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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

☐ | 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: 0-56223 (Aimco OP L.P.)

Apartment Investment and Management Company

Aimco OP L.P.

(Exact name of registrant as specified in its charter)

Maryland (Apartment Investment and Management Company) |  | 84-1259577
Delaware (Aimco OP L.P.) |  | 85-2460835
(State or other jurisdiction of |  | (I.R.S. Employer
incorporation or organization) |  | Identification No.)
4582 South Ulster Street, Suite 1450 |  |
Denver, Colorado |  | 80237
(Address of principal executive offices) |  | (Zip Code)

(303) 224-7900

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Trading Symbol(s) |  | Name of Each Exchange on Which Registered
Class A Common Stock (Apartment Investment and Management Company) |  | AIV |  | New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None (Apartment Investment and Management Company)

Partnership Common Units (Aimco OP L.P.)

(title of each class)

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 ☒ No ☐ |  | Aimco OP L.P.: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Apartment Investment and Management Company: Yes ☒ No ☐ |  | Aimco OP L.P.: Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Apartment Investment and Management Company:

Large accelerated filer | ☒ |  |  | Accelerated filer | ☐
Non-accelerated filer | ☐ |  |  | Smaller reporting company | ☐
|  |  |  | Emerging growth company | ☐

Aimco OP L.P.:

Large accelerated filer | ☐ |  |  | Accelerated filer | ☐
Non-accelerated filer | ☒ |  |  | Smaller reporting company | ☐
|  |  |  | Emerging growth company | ☒

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.

Apartment Investment and Management Company: | ☐ |  | Aimco OP L.P.: | ☒

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 ☐ No ☒ |  | Aimco OP L.P.: Yes ☐ No ☒

The number of shares of Apartment Investment and Management Company Class A common stock ("Common Stock") outstanding as of August 4, 2023: 147,916,884

Table of Contents

EXPLANATORY NOTE

Apartment Investment and Management Company (“Aimco” or “the Company”), a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. On December 15, 2020, Aimco completed the separation of its businesses (the “Separation”), creating two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp. (“AIR”) (Aimco and AIR together, as they existed prior to the Separation, “Aimco Predecessor”). Events noted in this filing as occurring before December 15, 2020, were those entered into by Aimco Predecessor.

Aimco, through a wholly-owned subsidiary, is the general partner and directly is the special limited partner of Aimco OP L.P. ("Aimco Operating Partnership"). As of June 30, 2023, Aimco owned 92.5% of the legal interest in the common partnership units of Aimco Operating Partnership and 94.9% of the economic interest in Aimco Operating Partnership. The remaining 7.5% legal interest is owned by limited partners. As the sole general partner of Aimco Operating Partnership, Aimco has exclusive control of Aimco Operating Partnership’s day-to-day management.

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 Aimco Operating Partnership all proceeds from the offerings of its securities. In exchange for the contribution of such proceeds, Aimco receives additional interests in 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).

This filing combines the quarterly reports on Form 10-Q for the quarterly period ended June 30, 2023, of Aimco and 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, Aimco Operating Partnership, and their consolidated entities.

We believe combining the periodic reports of Aimco and 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 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 Aimco Operating Partnership as one enterprise; the management of Aimco directs the management and operations of Aimco Operating Partnership; and Aimco OP GP, LLC, Aimco Operating Partnership’s general partner, is managed by Aimco.

We believe it is important to understand the few differences between Aimco and Aimco Operating Partnership in the context of how Aimco and Aimco Operating Partnership operate as a consolidated company. Aimco has no assets or liabilities other than its investment in Aimco Operating Partnership. Also, Aimco is a corporation that issues publicly traded equity from time to time, whereas 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 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), Aimco Operating Partnership generates all remaining capital required by its business. These sources include 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 real estate.

Equity, partners’ capital, and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of Aimco and those of Aimco Operating Partnership. Interests in Aimco Operating Partnership held by entities other than Aimco are classified within partners’ capital in Aimco Operating Partnership’s condensed consolidated financial statements and as noncontrolling interests in Aimco’s condensed consolidated financial statements.

To help investors understand the differences between Aimco and Aimco Operating Partnership, this report provides: separate condensed consolidated financial statements for Aimco and Aimco Operating Partnership; a single set of condensed consolidated notes to such financial statements that includes separate discussions of each entity’s stockholders’ equity or partners’ capital, and earnings per share or earnings per unit, 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, where appropriate.

1

Table of Contents

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for Aimco and Aimco Operating Partnership in order to establish that the requisite certifications have been made and that Aimco and 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.

2

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO OP L.P.

TABLE OF CONTENTS

FORM 10-Q

|  | Page
| PART I. FINANCIAL INFORMATION |
ITEM 1. | FINANCIAL STATEMENTS |
| Apartment Investment and Management Company: |
| Condensed Consolidated Balance Sheets (Unaudited) | 4
| Condensed Consolidated Statements of Operations (Unaudited) | 5
| Condensed Consolidated Statements of Equity (Unaudited) | 6
| Condensed Consolidated Statements of Cash Flows (Unaudited) | 8
| Aimco OP L.P.: |
| Condensed Consolidated Balance Sheets (Unaudited) | 9
| Condensed Consolidated Statements of Operations (Unaudited) | 10
| Condensed Consolidated Statements of Partners’ Capital (Unaudited) | 11
| Condensed Consolidated Statements of Cash Flows (Unaudited) | 13
| Notes to Condensed Consolidated Financial Statements of Apartment Investment and Management Company and Aimco OP L.P. (Unaudited) | 14
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 27
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 39
ITEM 4. | CONTROLS AND PROCEDURES | 40
| PART II. OTHER INFORMATION |
ITEM 1A. | RISK FACTORS | 41
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 41
ITEM 6. | EXHIBITS | 43
Signatures |  | 44

3

Table of Contents

PART I. FINANCI AL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APARTMENT INVESTMENT A ND MANAGEMENT COMPANY

CONDENSED CONSOLIDA TED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

|  | June 30, 2023 |  |  | December 31, 2022 |
ASSETS |  |  |  |  |  |
Buildings and improvements |  | $ | 1,467,732 |  |  | $ | 1,322,381 |
Land |  |  | 638,660 |  |  |  | 641,102 |
Total real estate |  |  | 2,106,392 |  |  |  | 1,963,483 |
Accumulated depreciation |  |  | (548,316 | ) |  |  | (530,722 | )
Net real estate |  |  | 1,558,076 |  |  |  | 1,432,761 |
Cash and cash equivalents |  |  | 164,990 |  |  |  | 206,460 |
Restricted cash |  |  | 27,375 |  |  |  | 23,306 |
Mezzanine investment |  |  | 158,301 |  |  |  | 158,558 |
Interest rate options |  |  | 8,998 |  |  |  | 62,387 |
Unconsolidated real estate partnerships |  |  | 20,808 |  |  |  | 15,789 |
Notes receivable |  |  | 39,533 |  |  |  | 39,014 |
Right-of-use lease assets - finance leases |  |  | 109,631 |  |  |  | 110,269 |
Other assets, net |  |  | 128,640 |  |  |  | 132,679 |
Total assets |  | $ | 2,216,352 |  |  | $ | 2,181,223 |
LIABILITIES AND EQUITY |  |  |  |  |  |
Non-recourse property debt, net |  | $ | 869,974 |  |  | $ | 929,501 |
Construction loans, net |  |  | 195,688 |  |  |  | 118,698 |
Total indebtedness |  |  | 1,065,662 |  |  |  | 1,048,199 |
Deferred tax liabilities |  |  | 113,969 |  |  |  | 119,615 |
Lease liabilities - finance leases |  |  | 116,593 |  |  |  | 114,625 |
Mezzanine investment - participation sold |  |  | 33,977 |  |  |  | — |
Accrued liabilities and other |  |  | 118,744 |  |  |  | 106,600 |
Total liabilities |  |  | 1,448,945 |  |  |  | 1,389,039 |
Redeemable noncontrolling interests in consolidated real estate partnerships |  |  | 168,648 |  |  |  | 166,826 |
Commitments and contingencies (Note 3) |  |  |  |  |  |
Equity (510,587,500 shares authorized at both June 30, 2023 and December 31, 2022): |  |  |  |  |  |
Common Stock, $0.01 par value, 143,733,654 and 146,524,941 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively |  |  | 1,438 |  |  |  | 1,466 |
Additional paid-in capital |  |  | 483,258 |  |  |  | 496,482 |
Retained earnings |  |  | 37,486 |  |  |  | 49,904 |
Total Aimco equity |  |  | 522,182 |  |  |  | 547,852 |
Noncontrolling interests in consolidated real estate partnerships |  |  | 48,472 |  |  |  | 48,294 |
Common noncontrolling interests in Aimco Operating Partnership |  |  | 28,105 |  |  |  | 29,212 |
Total equity |  |  | 598,759 |  |  |  | 625,358 |
Total liabilities and equity |  | $ | 2,216,352 |  |  | $ | 2,181,223 |

See notes to condensed consolidated financial statements.

4

Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
REVENUES |  |  |  |  |  |  |  |  |  |  |  |
Rental and other property revenues |  | $ | 45,674 |  |  | $ | 50,697 |  |  | $ | 89,942 |  |  | $ | 100,691 |
OPERATING EXPENSES |  |  |  |  |  |  |  |  |  |  |  |
Property operating expenses |  |  | 18,783 |  |  |  | 19,708 |  |  |  | 36,287 |  |  |  | 38,929 |
Depreciation and amortization |  |  | 17,031 |  |  |  | 34,863 |  |  |  | 33,302 |  |  |  | 57,981 |
General and administrative expenses |  |  | 7,890 |  |  |  | 8,961 |  |  |  | 16,293 |  |  |  | 18,433 |
Total operating expenses |  |  | 43,704 |  |  |  | 63,532 |  |  |  | 85,882 |  |  |  | 115,343 |
Interest income |  |  | 2,478 |  |  |  | 565 |  |  |  | 4,536 |  |  |  | 1,121 |
Interest expense |  |  | (9,656 | ) |  |  | (41,546 | ) |  |  | (19,381 | ) |  |  | (56,147 | )
Mezzanine investment income (loss), net |  |  | (128 | ) |  |  | 8,330 |  |  |  | (257 | ) |  |  | 16,567 |
Realized and unrealized gains (losses) on interest rate options |  |  | 3,383 |  |  |  | 20,017 |  |  |  | 2,326 |  |  |  | 38,795 |
Realized and unrealized gains (losses) on equity investments |  |  | 1,094 |  |  |  | 26,630 |  |  |  | 1,231 |  |  |  | 22,297 |
Gain on dispositions of real estate |  |  | 1,878 |  |  |  | 94,598 |  |  |  | 1,878 |  |  |  | 94,465 |
Lease modification income |  |  | — |  |  |  | 205,387 |  |  |  | — |  |  |  | 205,387 |
Income from unconsolidated real estate partnerships |  |  | 121 |  |  |  | 44 |  |  |  | 295 |  |  |  | 300 |
Other income (expense), net |  |  | (1,413 | ) |  |  | (2,022 | ) |  |  | (4,910 | ) |  |  | (2,909 | )
Income (loss) before income tax |  |  | (273 | ) |  |  | 299,168 |  |  |  | (10,222 | ) |  |  | 305,224 |
Income tax benefit (expense) |  |  | 417 |  |  |  | (45,957 | ) |  |  | 4,613 |  |  |  | (41,901 | )
Net income (loss) |  |  | 144 |  |  |  | 253,211 |  |  |  | (5,609 | ) |  |  | 263,323 |
Net (income) loss attributable to redeemable noncontrolling interests in consolidated real estate partnerships |  |  | (3,576 | ) |  |  | (1,069 | ) |  |  | (6,849 | ) |  |  | (2,539 | )
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships |  |  | (348 | ) |  |  | (346 | ) |  |  | (613 | ) |  |  | (344 | )
Net (income) loss attributable to common noncontrolling interests in Aimco Operating Partnership |  |  | 178 |  |  |  | (12,659 | ) |  |  | 652 |  |  |  | (13,094 | )
Net income (loss) attributable to Aimco |  | $ | (3,602 | ) |  | $ | 239,137 |  |  | $ | (12,419 | ) |  | $ | 247,346 |
Net income (loss) attributable to Aimco per common share – basic (Note 4) |  | $ | (0.02 | ) |  | $ | 1.58 |  |  | $ | (0.09 | ) |  | $ | 1.63 |
Net income (loss) attributable to Aimco per common share – diluted (Note 4) |  | $ | (0.02 | ) |  | $ | 1.57 |  |  | $ | (0.09 | ) |  | $ | 1.62 |
Weighted-average common shares outstanding – basic |  |  | 144,195 |  |  |  | 149,600 |  |  |  | 145,007 |  |  |  | 149,694 |
Weighted-average common shares outstanding – diluted |  |  | 144,195 |  |  |  | 150,423 |  |  |  | 145,007 |  |  |  | 150,660 |

