCO LA SALLE, LLC
AIMCO LA VISTA, LLC
AIMCO LIHTC HOLDINGS, LLC
AIMCO LJC, LLC
AIMCO LORING TOWERS, LLC
AIMCO LP LA, LP
AIMCO N.P. LOFTS, L.P.
AIMCO NEW BALTIMORE, LLC
AIMCO NORTHPOINT, L.L.C.
AIMCO PACIFICA GP, LLC
AIMCO PACIFICA PARK, L.P.
AIMCO PALM SPRINGS DEVCO, LLC
AIMCO PANORAMA PARK PRESERVATION GP, LLC
AIMCO PARK LA BREA HOLDINGS, LLC
AIMCO PARK LA BREA SERVICES, LLC
AIMCO PARK LA BREA, INC.
AIMCO PARK PLACE, LLC
AIMCO PARKVIEW DEVCO, LLC
STATE CODE
DE
DE
DE
DE
DE
DE
DE
VA
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
MD
DE
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
AIMCO PARKWAYS GP, LLC
AIMCO PATHFINDER VILLAGE APARTMENTS GP, LLC
AIMCO PLEASANT HILL, LLC
AIMCO PLUMMER VILLAGE, LLC
AIMCO PROPERTIES FINANCE CORP.
AIMCO PROPERTIES, LLC
AIMCO QRS GP, LLC
AIMCO RAMBLEWOOD, L.L.C.
AIMCO RIDGEWOOD LA LOMA DEVCO, LLC
AIMCO RIVERWOODS GP, LLC
AIMCO ROBIN DRIVE GP, LLC
AIMCO ROUND BARN MANOR GP, LLC
AIMCO RUSCOMBE GARDENS SLP, LLC
AIMCO SALEM PRESERVATION GP, LLC
AIMCO SAN JOSE, LLC
AIMCO SAN JUAN DEL CENTRO GP, LLC
AIMCO SCOTCHOLLOW APARTMENTS GP, LLC
AIMCO SELECT PROPERTIES, L.P.
AIMCO SERVICE COMPANY, LLC
AIMCO SHOREVIEW, LLC
AIMCO SOUTH BAY VILLA, LLC
AIMCO STERLING VILLAGE DEVCO, LLC
AIMCO SUMMIT OAKS GP, LLC
AIMCO TAMARAC PINES, LLC
AIMCO TERRY MANOR, LLC
AIMCO TOMPKINS TERRACE GP, LLC
AIMCO UBS ACQUISITIONS, L.P.
AIMCO UBS, LLC
AIMCO VAN NUYS PRESERVATION, LLC
AIMCO WALNUT HILLS PRESERVATION GP, LLC
AIMCO WHITEFIELD PLACE, LLC
AIMCO WINTER GARDEN, LLC
AIMCO WOODLAND HILLS, LLC
AIMCO/BETHESDA EMPLOYEE, L.L.C.
AIMCO/BETHESDA HOLDINGS, INC.
AIMCO/FARMINGDALE, L.L.C.
AIMCO/IPT, INC.
AIMCO/LAKE RIDGE, L.L.C.
AIMCO/LEXINGTON, L.L.C.
AIMCO/NASHUA, L.L.C.
AIMCO/NHP PARTNERS, L.P.
AIMCO/NHP PROPERTIES, INC.
AIMCO/PARK TOWNE PLACE ASSOCIATES GP, LLC
AIMCO/RAVENSWORTH ASSOCIATES GP, LLC
AIMCO/SOUTHRIDGE, L.L.C.
AIMCO/SWAP, L.L.C.
STATE CODE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
AIMCO/WESTRIDGE, L.L.C.
AMBASSADOR APARTMENTS, L.P.
AMBASSADOR IX, INC.
AMBASSADOR IX, L.P.
AMREAL CORPORATION
ANGELES INCOME PROPERTIES 6, LP
ANGELES PARTNERS XII, LP
ANGELES REALTY CORPORATION II
BRIARCLIFFE-OXFORD ASSOCIATES LIMITED PARTNERSHIP
BROAD RIVER PROPERTIES, L.L.C.
CALMARK INVESTORS, LTD., A CALIFORNIA LIMITED PARTNERSHIP
CCP IV ASSOCIATES, LTD.
CCP/IV RESIDENTIAL GP, L.L.C.
CONCAP EQUITIES, INC.
CONGRESS REALTY COMPANIES LIMITED PARTNERSHIP
CONGRESS REALTY CORP.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES, LP
CONSOLIDATED CAPITAL PROPERTIES IV, LP
COOPER RIVER PROPERTIES, L.L.C.
CRC CONGRESS REALTY CORP.
FOX CAPITAL MANAGEMENT CORPORATION
FOX PARTNERS
FOX REALTY INVESTORS
GP REAL ESTATE SERVICES II INC.
GP-OP PROPERTY MANAGEMENT, LLC
HC/OAC, L.L.C.
HERITAGE PARK II INC.
HERITAGE PARK INVESTORS, INC.
IPLP ACQUISITION I LLC
ISTC CORPORATION
LA BROADCAST CENTER GP LLC
LA BROADCAST CENTER QRS INC.
LA CRESCENT GARDENS GP LLC
LA CRESCENT GARDENS QRS INC.
LA INDIAN OAKS GP LLC
LA LAKES GP LLC
LA LAKES QRS INC.
LA MALIBU CANYON GP LLC
LA MALIBU CANYON LP
LA MALIBU CANYON QRS INC.
LA PARK LA BREA LLC
LAC PROPERTIES GP II LIMITED PARTNERSHIP
LAC PROPERTIES GP III LIMITED PARTNERSHIP
LAC PROPERTIES OPERATING PARTNERSHIP, L.P.
LAC PROPERTIES QRS II INC.
LAC PROPERTIES QRS III INC.
STATE CODE
DE
DE
DE
DE
SC
DE
DE
CA
MI
DE
CA
TX
SC
DE
MA
MA
DE
DE
DE
MA
CA
CA
CA
DE
DE
MD
DE
CA
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
LARGO/OAC, L.L.C.
LINCOLN PROPERTY COMPANY NO. 409, LTD.
LJC ACQUISITIONS, LLC
MADISON RIVER PROPERTIES, L.L.C.
MAERIL, INC.
MONROE CORPORATION
MORTON TOWERS APARTMENTS, L.P.
NATIONAL CORPORATION FOR HOUSING PARTNERSHIPS
NHP A&R SERVICES, LLC
NHP MID-ATLANTIC PARTNERS TWO L.P.
NHP PARKWAY ASSOCIATES L.P.
NHP PARTNERS TWO LIMITED PARTNERSHIP
NHP-HDV ELEVEN, INC.
NHP-HDV SEVENTEEN, INC.
NHP-HDV TEN, INC.
NHP-HG FOUR, INC.
NHPMN MANAGEMENT, L.P.
NHPMN MANAGEMENT, LLC
NHPMN-GP, INC.
NPI EQUITY INVESTMENTS II, INC.
NPI EQUITY INVESTMENTS, INC.
OAC INVESTMENT, INC.
OAC L.L.C.
OAC LIMITED PARTNERSHIP
OAMCO VII, L.L.C.
OAMCO XI, L.L.C.
OAMCO XIX, L.L.C.
OAMCO XIX, L.P.
OAMCO XV, L.L.C.
OAMCO XVI, L.L.C.
OAMCO XXIII, L.L.C.
OP PROPERTY MANAGEMENT, L.P.
OP PROPERTY MANAGEMENT, LLC
OXFORD APARTMENT COMPANY, INC.
OXFORD ASSOCIATES '82 LIMITED PARTNERSHIP
OXFORD ASSOCIATES '84 LIMITED PARTNERSHIP
OXFORD ASSOCIATES '85 LIMITED PARTNERSHIP
OXFORD EQUITIES CORPORATION
OXFORD EQUITIES CORPORATION III
OXFORD HOLDING CORPORATION
OXFORD INVESTMENT CORPORATION
OXFORD INVESTMENT II CORPORATION
OXFORD MANAGERS I LIMITED PARTNERSHIP
OXFORD PARTNERS X, L.L.C.
OXFORD REALTY FINANCIAL GROUP, INC.
PARK LA BREA ACQUISITION, LLC
STATE CODE
MD
CA
DE
DE
DE
MD
DE
DC
VA
DE
DE
DE
DE
DE
DE
VA
DE
DE
DE
FL
FL
MD
MD
MD
DE
DE
DE
DE
DE
DE
DE
DE
DE
MD
IN
MD
MD
IN
DE
MD
MD
MD
MD
MD
MD
DE
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
LIST OF SUBSIDIARIES
Exhibit 21.1
ENTITY NAME
RAVENSWORTH ASSOCIATES LIMITED PARTNERSHIP
REEDY RIVER PROPERTIES, L.L.C.
RESCORP DEVELOPMENT, INC.
RI-15 GP, LLC
RIVER LOFT ASSOCIATES LIMITED PARTNERSHIP
THE NATIONAL HOUSING PARTNERSHIP
WF-AC TAX CREDIT FUND I, L.P.
WF-AC TAX CREDIT FUND I, LLC
WF-AC TAX CREDIT FUND II, L.P.