See notes to condensed consolidated financial statements.

5

Table of Contents

APARTMENT INVESTMENT A ND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended June 30, 2023 and 2022

(In thousands, except per share data)

(Unaudited)

|  | Common Stock |  |  |  |  |  |  |  |  |  |  |  | Noncontrolling Interests in |  |  | Common Noncontrolling Interests in |  |  |  |
|  | Shares Issued |  |  | Amount |  |  | Additional Paid- in Capital |  |  | Retained Earnings (Accumulated Deficit) |  |  | Total Aimco Equity |  |  | Consolidated Real Estate Partnerships |  |  | Aimco Operating Partnership |  |  | Total Equity |
Balances at March 31, 2022 |  |  | 149,690 |  |  | $ | 1,497 |  |  | $ | 523,455 |  |  | $ | (14,571 | ) |  | $ | 510,381 |  |  | $ | 44,629 |  |  | $ | 26,975 |  |  | $ | 581,985 |
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 239,137 |  |  |  | 239,137 |  |  |  | 346 |  |  |  | 12,659 |  |  |  | 252,142 |
Redemption of OP Units |  |  | 16 |  |  |  | — |  |  |  | 581 |  |  |  |  |  |  | 581 |  |  |  | — |  |  |  | (591 | ) |  |  | (10 | )
Share-based compensation expense |  |  | — |  |  |  | — |  |  |  | 1,417 |  |  |  | — |  |  |  | 1,417 |  |  |  | — |  |  |  | 191 |  |  |  | 1,608 |
Distributions to noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (310 | ) |  |  | — |  |  |  | (310 | )
Purchase of noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | (7,244 | ) |  |  | — |  |  |  | (7,244 | ) |  |  | — |  |  |  | — |  |  |  | (7,244 | )
Common stock repurchased |  |  | (540 | ) |  |  | (5 | ) |  |  | (3,097 | ) |  |  | — |  |  |  | (3,102 | ) |  |  | — |  |  |  | — |  |  |  | (3,102 | )
Other, net |  |  | (69 | ) |  |  | — |  |  |  | (47 | ) |  |  | 1 |  |  |  | (46 | ) |  |  | — |  |  |  | (1 | ) |  |  | (47 | )
Balances at June 30, 2022 |  |  | 149,097 |  |  | $ | 1,492 |  |  | $ | 515,065 |  |  | $ | 224,567 |  |  | $ | 741,124 |  |  | $ | 44,665 |  |  | $ | 39,233 |  |  | $ | 825,022 |
Balances at March 31, 2023 |  |  | 144,718 |  |  | $ | 1,448 |  |  | $ | 489,304 |  |  | $ | 41,087 |  |  | $ | 531,839 |  |  | $ | 48,321 |  |  | $ | 28,589 |  |  | $ | 608,749 |
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3,602 | ) |  |  | (3,602 | ) |  |  | 348 |  |  |  | (178 | ) |  |  | (3,432 | )
Redemption of OP Units |  |  | — |  |  |  | — |  |  |  | (37 | ) |  |  | — |  |  |  | (37 | ) |  |  | — |  |  |  | (329 | ) |  |  | (366 | )
Share-based compensation expense |  |  | — |  |  |  | — |  |  |  | 1,853 |  |  |  | — |  |  |  | 1,853 |  |  |  | — |  |  |  | 23 |  |  |  | 1,876 |
Contributions from noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 113 |  |  |  | — |  |  |  | 113 |
Distributions to noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (310 | ) |  |  | — |  |  |  | (310 | )
Common stock repurchased |  |  | (984 | ) |  |  | (10 | ) |  |  | (7,860 | ) |  |  | — |  |  |  | (7,870 | ) |  |  | — |  |  |  | — |  |  |  | (7,870 | )
Other, net |  |  | — |  |  |  | — |  |  |  | (2 | ) |  |  | 1 |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | (1 | )
Balances at June 30, 2023 |  |  | 143,734 |  |  | $ | 1,438 |  |  | $ | 483,258 |  |  | $ | 37,486 |  |  | $ | 522,182 |  |  | $ | 48,472 |  |  | $ | 28,105 |  |  | $ | 598,759 |

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, 2023 and 2022

(In thousands, except per share data)

(Unaudited)

|  | Common Stock |  |  |  |  |  |  |  |  |  |  |  | Noncontrolling Interests in |  |  | Common Noncontrolling Interests in |  |  |  |
|  | Shares Issued |  |  | Amount |  |  | Additional Paid- in Capital |  |  | Retained Earnings (Accumulated Deficit) |  |  | Total Aimco Equity |  |  | Consolidated Real Estate Partnerships |  |  | Aimco Operating Partnership |  |  | Total Equity |
Balances at December 31, 2021 |  |  | 149,818 |  |  | $ | 1,498 |  |  | $ | 521,842 |  |  | $ | (22,775 | ) |  | $ | 500,565 |  |  | $ | 35,213 |  |  | $ | 26,455 |  |  | $ | 562,233 |
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 247,346 |  |  |  | 247,346 |  |  |  | 344 |  |  |  | 13,094 |  |  |  | 260,784 |
Redemption of OP Units |  |  | 39 |  |  |  | — |  |  |  | 1,535 |  |  |  | — |  |  |  | 1,535 |  |  |  | — |  |  |  | (1,678 | ) |  |  | (143 | )
Share-based compensation expense |  |  | — |  |  |  | — |  |  |  | 2,780 |  |  |  | — |  |  |  | 2,780 |  |  |  | — |  |  |  | 1,257 |  |  |  | 4,037 |
Distributions to noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (605 | ) |  |  | — |  |  |  | (605 | )
Contributions from noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 9,718 |  |  |  | — |  |  |  | 9,718 |
Purchase of noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | (7,244 | ) |  |  | — |  |  |  | (7,244 | ) |  |  | — |  |  |  | — |  |  |  | (7,244 | )
Common stock repurchased |  |  | (742 | ) |  |  | (7 | ) |  |  | (4,412 | ) |  |  |  |  |  | (4,419 | ) |  |  |  |  |  | — |  |  |  | (4,419 | )
Other common stock issuances |  |  | 106 |  |  |  | 1 |  |  |  | 851 |  |  |  | — |  |  |  | 852 |  |  |  | — |  |  |  | 109 |  |  |  | 961 |
Redemption of redeemable noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | (183 | ) |  |  |  |  |  | (183 | ) |  |  | — |  |  |  | — |  |  |  | (183 | )
Other, net |  |  | (124 | ) |  |  | — |  |  |  | (104 | ) |  |  | (4 | ) |  |  | (108 | ) |  |  | (5 | ) |  |  | (4 | ) |  |  | (117 | )
Balances at June 30, 2022 |  |  | 149,097 |  |  | $ | 1,492 |  |  | $ | 515,065 |  |  | $ | 224,567 |  |  | $ | 741,124 |  |  | $ | 44,665 |  |  | $ | 39,233 |  |  | $ | 825,022 |
Balances at December 31, 2022 |  |  | 146,525 |  |  | $ | 1,466 |  |  | $ | 496,482 |  |  | $ | 49,904 |  |  | $ | 547,852 |  |  | $ | 48,294 |  |  | $ | 29,212 |  |  | $ | 625,358 |
Net income (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (12,419 | ) |  |  | (12,419 | ) |  |  | 613 |  |  |  | (652 | ) |  |  | (12,458 | )
Redemption of OP Units |  |  | — |  |  |  | — |  |  |  | 4,256 |  |  |  | — |  |  |  | 4,256 |  |  |  | — |  |  |  | (4,876 | ) |  |  | (620 | )
Share-based compensation expense |  |  | — |  |  |  | — |  |  |  | 3,549 |  |  |  | — |  |  |  | 3,549 |  |  |  | — |  |  |  | 3,149 |  |  |  | 6,698 |
Contributions from noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 163 |  |  |  | — |  |  |  | 163 |
Distributions to noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (597 | ) |  |  | — |  |  |  | (597 | )
Common stock repurchased |  |  | (3,003 | ) |  |  | (30 | ) |  |  | (22,562 | ) |  |  | — |  |  |  | (22,592 | ) |  |  | — |  |  |  | — |  |  |  | (22,592 | )
Other common stock issuances |  |  | 247 |  |  |  | 2 |  |  |  | 1,538 |  |  |  | — |  |  |  | 1,540 |  |  |  | — |  |  |  | 1,272 |  |  |  | 2,812 |
Other, net |  |  | (35 | ) |  |  | — |  |  |  | (5 | ) |  |  | 1 |  |  |  | (4 | ) |  |  | (1 | ) |  |  | — |  |  |  | (5 | )
Balances at June 30, 2023 |  |  | 143,734 |  |  | $ | 1,438 |  |  | $ | 483,258 |  |  | $ | 37,486 |  |  | $ | 522,182 |  |  | $ | 48,472 |  |  | $ | 28,105 |  |  | $ | 598,759 |

See notes to condensed consolidated financial statements.