WF-AC TAX CREDIT FUND III, L.P.
WL/OAC, L.L.C.
ZIMCO XI L.L.C.
ZIMCO XVIII L.L.C.
AIMCO WASHINGTON SQUARE WEST GP, LLC
ZIMCO/CHANTILLY CORPORATION
ZIMCO/MONROE CORPORATION XI
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Section 3: EX-23.1 (EXHIBIT 23.1 2017)
STATE CODE
DE
DE
IL
DE
MA
DC
DE
DE
DE
DE
MD
MD
MD
DE
MD
MD
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements listed below of Apartment Investment and Management Company and
in the related Prospectuses of our reports dated February 28, 2018, with respect to the consolidated financial statements and schedule of Apartment
Investment and Management Company, and the effectiveness of internal control over financial reporting of Apartment Investment and
Management Company, included in this Annual Report (Form 10-K) for the year ended December 31, 2017.
Exhibit 23.1
Form S-3ASR (No. 333-217456)
Form S-3 (No. 333-828)
Form S-3 (No. 333-20755)
Form S-3 (No. 333-36537)
Form S-8 (No. 333-4548)
Form S-8 (No. 333-41719)
Form S-8 (No. 333-57617)
Form S-3 (No. 333-69121)
Form S-8 (No. 333-75349)
Form S-3 (No. 333-81689)
Form S-3 (No. 333-50742)
Form S-3 (No. 333-64460)
Form S-3 (No. 333-26415)
Form S-3 (No. 333-85844)
Form S-3 (No. 333-86200)
Form S-4 (No. 333-90590)
Form S-8 (No. 333-142466)
Form S-3 (No. 333-08997)
Form S-3 (No. 333-4546)
Form S-8 (No. 333-14481)
Form S-4 (No. 333-49075)
Form S-4 (No. 333-60663)
Form S-3 (No. 333-75109)
Form S-3 (No. 333-77257)
Form S-3 (No. 333-92743)
Form S-4 (No. 333-51154)
Form S-3 (No. 333-71002)
Form S-3 (No. 333-61409)
Form S-3 (No. 333-113977)
Form S-3 (No. 333-101735)
Form S-4 (No. 333-90588)
Form S-8 (No. 333-142467)
Form S-4 (No. 333-169353)
Form S-4 (No. 333-169871)
Form S-3 (No. 333-17431)
Form S-3 (No. 333-36531)
Form S-8 (No. 333-4550)
Form S-8 (No. 333-36803)
Form S-3 (No. 333-47201)
Form S-8 (No. 333-70409)
Form S-4 (No. 333-60355)
Form S-3 (No. 333-77067)
Form S-3 (No. 333-31718)
Form S-3 (No. 333-52808)
Form S-3 (No. 333-73162)
Form S-3 (No. 333-71452)
Form S-4 (No. 333-39357)
Form S-3 (No. 333-130735)
Form S-4 (No. 333-136801)
Form S-3 (No. 333-150342)
Form S-4 (No. 333-169869)
Form S-4 (No. 333-169870)
Form S-4 (No. 333-169873)
Form S-4 (No. 333-175848)
Form S-4 (No. 333-175853)
Form S-8 (No. 333-207826)
Form S-4 (No. 333-175842)
Form S-4 (No. 333-175846)
Form S-4 (No. 333-175850)
Form S-4 (No. 333-66207)
Form S-8 (No. 333-207828)
Form S-4 (No. 333-169872)
Form S-4 (No. 333-175843)
Form S-4 (No. 333-175847)
Form S-4 (No. 333-186965)
/s/ ERNST & YOUNG LLP
Denver, Colorado
February 28, 2018
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Section 4: EX-23.2 (EXHIBIT 23.2 2017)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.2
We consent to the incorporation by reference in the Registration Statements listed below of AIMCO Properties, L.P. and in the related Prospectuses
of our reports dated February 28, 2018, with respect to the consolidated financial statements and schedule of AIMCO Properties, L.P., and the
effectiveness of internal control over financial reporting of AIMCO Properties, L.P., included in this Annual Report (Form 10-K) for the year ended
December 31, 2017.
Form S-3ASR No. 333-217456-01
Form S-4 No. 333-60355-01
Form S-4 No. 333-90588-01
Form S-4 No. 333-90590-01
Form S-4 No. 333-136801-01
Form S-4 No. 333-169353-01
Form S-4 No. 333-169869-01
Form S-4 No. 333-169870-01
Form S-4 No. 333-169871-01
Form S-4 No. 333-169872-01
Form S-4 No. 333-169873-01
Form S-4 No. 333-175842-01
Form S-4 No. 333-175843-01
Form S-4 No. 333-175846-01
Form S-4 No. 333-175847-01
Form S-4 No. 333-175848-01
Form S-4 No. 333-175849-01
Form S-4 No. 333-175850-01
Form S-4 No. 333-175853-01
Form S-4 No. 333-186965-01
Denver, Colorado
February 28, 2018
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/s/ ERNST & YOUNG LLP
Section 5: EX-31.1 (EXHIBIT 31.1 2017)
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Terry Considine, certify that:
1.