7

Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

| Six Months Ended June 30, |
| 2023 |  |  | 2022 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |
Net income (loss) | $ | (5,609 | ) |  | $ | 263,323 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization |  | 33,302 |  |  |  | 57,981 |
Mezzanine investment (income) loss, net |  | 257 |  |  |  | (16,567 | )
Realized and unrealized (gains) losses on interest rate options |  | (2,326 | ) |  |  | (38,795 | )
Realized and unrealized (gains) losses on equity investments |  | (1,231 | ) |  |  | (22,297 | )
Income tax expense (benefit) |  | (4,613 | ) |  |  | 41,901 |
Share-based compensation |  | 5,965 |  |  |  | 4,513 |
Loss on extinguishment of debt, net |  | 929 |  |  |  | 27,482 |
Lease modification income |  | — |  |  |  | (205,387 | )
Gain on dispositions of real estate |  | (1,878 | ) |  |  | (94,465 | )
Income from unconsolidated real estate partnerships |  | (295 | ) |  |  | (300 | )
Amortization of debt issuance costs and other |  | 1,114 |  |  |  | 1,421 |
Changes in operating assets and operating liabilities: |  |  |  |  |
Other assets, net |  | (1,244 | ) |  |  | 2,201 |
Net cash received from lease incentive |  | — |  |  |  | 7,895 |
Accrued liabilities and other |  | (6,686 | ) |  |  | (3,528 | )
Total adjustments |  | 23,294 |  |  |  | (237,945 | )
Net cash provided by operating activities |  | 17,685 |  |  |  | 25,378 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |
Purchases of real estate |  | (4,108 | ) |  |  | (100,758 | )
Capital expenditures (1) |  | (129,919 | ) |  |  | (124,813 | )
Proceeds from disposition of real estate |  | — |  |  |  | 126,769 |
Investment in IQHQ |  | — |  |  |  | (14,227 | )
Investment in unconsolidated real estate partnerships |  | (1,387 | ) |  |  | (12,244 | )
Distributions received from unconsolidated real estate partnerships |  | 4,209 |  |  |  | — |
Other investing activities |  | 4,570 |  |  |  | (116 | )
Net cash used in investing activities |  | (126,635 | ) |  |  | (125,389 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |
Proceeds from non-recourse property debt |  | — |  |  |  | 614,720 |
Proceeds from construction loans |  | 73,152 |  |  |  | 33,607 |
Proceeds from sale of participation in Mezzanine Investment |  | 37,500 |  |  |  | — |
Payments of deferred loan costs |  | (229 | ) |  |  | (6,620 | )
Principal repayments on non-recourse property debt |  | (61,541 | ) |  |  | (283,826 | )
Principal repayments on Notes Payable to AIR |  | — |  |  |  | (387,088 | )
Proceeds from interest rate option |  | 55,687 |  |  |  | 13,660 |
Payments on finance leases |  | (1,523 | ) |  |  | (25,366 | )
Payments of prepayment premiums |  | — |  |  |  | (21,395 | )
Common stock repurchased |  | (22,391 | ) |  |  | (4,419 | )
Redemption of noncontrolling interest in real estate partnership |  | — |  |  |  | (7,244 | )
Distributions to redeemable noncontrolling interests |  | (5,152 | ) |  |  | — |
Contributions from noncontrolling interests |  | 163 |  |  |  | 9,718 |
Distributions to noncontrolling interests |  | (597 | ) |  |  | (605 | )
Contributions from redeemable noncontrolling interests |  | 125 |  |  |  | 20,392 |
Redemption of OP units |  | (621 | ) |  |  | (133 | )
Redemption of redeemable noncontrolling interests |  | — |  |  |  | (5,094 | )
Other financing activities |  | (3,024 | ) |  |  | (569 | )
Net cash provided by (used in) financing activities |  | 71,549 |  |  |  | (50,262 | )
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |  | (37,401 | ) |  |  | (150,273 | )
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |  | 229,766 |  |  |  | 244,582 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 192,365 |  |  | $ | 94,309 |

(1) Accrued capital expenditures wer e $62.8 million and $29.1 m illion as of June 30, 2023 and 2022, respectively.

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDA TED BALANCE SHEETS

(In thousands)

(Unaudited)

|  | June 30, 2023 |  |  | December 31, 2022 |
ASSETS |  |  |  |  |  |
Buildings and improvements |  | $ | 1,467,732 |  |  | $ | 1,322,381 |
Land |  |  | 638,660 |  |  |  | 641,102 |
Total real estate |  |  | 2,106,392 |  |  |  | 1,963,483 |
Accumulated depreciation |  |  | (548,316 | ) |  |  | (530,722 | )
Net real estate |  |  | 1,558,076 |  |  |  | 1,432,761 |
Cash and cash equivalents |  |  | 164,990 |  |  |  | 206,460 |
Restricted cash |  |  | 27,375 |  |  |  | 23,306 |
Mezzanine investment |  |  | 158,301 |  |  |  | 158,558 |
Interest rate options |  |  | 8,998 |  |  |  | 62,387 |
Unconsolidated real estate partnerships |  |  | 20,808 |  |  |  | 15,789 |
Notes receivable |  |  | 39,533 |  |  |  | 39,014 |
Right-of-use lease assets - finance leases |  |  | 109,631 |  |  |  | 110,269 |
Other assets, net |  |  | 128,640 |  |  |  | 132,679 |
Total assets |  | $ | 2,216,352 |  |  | $ | 2,181,223 |
LIABILITIES AND EQUITY |  |  |  |  |  |
Non-recourse property debt, net |  | $ | 869,974 |  |  | $ | 929,501 |
Construction loans, net |  |  | 195,688 |  |  |  | 118,698 |
Total indebtedness |  |  | 1,065,662 |  |  |  | 1,048,199 |
Deferred tax liabilities |  |  | 113,969 |  |  |  | 119,615 |
Lease liabilities - finance leases |  |  | 116,593 |  |  |  | 114,625 |
Mezzanine investment - participation sold |  |  | 33,977 |  |  |  | — |
Accrued liabilities and other |  |  | 118,744 |  |  |  | 106,600 |
Total liabilities |  |  | 1,448,945 |  |  |  | 1,389,039 |
Redeemable noncontrolling interests in consolidated real estate partnerships |  |  | 168,648 |  |  |  | 166,826 |
Commitments and contingencies (Note 3) |  |  |  |  |  |
Partners’ capital: |  |  |  |  |  |
General Partner and Special Limited Partner |  |  | 522,182 |  |  |  | 547,852 |
Limited Partners |  |  | 28,105 |  |  |  | 29,212 |
Partners’ capital attributable to Aimco Operating Partnership |  |  | 550,287 |  |  |  | 577,064 |
Noncontrolling interests in consolidated real estate partnerships |  |  | 48,472 |  |  |  | 48,294 |
Total partners’ capital |  |  | 598,759 |  |  |  | 625,358 |
Total liabilities and partners’ capital |  | $ | 2,216,352 |  |  | $ | 2,181,223 |

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
REVENUES |  |  |  |  |  |  |  |  |  |  |  |
Rental and other property revenues |  | $ | 45,674 |  |  | $ | 50,697 |  |  | $ | 89,942 |  |  | $ | 100,691 |
OPERATING EXPENSES |  |  |  |  |  |  |  |  |  |  |  |
Property operating expenses |  |  | 18,783 |  |  |  | 19,708 |  |  |  | 36,287 |  |  |  | 38,929 |
Depreciation and amortization |  |  | 17,031 |  |  |  | 34,863 |  |  |  | 33,302 |  |  |  | 57,981 |
General and administrative expenses |  |  | 7,890 |  |  |  | 8,961 |  |  |  | 16,293 |  |  |  | 18,433 |
Total operating expenses |  |  | 43,704 |  |  |  | 63,532 |  |  |  | 85,882 |  |  |  | 115,343 |
Interest income |  |  | 2,478 |  |  |  | 565 |  |  |  | 4,536 |  |  |  | 1,121 |
Interest expense |  |  | (9,656 | ) |  |  | (41,546 | ) |  |  | (19,381 | ) |  |  | (56,147 | )
Mezzanine investment income (loss), net |  |  | (128 | ) |  |  | 8,330 |  |  |  | (257 | ) |  |  | 16,567 |
Realized and unrealized gains (losses) on interest rate options |  |  | 3,383 |  |  |  | 20,017 |  |  |  | 2,326 |  |  |  | 38,795 |
Realized and unrealized gains (losses) on equity investments |  |  | 1,094 |  |  |  | 26,630 |  |  |  | 1,231 |  |  |  | 22,297 |
Gain on dispositions of real estate |  |  | 1,878 |  |  |  | 94,598 |  |  |  | 1,878 |  |  |  | 94,465 |
Lease modification income |  |  | — |  |  |  | 205,387 |  |  |  | — |  |  |  | 205,387 |
Income from unconsolidated real estate partnerships |  |  | 121 |  |  |  | 44 |  |  |  | 295 |  |  |  | 300 |
Other income (expense), net |  |  | (1,413 | ) |  |  | (2,022 | ) |  |  | (4,910 | ) |  |  | (2,909 | )
Income (loss) before income tax |  |  | (273 | ) |  |  | 299,168 |  |  |  | (10,222 | ) |  |  | 305,224 |
Income tax benefit (expense) |  |  | 417 |  |  |  | (45,957 | ) |  |  | 4,613 |  |  |  | (41,901 | )
Net income (loss) |  |  | 144 |  |  |  | 253,211 |  |  |  | (5,609 | ) |  |  | 263,323 |
Net (income) loss attributable to redeemable noncontrolling interests in consolidated real estate partnerships |  |  | (3,576 | ) |  |  | (1,069 | ) |  |  | (6,849 | ) |  |  | (2,539 | )
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships |  |  | (348 | ) |  |  | (346 | ) |  |  | (613 | ) |  |  | (344 | )
Net income (loss) attributable to Aimco Operating Partnership |  | $ | (3,780 | ) |  | $ | 251,796 |  |  | $ | (13,071 | ) |  | $ | 260,440 |
Net income (loss) attributable to Aimco Operating Partnership per common unit – basic (Note 4) |  | $ | (0.02 | ) |  | $ | 1.58 |  |  | $ | (0.09 | ) |  | $ | 1.63 |
Net income (loss) attributable to Aimco Operating Partnership per common unit – diluted (Note 4) |  | $ | (0.02 | ) |  | $ | 1.57 |  |  | $ | (0.09 | ) |  | $ | 1.62 |
Weighted-average common units outstanding – basic |  |  | 151,966 |  |  |  | 157,525 |  |  |  | 152,795 |  |  |  | 157,621 |
Weighted-average common units outstanding – diluted |  |  | 151,966 |  |  |  | 158,447 |  |  |  | 152,795 |  |  |  | 158,666 |

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED S TATEMENTS OF PARTNERS’ CAPITAL

For the Three Months Ended June 30, 2023 and 2022

(In thousands)

(Unaudited)

|  | General Partner and Special Limited Partner |  |  | Limited Partners |  |  | Partners’ Capital Attributable to Aimco Operating Partnership |  |  | Noncontrolling Interests in Consolidated Real Estate Partnerships |  |  | Total Partners’ Capital |
Balances at March 31, 2022 |  | $ | 510,381 |  |  | $ | 26,975 |  |  | $ | 537,356 |  |  | $ | 44,629 |  |  | $ | 581,985 |
Net income (loss) |  |  | 239,137 |  |  |  | 12,659 |  |  |  | 251,796 |  |  |  | 346 |  |  |  | 252,142 |
Redemption of OP Units |  |  | 581 |  |  |  | (591 | ) |  |  | (10 | ) |  |  | — |  |  |  | (10 | )
Share-based compensation expense |  |  | 1,417 |  |  |  | 191 |  |  |  | 1,608 |  |  |  | — |  |  |  | 1,608 |
Distributions to noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (310 | ) |  |  | (310 | )
Purchase of noncontrolling interests in consolidated real estate partnerships |  |  | (7,244 | ) |  |  | — |  |  |  | (7,244 | ) |  |  | — |  |  |  | (7,244 | )
Repurchases of OP Units held by Aimco |  |  | (3,102 | ) |  |  | — |  |  |  | (3,102 | ) |  |  | — |  |  |  | (3,102 | )
Other, net |  |  | (46 | ) |  |  | (1 | ) |  |  | (47 | ) |  |  | — |  |  |  | (47 | )
Balances at June 30, 2022 |  | $ | 741,124 |  |  | $ | 39,233 |  |  | $ | 780,357 |  |  | $ | 44,665 |  |  | $ | 825,022 |
Balances at March 31, 2023 |  | $ | 531,839 |  |  | $ | 28,589 |  |  | $ | 560,428 |  |  | $ | 48,321 |  |  | $ | 608,749 |
Net income (loss) |  |  | (3,602 | ) |  |  | (178 | ) |  |  | (3,780 | ) |  |  | 348 |  |  |  | (3,432 | )
Redemption of OP Units |  |  | (37 | ) |  |  | (329 | ) |  |  | (366 | ) |  |  | — |  |  |  | (366 | )
Share-based compensation expense |  |  | 1,853 |  |  |  | 23 |  |  |  | 1,876 |  |  |  | — |  |  |  | 1,876 |
Contributions from noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 113 |  |  |  | 113 |
Distributions to noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (310 | ) |  |  | (310 | )
Repurchases of OP Units held by Aimco |  |  | (7,870 | ) |  |  | — |  |  |  | (7,870 | ) |  |  | — |  |  |  | (7,870 | )
Other, net |  |  | (1 | ) |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (1 | )
Balances at June 30, 2023 |  | $ | 522,182 |  |  | $ | 28,105 |  |  | $ | 550,287 |  |  | $ | 48,472 |  |  | $ | 598,759 |

See notes to condensed consolidated financial statements.

11

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AIMCO OP L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Six Months Ended June 30, 2023 and 2022

(In thousands)

(Unaudited)

|  | General Partner and Special Limited Partner |  |  | Limited Partners |  |  | Partners’ Capital Attributable to Aimco Operating Partnership |  |  | Noncontrolling Interests in Consolidated Real Estate Partnerships |  |  | Total Partners’ Capital |
Balances at December 31, 2021 |  | $ | 500,565 |  |  | $ | 26,455 |  |  | $ | 527,020 |  |  | $ | 35,213 |  |  | $ | 562,233 |
Net income (loss) |  |  | 247,346 |  |  |  | 13,094 |  |  |  | 260,440 |  |  |  | 344 |  |  |  | 260,784 |
Redemption of OP Units |  |  | 1,534 |  |  |  | (1,677 | ) |  |  | (143 | ) |  |  | — |  |  |  | (143 | )
Share-based compensation expense |  |  | 2,780 |  |  |  | 1,257 |  |  |  | 4,037 |  |  |  | — |  |  |  | 4,037 |
Distributions to noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (605 | ) |  |  | (605 | )
Contributions from noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 9,718 |  |  |  | 9,718 |
Purchase of noncontrolling interests in consolidated real estate partnerships |  |  | (7,244 | ) |  |  | — |  |  |  | (7,244 | ) |  |  | — |  |  |  | (7,244 | )
Repurchases of OP Units held by Aimco |  |  | (4,419 | ) |  |  | — |  |  |  | (4,419 | ) |  |  | — |  |  |  | (4,419 | )
Other OP Unit issuances |  |  | 852 |  |  |  | 109 |  |  |  | 961 |  |  |  | — |  |  |  | 961 |
Redemption of redeemable noncontrolling interests in consolidated real estate partnerships |  |  | (183 | ) |  |  | — |  |  |  | (183 | ) |  |  | — |  |  |  | (183 | )
Other, net |  |  | (107 | ) |  |  | (5 | ) |  |  | (112 | ) |  |  | (5 | ) |  |  | (117 | )
Balances at June 30, 2022 |  | $ | 741,124 |  |  | $ | 39,233 |  |  | $ | 780,357 |  |  | $ | 44,665 |  |  | $ | 825,022 |
Balances at December 31, 2022 |  | $ | 547,852 |  |  | $ | 29,212 |  |  | $ | 577,064 |  |  | $ | 48,294 |  |  | $ | 625,358 |
Net income (loss) |  |  | (12,419 | ) |  |  | (652 | ) |  |  | (13,071 | ) |  |  | 613 |  |  |  | (12,458 | )
Redemption of OP Units |  |  | 4,256 |  |  |  | (4,876 | ) |  |  | (620 | ) |  |  | — |  |  |  | (620 | )
Share-based compensation expense |  |  | 3,549 |  |  |  | 3,149 |  |  |  | 6,698 |  |  |  | — |  |  |  | 6,698 |
Contributions from noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 163 |  |  |  | 163 |
Distributions to noncontrolling interests in consolidated real estate partnerships |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (597 | ) |  |  | (597 | )
Repurchases of OP Units held by Aimco |  |  | (22,592 | ) |  |  | — |  |  |  | (22,592 | ) |  |  | — |  |  |  | (22,592 | )
Other OP Unit issuances |  |  | 1,540 |  |  |  | 1,272 |  |  |  | 2,812 |  |  |  | — |  |  |  | 2,812 |
Other, net |  |  | (4 | ) |  |  | — |  |  |  | (4 | ) |  |  | (1 | ) |  |  | (5 | )
Balances at June 30, 2023 |  | $ | 522,182 |  |  | $ | 28,105 |  |  | $ | 550,287 |  |  | $ | 48,472 |  |  | $ | 598,759 |

See notes to condensed consolidated financial statements.

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AIMCO OP L.P.

CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

| Six Months Ended June 30, |
| 2023 |  |  | 2022 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |
Net income (loss) | $ | (5,609 | ) |  | $ | 263,323 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization |  | 33,302 |  |  |  | 57,981 |
Mezzanine investment (income) loss, net |  | 257 |  |  |  | (16,567 | )
Realized and unrealized (gains) losses on interest rate options |  | (2,326 | ) |  |  | (38,795 | )
Realized and unrealized (gains) losses on equity investments |  | (1,231 | ) |  |  | (22,297 | )
Income tax expense (benefit) |  | (4,613 | ) |  |  | 41,901 |
Share-based compensation |  | 5,965 |  |  |  | 4,513 |
Loss on extinguishment of debt, net |  | 929 |  |  |  | 27,482 |
Lease modification income |  | — |  |  |  | (205,387 | )
Gain on dispositions of real estate |  | (1,878 | ) |  |  | (94,465 | )
Income from unconsolidated real estate partnerships |  | (295 | ) |  |  | (300 | )
Amortization of debt issuance costs and other |  | 1,114 |  |  |  | 1,421 |
Changes in operating assets and operating liabilities: |  |  |  |  |
Other assets, net |  | (1,244 | ) |  |  | 2,201 |
Net cash received from lease incentive |  | — |  |  |  | 7,895 |
Accrued liabilities and other |  | (6,686 | ) |  |  | (3,528 | )
Total adjustments |  | 23,294 |  |  |  | (237,945 | )
Net cash provided by operating activities |  | 17,685 |  |  |  | 25,378 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |
Purchases of real estate |  | (4,108 | ) |  |  | (100,758 | )
Capital expenditures (1) |  | (129,919 | ) |  |  | (124,813 | )
Proceeds from disposition of real estate |  | — |  |  |  | 126,769 |
Investment in IQHQ |  | — |  |  |  | (14,227 | )
Investment in unconsolidated real estate partnerships |  | (1,387 | ) |  |  | (12,244 | )
Distributions received from unconsolidated real estate partnerships |  | 4,209 |  |  |  |
Other investing activities |  | 4,570 |  |  |  | (116 | )
Net cash used in investing activities |  | (126,635 | ) |  |  | (125,389 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |
Proceeds from non-recourse property debt |  | — |  |  |  | 614,720 |
Proceeds from construction loans |  | 73,152 |  |  |  | 33,607 |
Proceeds from sale of participation in Mezzanine Investment |  | 37,500 |  |  |  | — |
Payments of deferred loan costs |  | (229 | ) |  |  | (6,620 | )
Principal repayments on non-recourse property debt |  | (61,541 | ) |  |  | (283,826 | )
Principal repayments on Notes Payable to AIR |  | — |  |  |  | (387,088 | )
Proceeds from interest rate option |  | 55,687 |  |  |  | 13,660 |
Payments on finance leases |  | (1,523 | ) |  |  | (25,366 | )
Payments of prepayment premiums |  | — |  |  |  | (21,395 | )
Common stock repurchased |  | (22,391 | ) |  |  | (4,419 | )
Redemption of noncontrolling interest in real estate partnership |  | — |  |  |  | (7,244 | )
Distributions to redeemable noncontrolling interests |  | (5,152 | ) |  |  | — |
Contributions from noncontrolling interests |  | 163 |  |  |  | 9,718 |
Distributions to noncontrolling interests |  | (597 | ) |  |  | (605 | )
Contributions from redeemable noncontrolling interests |  | 125 |  |  |  | 20,392 |
Redemption of OP units |  | (621 | ) |  |  | (133 | )
Redemption of redeemable noncontrolling interests |  | — |  |  |  | (5,094 | )
Other financing activities |  | (3,024 | ) |  |  | (569 | )
Net cash provided by (used in) financing activities |  | 71,549 |  |  |  | (50,262 | )
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |  | (37,401 | ) |  |  | (150,273 | )
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |  | 229,766 |  |  |  | 244,582 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 192,365 |  |  | $ | 94,309 |

(1) Accrued capital expenditures we re $62.8 million and $29.1 million as of June 30, 2023 and 2022, respectively.

See notes to condensed consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO OP L.P.

NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

Note 1 — Organization

Apartment Investment and Management Company (“Aimco”), a Maryland corporation incorporated on January 10, 1994, is a self-administered and self-managed real estate investment trust (“REIT”). On December 15, 2020, Aimco completed the separation of its businesses (the “Separation”), creating two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp. (“AIR”) (Aimco and AIR together, as they existed prior to the Separation, “Aimco Predecessor”). Events noted in this filing as occurring before December 15, 2020, were those entered into by Aimco Predecessor. Aimco, through a wholly owned subsidiary, is the general and special limited partner of Aimco OP L.P. (“Aimco Operating Partnership”).