I have reviewed this annual report on Form 10-K of Apartment Investment and Management Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 28, 2018
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Section 6: EX-31.2 (EXHIBIT 31.2 2017)
/s/ Terry Considine
Terry Considine
Chairman and Chief Executive Officer
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Paul Beldin, certify that:
1.
I have reviewed this annual report on Form 10-K of Apartment Investment and Management Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 28, 2018
/s/ Paul Beldin
Paul Beldin
Executive Vice President and Chief
Financial Officer
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Section 7: EX-31.3 (EXHIBIT 31.3 2017)
CHIEF EXECUTIVE OFFICER CERTIFICATION
Exhibit 31.3
I, Terry Considine, certify that:
1.
I have reviewed this annual report on Form 10-K of AIMCO Properties, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 28, 2018
/s/ Terry Considine
Terry Considine
Chairman and Chief Executive Officer
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Section 8: EX-31.4 (EXHIBIT 31.4 2017)
CHIEF FINANCIAL OFFICER CERTIFICATION
Exhibit 31.4
I, Paul Beldin, certify that:
1.
I have reviewed this annual report on Form 10-K of AIMCO Properties, L.P.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 28, 2018
/s/ Paul Beldin
Paul Beldin
Executive Vice President and Chief Financial Officer
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Section 9: EX-32.1 (EXHIBIT 32.1 2017)
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1
In connection with the annual report of Apartment Investment and Management Company (the “Company”) on Form 10-K for the period ended
December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
/s/ Terry Considine
Terry Considine
Chairman and Chief Executive Officer
February 28, 2018
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Section 10: EX-32.2 (EXHIBIT 32.2 2017)
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2
In connection with the annual report of Apartment Investment and Management Company (the “Company”) on Form 10-K for the period ended
December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Partnership.
/s/ Paul Beldin
Paul Beldin
Executive Vice President and Chief Financial Officer
February 28, 2018
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Section 11: EX-32.3 (EXHIBIT 32.3 2017)
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.3
In connection with the annual report of AIMCO Properties, L.P. (the “Partnership”) on Form 10-K for the period ended December 31, 2017 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Terry Considine, as Chief Executive Officer of the Partnership
hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
/s/ Terry Considine
Terry Considine
Chairman and Chief Executive Officer
February 28, 2018
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Section 12: EX-32.4 (EXHIBIT 32.4 2017)
Certification of CFO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.4
In connection with the annual report of AIMCO Properties, L.P. (the “Partnership”) on Form 10-K for the period ended December 31, 2017 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Beldin, as Chief Financial Officer of the Partnership hereby
certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
/s/ Paul Beldin
Paul Beldin
Executive Vice President and Chief Financial Officer
February 28, 2018
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Section 13: EX-99.1 (EXHIBIT 99.1 2017)
Agreement Regarding Disclosure of Long-Term Debt Instruments
Exhibit 99.1
In reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K, Apartment Investment and Management Company, a Maryland corporation (the
"Company"), has not filed as an exhibit to its annual report on Form 10-K for the annual period ended December 31, 2017, any instrument with
respect to long-term debt not being registered where the total amount of securities authorized thereunder does not exceed ten percent of the total
assets of the Company and its subsidiaries on a consolidated basis. Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Company hereby
agrees to furnish a copy of any such agreement to the Securities and Exchange Commission upon request.
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Section 14: EX-99.2 (EXHIBIT 99.2 2017)
By:
/s/ Paul Beldin
Paul Beldin
Executive Vice President and Chief Financial
Officer
February 28, 2018
Exhibit 99.2
Agreement Regarding Disclosure of Long-Term Debt Instruments
In reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K, AIMCO Properties, L.P., a Delaware limited partnership (the "Partnership"), has not
filed as an exhibit to its annual report on Form 10-K for the annual period ended December 31, 2017, any instrument with respect to long-term debt
not being registered where the total amount of securities authorized thereunder does not exceed ten percent of the total assets of the Partnership
and its subsidiaries on a consolidated basis. Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Partnership hereby agrees to furnish a copy of
any such agreement to the Securities and Exchange Commission upon request.
By:
/s/ Paul Beldin
Paul Beldin
Executive Vice President and Chief Financial
Officer
February 28, 2018
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