Except as the context otherwise requires, “we,” “our,” and “us” refer to Aimco, Aimco Operating Partnership, and their consolidated subsidiaries, collectively.

As of June 30, 2023, Aimco owned 92.5% of the legal interest in the common partnership units of Aimco Operating Partnership and 94.9% of the economic interest in Aimco Operating Partnership. The remaining 7.5% legal interest is owned by limited partners. The common partnership units of Aimco Operating Partnership are referred to as "OP Units". As the sole general partner of Aimco Operating Partnership, Aimco has exclusive control of Aimco Operating Partnership’s day-to-day management.

We own or lease a portfolio of real estate investments focused primarily on the U.S. multifamily sector. These real estate investments include: a portfolio of 26 operating apartment communities (22 consolidated properties with 5,640 apartment homes and four unconsolidated operating properties), diversified by both geography and price point; one commercial office building that is part of a land assemblage; one hotel, with 106 rooms; three residential apartment communities, with 1,185 apartment homes, of which 276 have been completed and an additional 909 are planned, and a single family rental community with 16 planned homes plus eight accessory dwelling units, which we are actively developing or redeveloping; land parcels held for development. Our real estate portfolio also includes two unconsolidated investments in land held for development. In addition, we hold other alternative investments, including our Mezzanine Investment (see Note 2 for further information); our investment in IQHQ, Inc. ("IQHQ"); and our investment in real estate technology funds.

Note 2 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The Condensed Consolidated Balance Sheets of Aimco and Aimco Operating Partnership as of December 31, 2022 have been derived from their respective audited financial statements at that date, but do not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2022. Except where indicated, the footnotes refer to both Aimco and Aimco Operating Partnership.

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Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Aimco, Aimco Operating Partnership, and their consolidated subsidiaries. Aimco Operating Partnership’s condensed consolidated financial statements include the accounts of Aimco Operating Partnership and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

We consolidate a variable interest entity (“VIE”) in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

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.

Certain reclassifications have been made to prior period amounts to conform to the current period condensed consolidated financial statement presentation with no effect on the Company’s previously reported results of operations, financial position, or cash flows.

Common Noncontrolling Interests in Aimco Operating Partnership

Common noncontrolling interests in Aimco Operating Partnership consist of OP Units held by third parties, and are reflected in Aimco’s accompanying Condensed Consolidated Balance Sheets as Common Noncontrolling Interests in Aimco Operating Partnership. Aimco Operating Partnership’s income or loss is allocated to the holders of OP Units, other than Aimco, based on the weighted-average number of OP Units (including Aimco) outstanding during the period. For the periods ended June 30, 2023 and 2022, the holders of OP Units had a weighted-average economic ownership interest in Aimco Operating Partnership of approximately 5.1%, and 5.0%, respectively. Substantially all of the assets and liabilities of Aimco are held by Ai mco Operating Partnership.

Redeemable Noncontrolling Interests in Consolidated Real Estate Partnerships

Redeemable noncontrolling interests consist of equity interests held by a limited partner in a consolidated real estate partnership that has a finite life. If a consolidated real estate partnership includes redemption rights that are not within our control, the noncontrolling interest is included as temporary equity.

Redeemable noncontrolling interests in consolidated real estate partnerships as of June 30, 2023, consists of the following: (i) a $102.0 million preferred equity interest in an entity that owns a portfolio of operating apartment communities and (ii) equity interests in two separate consolidated joint ventures that are actively developing residential apartment communities. Capital contributions, distributions, and net income attributable to redeemable noncontrolling interests in consolidated real estate partnerships are determined in accordance with the relevant partnership agreements. These interests are presented as Redeemable noncontrolling interests in consolidated real estate partnerships in our Condensed Consolidated Balance Sheet as of June 30, 2023.

The following table shows changes in our redeemable noncontrolling interests in consolidated real estate partnerships from December 31, 2022 to June 30, 2023 (in thousands):

Balance at December 31, 2022 |  | $ | 166,826 |
Capital contributions |  |  | 125 |
Distributions |  |  | (5,152 | )
Net income |  |  | 6,849 |
Balance at June 30, 2023 |  | $ | 168,648 |

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Mezzanine Investment

In November 2019, Aimco Predecessor made a five-year, $275.0 million mezzanine loan to the partnership owning the “Parkmerced Apartments” located in southwest San Francisco (the “Mezzanine Investment”). The loan bears interest at a 10% annual rate, accruing if not paid from property operations. Ownership of the subsidiaries that originated and hold the Mezzanine Investment was retained by AIR following the Separation.

The Separation Agreement with AIR provides for AIR to transfer ownership of the subsidiaries that originated and hold the Mezzanine Investment, a related equity option to acquire a 30% interest in the partnership owning Parkmerced Apartments and the interest rate option, or swaption, that provides partial protection against future refinancing risk to Aimco through 2024 once required third-party consents are received. At the time of Separation and as of the date of this filing, legal title of these subsidiaries had not yet transferred to us. Until legal title of the subsidiaries is transferred, AIR is obligated to pass payments received on the Mezzanine Investment to us, and we are obligated to indemnify AIR against any costs and expenses related thereto. We have the risks and rewards of ownership of the Mezzanine Investment and have recognized an asset related to our right to receive the Mezzanine Investment from AIR.

On a periodic basis, we evaluate our Mezzanine Investment for impairment. We assess whether there are any indicators that imply the value of our investment may be impaired. These include assessments of both the underlying property performance and general market conditions in place. An investment is considered impaired if we determine that its fair value is less than the net carrying value of the investment on an other-than-temporary basis. Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. These factors include the loan’s maturity date, our intent and ability to retain our investment in the entity, and the financial condition and long-term prospects of the entity.

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

In June 2023, we closed on the sale of a 20% non-controlling participation in the Mezzanine Investment for $33.5 million. Pursuant to the terms of the agreement, the purchaser has the option to acquire the remaining 80% for an additional $134 million plus interest accruing at no less than 19% annually through May 2024 when the option expires. The purchaser pre-paid $4 million of interest at the time of closing. So long as the purchaser's option remains unexercised, Aimco receives a first priority return from any payments made to service or pay down the Mezzanine Investment equal to $134 million plus no less than a 19% annualized return as well as 80% of any residual payments after the purchaser receives a 10% annualized retu rn on its subordinate investment. Additionally, Aimco is responsible for the servicing and administration of the Mezzanine Investment.

Because Aimco receives first priority and a higher annualized return than the purchaser, the sale and transfer of the financial interest does not qualify for sale accounting in accordance with GAAP. Therefore, the portion of the Mezzanine Investment that was sold, which has a carrying amount of $31.5 million, remains in Mezzanine investment in our Condensed Consolidated Balance Sheet. We have also recorded the cash received from the purchaser as a liability, which is included in Mezzanine investment - participation sold in our Condensed Consolidated Balance Sheet. Transaction costs have been deferred and presented as a direct reduction from the related liability in Mezzanine investment - participation sold in our Condensed Consolidated Balance Sheet. The cash flows associated with the Mezzanine investment - participation sold have been included in Cash Flows from Financing Activities in the Condensed Consolidated Statements of Cash Flows.

Income Tax Benefit (Expense)

Certain aspects of our operations, including our development and redevelopment activities, are conducted through taxable REIT subsidiaries, or TRS entities. Additionally, our TRS entities hold investments in one of our apartment communities and 1001 Brickell Bay Drive.

Our income tax benefit (expense) calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities. Income taxes, as well as changes in valuation allowance and incremental deferred tax items in conjunction with intercompany asset transfers and internal restructurings (if applicable), are included in Income tax benefit (expense) in our Condensed Consolidated Statements of Operations.

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Consolidated GAAP income or loss subject to tax consists of pretax income or loss of our taxable entities and gains retained by the REIT. For the three and six months ended June 30, 2023, we had consolidated net losses subject to tax of $2.5 million and $7.4 million, respectively. For the three and six months ended June 30, 2022, we had consolidated net income subject to tax of $181.4 million and $166.6 million, respectively.

For the three months ended June 30, 2023, we recognized an income tax benefit of $0.4 million, compared to income tax expense of $46.0 million during the same period in 2022. The change is due primarily to GAAP income taxes associated with the lease modification income recognized in the second quarter of 2022.

For the six months ended June 30, 2023, we recognized an income tax benefit of $4.6 million compared to income tax expense of $41.9 million during the same period in 2022. The change is primarily due to GAAP income taxes associated with the lease modification income recognized in the second quarter of 2022, as well as a change in the first quarter of 2023 to the effective state tax rate expected to apply to the reversal of deferred taxes.

Use of Estimates

The preparation of our condensed 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.

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 consists of tenant security deposits, capital replacement reserves, insurance reserves, and cash restricted as required by our debt agreements.

Other Assets, net

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

| June 30, 2023 |  |  | December 31, 2022 |
Other investments | $ | 65,554 |  |  | $ | 63,982 |
Deferred costs, deposits, and other |  | 18,493 |  |  |  | 20,460 |
Prepaid expenses and real estate taxes |  | 13,851 |  |  |  | 17,363 |
Intangible assets, net |  | 13,632 |  |  |  | 14,160 |
Corporate fixed assets |  | 9,341 |  |  |  | 8,371 |
Accounts receivable, net of allowances of $346 and $1,206 as of June 30, 2023 and December 31, 2022, respectively |  | 4,202 |  |  |  | 4,079 |
Deferred tax assets |  | 1,788 |  |  |  | 2,321 |
Due from third-party property manager |  | 1,143 |  |  |  | 1,669 |
Due from affiliates |  | 636 |  |  |  | 274 |
Total other assets, net | $ | 128,640 |  |  | $ | 132,679 |

Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-04,“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients to debt, derivatives, and other contracts that refer to LIBOR or another reference rate expected to be discontinued because of reference rate reform. The original ASU was effective as of its issuance date and provided temporary relief through December 31, 2022, which was extended through December 31, 2024 by ASU 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848". We are transitioning to the Secured Overnight Financing Rate ("SOFR") effective July 1, 2023. There is not a material impact on our consolidated financial statements as a result of this transition.

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Note 3 — Commitments and Contingencies

Commitments

In connection with our development, redevelopment, and other capital additions activities, we have entered into various construction-related contracts, and have made commitments to complete development and redevelopment of certain real estate, pursuant to financing or other arrangements. We expect to fund most of these commitments over the next 24 months. As of June 30, 2023, we had entered into construction-related contracts for $165.5 million, with $229.0 million undrawn on our construction loans.

As of June 30, 2023, we have remaining commitments of $3.2 million related to our unconsolidated joint ventures, which we expect to fund over the next twelve months. In addition, we have remaining commitments of $2.1 million related to our investments in property technology funds invested in entities that develop technology related to the real estate industry. The timing of the remaining funding of these commitments is uncertain.

We also enter into certain commitments for future purchases of goods and services in connection with the operations of our apartment communities. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.

Legal Matters

From time to time, we may be a party to certain legal proceedings. While the outcome of the legal proceedings cannot be predicted with certainty, we believe there are no legal proceedings pending that would have a material effect upon our financial condition or results of operations.

Note 4 — Earnings per Share and per Unit

Aimco and Aimco Operating Partnership calculate basic earnings per share and basic earnings per unit based on the weighted-average number of shares of Common Stock and OP Units outstanding. We calculate diluted earnings per share and diluted earnings per unit taking into consideration dilutive shares of Common Stock and OP Unit equivalents and dilutive convertible securities outstanding during the period.

Aimco's Common Stock and OP Unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in our issuance of additional shares of Common Stock and Aimco Operating Partnership’s issuance to us of additional OP Units equal to the number of shares of Common Stock purchased under the options. These equivalents also include unvested market-based restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of Common Stock and OP Units outstanding equal to the number of the shares that vest. OP Unit equivalents also include unvested long-term incentive partnership units. The Common Stock and OP Unit equivalents were included in the computation of diluted earnings per share and unit for the three and six months ended June 30, 2022, because the effect of their inclusion was dilutive. However, the Common Stock and OP Unit equivalents were not included in the computation of diluted earnings per share and unit for the three and six months ended June 30, 2023, because the effect of their inclusion would be antidilutive. As of June 30, 2023, the Common Stock and OP Unit equivalents that could potentially dilute basic earnings per share or unit in future periods totaled 3.7 million and 7.9 million, respectively.

Aimco's time-based restricted stock awards receive non-forfeitable dividends similar to shares of Common Stock and OP Units prior to vesting, and our market-based long-term incentive partnership units receive non-forfeitable distributions based on specified percentages of the distributions paid to OP Units prior to vesting and conversion. The unvested restricted shares and units related to these awards are participating securities. We include the effect of participating securities in basic and diluted earnings per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method. Participating securities were included in the computation of diluted earnings per share and unit for the three and six months ended June 30, 2022, because the effect of their inclusion was dilutive. However, participating securities are not included in the computation of diluted earnings per share and unit for the three and six months ended June 30, 2023, because the effect of their inclusion would be antidilutive. As of June 30, 2023, participating securities that could potentially dilute basic earnings per share or unit in future periods total ed 2.5 million.

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Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings per share and per unit for the three and six months ended June 30, 2023 and 2022, are as follows (in thousands, except per share and per unit data):

| Three Months Ended June 30, |  |  | Six Months Ended June 30, |
| 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Earnings per share |  |  |  |  |  |  |  |  |  |  |
Numerator: |  |  |  |  |  |  |  |  |  |  |
Net income (loss) attributable to Aimco | $ | (3,602 | ) |  | $ | 239,137 |  |  | $ | (12,419 | ) |  | $ | 247,346 |
Net income allocated to Aimco participating securities |  | — |  |  |  | (3,284 | ) |  |  | — |  |  |  | (3,410 | )
Net income (loss) attributable to Aimco common stockholders | $ | (3,602 | ) |  | $ | 235,853 |  |  | $ | (12,419 | ) |  | $ | 243,936 |
Denominator - shares: |  |  |  |  |  |  |  |  |  |  |
Basic weighted-average common stock outstanding |  | 144,195 |  |  |  | 149,600 |  |  |  | 145,007 |  |  |  | 149,694 |
Diluted share equivalents outstanding |  | — |  |  |  | 823 |  |  |  | — |  |  |  | 966 |
Diluted weighted-average common stock outstanding |  | 144,195 |  |  |  | 150,423 |  |  |  | 145,007 |  |  |  | 150,660 |
Earnings (loss) per share - basic | $ | (0.02 | ) |  | $ | 1.58 |  |  | $ | (0.09 | ) |  | $ | 1.63 |
Earnings (loss) per share - diluted | $ | (0.02 | ) |  | $ | 1.57 |  |  | $ | (0.09 | ) |  | $ | 1.62 |
Earnings per unit |  |  |  |  |  |  |  |  |  |  |
Numerator: |  |  |  |  |  |  |  |  |  |  |
Net income (loss) attributable to Aimco Operating Partnership | $ | (3,780 | ) |  | $ | 251,796 |  |  | $ | (13,071 | ) |  | $ | 260,440 |
Net income allocated to Aimco Operating Partnership participating securities |  | — |  |  |  | (3,423 | ) |  |  | — |  |  |  | (3,551 | )
Net income (loss) attributable to Aimco Operating Partnership's common unit holders | $ | (3,780 | ) |  | $ | 248,373 |  |  | $ | (13,071 | ) |  | $ | 256,889 |
Denominator - units |  |  |  |  |  |  |  |  |  |  |
Basic weighted-average common partnership units outstanding |  | 151,966 |  |  |  | 157,525 |  |  |  | 152,795 |  |  |  | 157,621 |
Diluted partnership unit equivalents outstanding |  | - |  |  |  | 922 |  |  |  | - |  |  |  | 1,045 |
Diluted weighted-average common partnership units outstanding |  | 151,966 |  |  |  | 158,447 |  |  |  | 152,795 |  |  |  | 158,666 |
Earnings (loss) per unit - basic | $ | (0.02 | ) |  | $ | 1.58 |  |  | $ | (0.09 | ) |  | $ | 1.63 |
Earnings (loss) per unit - diluted | $ | (0.02 | ) |  | $ | 1.57 |  |  | $ | (0.09 | ) |  | $ | 1.62 |

Note 5 — Fair Value Measure ments and Disclosures

Recurring Fair Value Measurements

From time to time we purchase interest rate swaps, caps, and other instruments to provide protection against increases in interest rates on our variable rate debt. As of June 30, 2023, we held interest rate swaps and caps with $473.2 million notional value. These instruments were acquired for $5.1 million, and the fair value of these instruments is noted in the table below.

During the three months ended June 30, 2023, we monetized the $1.5 billion notional amount interest rate swaption, purchased in conjunction with the Mezzanine Investment to protect against future interest rate increases, for gross proceeds o f $54.2 million. We invested the $53.1 million net proceeds in a three-month treasury instrument, reflected in Cash and cash equivalents in our Condensed Consolidated Balance Sheet, that had a carrying value of $53.6 million as of June 30, 2023, which also approximated its fair value.

On a recurring basis, we measure at fair value our interest rate options. Our interest rate options are classified within Level 2 of the GAAP fair value hierarchy, and we estimate their fair value using pricing models that rely on observable market information, including contractual terms, market prices, and interest rate yield curves. The fair value adjustment is included in earnings in Realized and unrealized gains (losses) on interest rate options in our Condensed Consolidated Statements of Operations. Changes in fair value are reflected as a non-cash transaction in adjustments to arrive at cash flows from operations, any upfront premium is reflected in Purchase of interest rate options, and any proceeds are reflected in Proceeds from interest rate options in our Condensed Consolidated Statements of Cash Flows.

As of June 30, 2023 and December 31, 2022, we have an investment in stock of $3.4 million and $1.2 million, respectively, classified within Level 1 of the GAAP fair value hierarchy. In addition, as of June 30, 2023 and December 31, 2022, we have investments in property technology funds of $2.4 million and $3.1 million, respectively, in entities that develop technology related to the real estate industry. These investments are measured at net asset value (“NAV”) as a practical expedient.

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The following table summarizes the fair value for our interest rate options and our investments in real estate technology funds as of June 30, 2023 , and December 31, 2022 (in thousands):

|  | As of June 30, 2023 |  |  | As of December 31, 2022 |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Interest rate options |  | $ | 8,957 |  |  | $ | — |  |  | $ | 8,957 |  |  | $ | — |  |  | $ | 62,259 |  |  | $ | — |  |  | $ | 62,259 |  |  | $ | — |
Investment in stock |  | $ | 3,443 |  |  | $ | 3,443 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,179 |  |  | $ | 1,179 |  |  | $ | — |  |  | $ | — |
Investments in real estate technology funds (1) |  | $ | 2,422 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,117 |  |  | $ | — |  |  | $ | — |  |  | $ | — |

(1) Investments measured at fair value using NAV as a practical expedient are not classified in the fair value hierarchy.

Fair Value Disclosures

We believe that the carrying value of the consolidated amounts of cash and cash equivalents, restricted cash, accounts receivable and payables approximated their fair value as of June 30, 2023, and December 31, 2022, due to their relatively short-term nature and high probability of realization. We estimate the fair value of our debt using an income and market approach, including comparison of the contractual terms to observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, debt service coverage ratios, and loan to value ratios. We classify the fair value of our non-recourse property debt and construction loans within Level 2 of the GAAP valuation hierarchy based on the significance of certain of the unobservable inputs used to estimate their fair value.

The following table summarizes the carrying value and fair value of our non-recourse property debt, and construction loans as of June 30, 2023, and December 31, 2022 (in thousands):

|  | As of June 30, 2023 |  |  | As of December 31, 2022 |
|  | Carrying Value |  |  | Fair Value |  |  | Carrying Value |  |  | Fair Value |
Non-recourse property debt |  | $ | 876,935 |  |  | $ | 826,108 |  |  | $ | 938,476 |  |  | $ | 878,804 |
Construction loans |  |  | 201,990 |  |  |  | 201,632 |  |  |  | 126,317 |  |  |  | 125,954 |
Total |  | $ | 1,078,925 |  |  | $ | 1,027,740 |  |  | $ | 1,064,793 |  |  | $ | 1,004,758 |

Note 6 — Variable Interest Entities

We evaluate our investments in limited partnerships and similar entities in accordance with applicable consolidation guidance to determine whether each such entity is a VIE. The accounting standards for the consolidation of VIEs require qualitative assessments to determine whether we are the primary beneficiary. The primary beneficiary analysis is based on power and economics. We conclude that we are the primary beneficiary and consolidate the VIE if we have both: (i) the power to direct the activities of the VIE that most significantly influence the VIE's economic performance, and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Significant judgments and assumptions related to these determinations include, but are not limited to, estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

We consolidate Aimco Operating Partnership, a VIE of which we are the primary beneficiary. Through Aimco Operating Partnership, we consolidate all VIEs for which we are the primary beneficiary. Substantially all of our assets and liabilities are those of Aimco Operating Partnership.

Aimco Operating Partnership is the primary beneficiary, and therefore consolidates its five VIEs that own interests in real estate. Assets of our consolidated VIEs must first be used to settle the liabilities of those VIEs. The consolidated VIEs' creditors do not have recourse to the general credit of Aimco Operating Partnership.

In addition, we have eight unconsolidated VIEs for which we are not the primary beneficiary because we are not their primary decision maker. The eight unconsolidated VIEs include four unconsolidated real estate partnerships that hold four apartment communities in San Diego, California, the Mezzanine Investment, our passive equity investment in IQHQ, and our two unconsolidated investments in land held for development in Miami, Florida and Bethesda, Maryland. Our maximum exposure to loss because of our involvement with the unconsolidated VIEs is limited to the carrying value of their assets.

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The details of our consolidated and unconsolidated VIEs, excluding those of Aimco Operating Partnership, are summarized in the table below as of June 30, 2023, and December 31, 2022 (in thousands, except for VIE count):

|  | As of June 30, 2023 |  |  | As of December 31, 2022 |
|  | Consolidated |  |  | Unconsolidated |  |  | Consolidated |  |  | Unconsolidated |
Count of VIEs |  | 5 |  |  | 8 |  |  | 5 |  |  | 8 |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Real estate, net |  | $ | 375,145 |  |  | $ | — |  |  | $ | 258,529 |  |  | $ | — |
Cash and cash equivalents |  |  | 4,541 |  |  |  | — |  |  |  | 5,075 |  |  |  | — |
Restricted Cash |  |  | 7,675 |  |  |  | — |  |  |  | 1,747 |  |  |  | — |
Mezzanine investment |  |  | — |  |  |  | 158,301 |  |  |  | — |  |  |  | 158,558 |
Interest rate options |  |  | 4,887 |  |  |  | — |  |  |  | 3,900 |  |  |  | — |
Right-of-use lease assets |  |  | 109,631 |  |  |  | — |  |  |  | 110,269 |  |  |  | — |
Unconsolidated real estate partnerships |  |  | — |  |  |  | 20,808 |  |  |  | — |  |  |  | 15,789 |
Other assets, net |  |  | 23,027 |  |  |  | 59,883 |  |  |  | 25,623 |  |  |  | 59,823 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Accrued liabilities and other |  |  | 49,373 |  |  |  | — |  |  |  | 26,003 |  |  |  | — |
Non-recourse property debt, net |  |  | 22,779 |  |  |  | — |  |  |  | 22,689 |  |  |  | — |
Construction loans, net |  |  | 102,230 |  |  |  | — |  |  |  | 40,013 |  |  |  | — |
Lease liabilities |  |  | 116,593 |  |  |  | — |  |  |  | 114,625 |  |  |  | — |
Mezzanine investment - participation sold |  |  | — |  |  |  | 33,977 |  |  |  | — |  |  |  | — |

Note 7 — Lease Arrangements

Aimco as Lessor

The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and commercial tenants primarily for utility reimbursements and other services.

For the three and six months ended June 30, 2023 and 2022, our total lease income was comprised of the following amounts for all residential and commercial property leases (in thousands):

Aimco as Lessee

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Fixed lease income |  | $ | 42,208 |  |  | $ | 46,851 |  |  | $ | 83,213 |  |  | $ | 92,982 |
Variable lease income |  |  | 3,244 |  |  |  | 3,673 |  |  |  | 6,406 |  |  |  | 7,409 |
Total lease income |  | $ | 45,452 |  |  | $ | 50,524 |  |  | $ | 89,619 |  |  | $ | 100,391 |

Finance Lease Arrangements

We are lessee to finance leases for the land underlying the development sites at Upton Place, Strathmore Square, and Oak Shore.

As of June 30, 2023 and December 31, 2022, our finance leases had weighted-average remaining terms of 93.8 years and 94.2 years, respectively, and weighted-average discount rates of 6.1% at both period ends.

For the three and six months ended June 30, 2023, amortization related to our finance leases was $0.0 million for both periods, net of amounts capitalized, compared to $3.4 million and $6.7 million, respectively, for the three and six months ended June 30, 2022.

For the three and six months ended June 30, 2023, we capitalized $2.1 million and $4.2 million, respectively, of lease costs associated with active development and redevelopment projects on certain of the underlying property and ground lease assets, compared to $1.8 million and $4.8 million, respectively, for the three and six months ended June 30, 2022.

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Operating Lease Arrangements

We have operating leases primarily for corporate office space. Substantially all of the payments under our office leases are fixed. As of June 30, 2023 and December 31, 2022, our operating leases had weighted-average remaining terms of 5.6 years and 6.3 years, respectively, and weighted-average discount rates of 3.3%, and 3.4%, re spectively.

We record operating lease expense on a straight-line basis over the lease term. Total operating lease expense for the three and six months ended June 30, 2023 was $0.4 million and $0.8 million, respectively, compared to $0.2 million and $0.3 million, respectively, for the three and six months ended June 30, 2022. As of June 30, 2023 and December 31, 2022, operating lease right-of-use lease assets of $6.9 million and $6.7 million, respectively, are included in Other assets, net in our Condensed Consolidated Balance Sheets. As of June 30, 2023 and December 31, 2022, operating lease liabilities of $12.7 million and $12.8 million, respectively, are included in Accrued liabilities and other in our Condensed Consolidated Balance Sheets.

For finance and operating leases, when the rate implicit in the lease cannot be determined, we estimate the value of our lease liabilities using discount rates equivalent to the rates we would pay on a secured borrowing with terms similar to the leases. We determine if an arrangement is or contains a lease at inception. We have lease agreements with lease and non-lease components, and have elected to not separate these components for all classes of underlying assets. Leases with an initial term of 12 months or less are not recorded in our Condensed Consolidated Balance Sheets. Leases with initial terms greater than 12 months are recorded as operating or finance leases in our Condensed Consolidated Balance Sheets.

Office Space Sublease

We have a sublease arrangement to provide space within our corporate office for fixed rents, which commenced on January 1, 2021 and expires on May 31, 2029. For the three and six months ended June 30, 2023, we recognized sublease income of $0.4 million and $0.7 million, respectively, compared to $0.4 million and $0.7 million, respectively, for the three and six months ended June 30, 2022.

Annual Future Minimum Lease Payments

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

| Sublease Income and Lease Modification Income |  |  | Operating Lease Future Minimum Rent |  |  | Finance Leases Future Minimum Payments |
Remainder of 2023 | $ | 704 |  |  | $ | 1,271 |  |  | $ | 1,451 |
2024 |  | 1,413 |  |  |  | 2,657 |  |  |  | 3,921 |
2025 |  | 1,423 |  |  |  | 2,355 |  |  |  | 4,437 |
2026 |  | 1,433 |  |  |  | 2,341 |  |  |  | 4,954 |
2027 |  | 1,443 |  |  |  | 2,380 |  |  |  | 5,483 |
Thereafter |  | 2,083 |  |  |  | 3,023 |  |  |  | 1,433,296 |
Total | $ | 8,499 |  |  |  | 14,027 |  |  |  | 1,453,542 |
Less: Discount |  |  |  |  | (1,283 | ) |  |  | (1,336,949 | )
Total lease liabilities |  |  |  | $ | 12,744 |  |  | $ | 116,593 |

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Note 8 — Business Segments

We have three segments: (i) Development and Redevelopment; (ii) Operating; and (iii) Other.

Our Development and Redevelopment segment consists of properties that are under construction or have not achieved stabilization, as well as land held for development. As of June 30, 2023, our Development and Redevelopment segment consists of 12 properties: three residential apartment communities with 1,185 apartment homes, of which 276 have been completed and an additional 909 are planned, a single family rental community with 16 planned homes plus eight accessory dwelling units, which we are actively developing or redeveloping; one hotel with 106 rooms and 18,000 square feet of event space completed in April 2023, and land parcels held for development.

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

During the first quarter of 2023, we reclassified one residential apartment community from the Other segment to the Operating segment because it reached stabilization. Prior period segment information has been recast based upon our current segment population, and is consistent with how our chief operating decision maker ("CODM") evaluates the business. The recast conforms with our reportable segment classification as of June 30, 2023.

Our Other segment consists of properties currently owned that are not included in our Development and Redevelopment or Operating segments. Our Other segment includes 1001 Brickell Bay Drive, our only office building, and St. George Villas.

Our CODM uses cash flow, construction timeline to completion, and actual versus budgeted results to evaluate our properties in our Development and Redevelopment segment. Our CODM uses proportionate property net operating income to assess the operating performance of our Operating segment. Proportionate property net operating income is defined as our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, including utility reimbursements, for the consolidated communities; but

•
excluding the results of four apartment communities with an aggregate 142 apartment homes that we neither manage nor consolidate, our investment in IQHQ and the Mezzanine Investment; and
•
excluding property management costs and casualty gains or losses, reported in consolidated amounts, in our assessment of segment performance.

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The following tables present the results of operations of consolidated properties with our segments reported on a proportionate basis for the three months ended June 30, 2023 and 2022 (in thousands):

| Development and Redevelopment |  |  | Operating |  |  | Other |  |  | Proportionate and Other Adjustments(1) |  |  | Corporate and Amounts Not Allocated to Segments (2) |  |  | Consolidated |
Three Months Ended June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rental and other property revenues | $ | 3,640 |  |  | $ | 37,011 |  |  | $ | 3,432 |  |  | $ | 1,591 |  |  | $ | — |  |  | $ | 45,674 |
Property operating expenses |  | 2,684 |  |  |  | 11,496 |  |  |  | 1,520 |  |  |  | 1,627 |  |  |  | 1,456 |  |  |  | 18,783 |
Other operating expenses not allocated to segments (3) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 24,921 |  |  |  | 24,921 |
Total operating expenses |  | 2,684 |  |  |  | 11,496 |  |  |  | 1,520 |  |  |  | 1,627 |  |  |  | 26,377 |  |  |  | 43,704 |
Proportionate property net operating income (loss) |  | 956 |  |  |  | 25,515 |  |  |  | 1,912 |  |  |  | (36 | ) |  |  | (26,377 | ) |  |  | 1,970 |
Other items included in income before income tax (4) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,243 | ) |  |  | (2,243 | )
Income (loss) before income tax | $ | 956 |  |  | $ | 25,515 |  |  | $ | 1,912 |  |  | $ | (36 | ) |  | $ | (28,620 | ) |  | $ | (273 | )

| Development and Redevelopment |  |  | Operating |  |  | Other |  |  | Proportionate and Other Adjustments(1) |  |  | Corporate and Amounts Not Allocated to Segments (2) |  |  | Consolidated |
Three Months Ended June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rental and other property revenues | $ | 33 |  |  | $ | 33,809 |  |  | $ | 3,645 |  |  | $ | 1,461 |  |  | $ | 11,749 |  |  | $ | 50,697 |
Property operating expenses |  | 363 |  |  |  | 10,563 |  |  |  | 1,138 |  |  |  | 1,439 |  |  |  | 6,205 |  |  |  | 19,708 |
Other operating expenses not allocated to segments (3) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 43,824 |  |  |  | 43,824 |
Total operating expenses |  | 363 |  |  |  | 10,563 |  |  |  | 1,138 |  |  |  | 1,439 |  |  |  | 50,029 |  |  |  | 63,532 |
Proportionate property net operating income (loss) |  | (330 | ) |  |  | 23,246 |  |  |  | 2,507 |  |  |  | 22 |  |  |  | (38,280 | ) |  |  | (12,835 | )
Other items included in income before income tax (4) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 312,003 |  |  |  | 312,003 |
Income (loss) before income tax | $ | (330 | ) |  | $ | 23,246 |  |  | $ | 2,507 |  |  | $ | 22 |  |  | $ | 273,723 |  |  | $ | 299,168 |

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The following tables present the results of operations of consolidated properties with our segments reported on a proportionate basis for the six months ended June 30, 2023 and 2022 (in thousands):

| Development and Redevelopment |  |  | Operating |  |  | Other |  |  | Proportionate and Other Adjustments(1) |  |  | Corporate and Amounts Not Allocated to Segments (2) |  |  | Consolidated |
Six Months Ended June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rental and other property revenues | $ | 5,842 |  |  | $ | 73,683 |  |  | $ | 7,129 |  |  | $ | 3,288 |  |  | $ | — |  |  | $ | 89,942 |
Property operating expenses |  | 4,708 |  |  |  | 22,683 |  |  |  | 2,712 |  |  |  | 3,304 |  |  |  | 2,880 |  |  |  | 36,287 |
Other operating expenses not allocated to segments (3) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 49,595 |  |  |  | 49,595 |
Total operating expenses |  | 4,708 |  |  |  | 22,683 |  |  |  | 2,712 |  |  |  | 3,304 |  |  |  | 52,475 |  |  |  | 85,882 |
Proportionate property net operating income (loss) |  | 1,134 |  |  |  | 51,000 |  |  |  | 4,417 |  |  |  | (16 | ) |  |  | (52,475 | ) |  |  | 4,060 |
Other items included in income before income tax (4) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (14,282 | ) |  |  | (14,282 | )
Income (loss) before income tax | $ | 1,134 |  |  | $ | 51,000 |  |  | $ | 4,417 |  |  | $ | (16 | ) |  | $ | (66,757 | ) |  | $ | (10,222 | )

| Development and Redevelopment |  |  | Operating |  |  | Other |  |  | Proportionate and Other Adjustments(1) |  |  | Corporate and Amounts Not Allocated to Segments (2) |  |  | Consolidated |
Six Months Ended June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rental and other property revenues | $ | 81 |  |  | $ | 66,739 |  |  | $ | 8,000 |  |  | $ | 3,122 |  |  | $ | 22,749 |  |  | $ | 100,691 |
Property operating expenses |  | 572 |  |  |  | 20,960 |  |  |  | 2,577 |  |  |  | 3,076 |  |  |  | 11,744 |  |  |  | 38,929 |
Other operating expenses not allocated to segments (3) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 76,414 |  |  |  | 76,414 |
Total operating expenses |  | 572 |  |  |  | 20,960 |  |  |  | 2,577 |  |  |  | 3,076 |  |  |  | 88,158 |  |  |  | 115,343 |
Proportionate property net operating income (loss) |  | (491 | ) |  |  | 45,779 |  |  |  | 5,423 |  |  |  | 46 |  |  |  | (65,409 | ) |  |  | (14,652 | )
Other items included in income before income tax (4) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 319,876 |  |  |  | 319,876 |
Income (loss) before income tax | $ | (491 | ) |  | $ | 45,779 |  |  | $ | 5,423 |  |  | $ | 46 |  |  | $ | 254,467 |  |  | $ | 305,224 |

(1)
Represents adjustments for noncontrolling interests in consolidated real estate partnerships' share of the results of consolidated communities in our segments, which are included in the related consolidated amounts, but excluded from proportionate property net operating income for our segment evaluation. Also includes the reclassification of utility reimbursements, which are included in Rental and other property revenues in our Condensed Consolidated Statements of Operations, in accordance with GAAP, from revenues to property operating expenses for the purpose of evaluating segment results.
(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. Also includes property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure.
(3)
Other operating expenses not allocated to segments consist of depreciation and amortization and general and administrative expense.
(4)
Other items included in Income before income tax benefit consist primarily of lease modification income, gain on dispositions of real estate, interest expense, mezzanine investment income (loss), net realized and unrealized gains (losses) on interest rate options, and realized and unrealized gains (losses) on equity investments.

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Net real estate and non-recourse property debt, net, of our segments as of June 30, 2023 and December 31, 2022, were as follows (in thousands):

| Development and Redevelopment |  |  | Operating |  |  | Other |  |  | Total |
As of June 30, 2023: |  |  |  |  |  |  |  |  |  |  |
Buildings and improvements | $ | 599,807 |  |  | $ | 702,884 |  |  | $ | 165,041 |  |  | $ | 1,467,732 |
Land |  | 226,161 |  |  |  | 262,409 |  |  |  | 150,090 |  |  |  | 638,660 |
Total real estate |  | 825,968 |  |  |  | 965,293 |  |  |  | 315,131 |  |  |  | 2,106,392 |
Accumulated depreciation |  | (7,385 | ) |  |  | (472,573 | ) |  |  | (68,358 | ) |  |  | (548,316 | )
Net real estate | $ | 818,583 |  |  | $ | 492,720 |  |  | $ | 246,773 |  |  | $ | 1,558,076 |
Non-recourse property debt and construction loans, net | $ | 218,468 |  |  | $ | 766,453 |  |  | $ | 80,741 |  |  | $ | 1,065,662 |

| Development and Redevelopment |  |  | Operating |  |  | Other |  |  | Total |
As of December 31, 2022: |  |  |  |  |  |  |  |  |  |  |
Buildings and improvements | $ | 449,316 |  |  | $ | 708,665 |  |  | $ | 164,400 |  |  | $ | 1,322,381 |
Land |  | 228,568 |  |  |  | 262,409 |  |  |  | 150,125 |  |  | $ | 641,102 |
Total real estate |  | 677,884 |  |  |  | 971,074 |  |  |  | 314,525 |  |  |  | 1,963,483 |
Accumulated depreciation |  | (2,378 | ) |  |  | (468,428 | ) |  |  | (59,916 | ) |  | $ | (530,722 | )
Net real estate | $ | 675,506 |  |  | $ | 502,646 |  |  | $ | 254,609 |  |  | $ | 1,432,761 |
Non-recourse property debt and construction loans, net | $ | 200,135 |  |  | $ | 767,513 |  |  | $ | 80,551 |  |  | $ | 1,048,199 |

In addition to the amounts disclosed in the tables above, as of June 30, 2023 the Development and Redevelopment segment right-of-use lease assets and lease liabilities aggregated to $109.6 million and $116.6 million, respectively, and as of December 31, 2022, aggregated to $110.3 million and $114.6 million, respectively. As of June 30, 2023 and December 31, 2022, right-of-use lease assets and lease liabilities primarily relate to our investments in Upton Place, Strathmore, and Oak Shore.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS O F FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 Quarterly Report on Form 10-Q contains or may contain information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding: our future plans and goals, including our pipeline investments and projects, our plans to eliminate certain near term debt maturities, our estimated value creation and potential, our timing, scheduling and budgeting, projections regarding lease growth, our plans to form joint ventures, our plans for new acquisitions or dispositions, our strategic partnerships and value added therefrom, and changes to our corporate governance.

These forward-looking statements are based on management’s judgment as of this date, which is subject to risks and uncertainties that could cause actual results to differ materially from our expectations, including, but not limited to: the risk that the 2023 plans and goals may not be completed, as expected, in a timely manner or at all, the inability to recognize the anticipated benefits of the pipeline investments and projects, changes in general economic conditions, including, increases in interest rates and other force-majeure events and such other risks and uncertainties described from time to time in our filings with the Securities and Exchange Commission (“SEC”).

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 of 1986, as amended (the “Code”) and depends on our ability to meet the various requirements imposed by the 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 Item 1A. Risk Factors in Part II of this report. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Readers should also carefully review the section entitled “Risk Factors” described in Item 1A of Apartment Investment and Management Company’s and Aimco OP L.P.’s combined Annual Report on Form 10-K for the year ended December 31, 2022, and subsequent documents we file from time to time with the SEC.

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

Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States ("GAAP"). These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading.

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Executive Overview

Our mission is to make real estate investments, primarily focused on the multifamily sector within targeted U.S. markets, where outcomes are enhanced through our human capital and substantial value is created for investors, teammates, and the communities in which we operate.

Our value proposition includes our:

•
Platform, consisting of a cohesive, talented, and tenured team with diverse real estate industry experience combined with a disciplined and proven investment process;
•
Diversified portfolio, consisting of in-process value-add investments, a deep pipeline, which includes approximately 14 million square feet of potential future development, a national portfolio of stabilized multifamily real estate and limited indirect and passive investments; and
•
Capital redeployment plan of prudent recycling of capital, reallocating our equity to higher returning investments.

Our primary goal is outsized risk adjusted returns and accelerating growth for our shareholders. We are focused on providing superior total-return performance to shareholders, primarily through capital appreciation driven by accretive investment and active portfolio management over multi-year periods. We plan to reinvest earnings to facilitate growth and, therefore, do not presently intend to pay a regular quarterly cash dividend.

Our financial objectives are to create value and produce superior, project-level, risk-adjusted returns on equity as measured by the investment period Internal Rate of Return (“IRR”) and the project-level Multiple on Invested Capital (“MOIC”). We measure broader performance based on Net Asset Value (“NAV”) growth over time.

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

Aimco targets a balanced allocation, which includes investments in “Value Add” and “Opportunistic” multifamily real estate, primarily located in Southeast Florida, the Washington D.C. Metro Area and Colorado's Front Range, plus investment in a geographically diversified portfolio of "Core" and "Core-Plus" apartment communities.

In addition, we currently hold select alternative assets, consisting primarily of indirect, real estate related debt and equity investments. We have reduced our allocation to these investments and plan to continue to significantly reduce our allocation over time.

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

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Given our stated strategy, it is expected that at any point in time the value-creation process will be ongoing at numerous of our investments. Over time, we expect our enterprise to produce superior returns on equity on a risk-adjusted basis and it is our plan to do so by:

•
Benefiting from a national platform while leveraging local and regional expertise

We have corporate headquarters in Denver, Colorado and Washington D.C. Our investment platform is managed by experienced professionals based in three regions, where we will focus our new investment activity: Southeast Florida, the Washington D.C. Metro Area and Colorado's Front Range. By regionalizing this platform, we are able to leverage the in-depth local market knowledge of each regional leader, creating a comparative advantage when sourcing, evaluating, and executing investment opportunities.

•
Managing and investing in value-add and opportunistic real estate

Our dedicated team will source and execute development and redevelopment projects, and various other direct investment strategies. Our development and redevelopment portfolio currently includes projects in construction and lease-up. In addition, our team has secured significant, high-quality, future development opportunities, including total potential of more than 14 million square feet, located in high-growth markets. Generally, we seek direct investment opportunities in locations where barriers to entry are high, target customers can be clearly defined and where we have a comparative advantage over others in the market.

•
Owning a portfolio of stabilized core and core plus real estate

Our entire portfolio of operating properties includes 26 apartment communities (22 consolidated properties and four unconsolidated properties) with average rents in line with local market averages (generally defined as B class). We also own one commercial office building that is part of an assemblage with an adjacent apartment building. The target composition of our stabilized portfolio will continue to include primarily B multifamily assets, spread across a geographically diversified portfolio, with a bias toward long established residential neighborhoods that rank highly in regard to schools, employment fundamentals and state and regional governance. Core-Plus opportunities offer the opportunity for incremental capital investment while maintaining stabilized cashflow to accelerate income growth and improve asset values.

•
Managing and continuing to reduce our allocation to alternative investments, over time

We currently hold select alternative investments, the majority of which originated with Aimco Predecessor and, over time, plan to significantly reduce capital allocated to these investments. Our current allocation to alternative investments includes: our indirect interest in the Mezzanine Investment to the Parkmerced partnership, which owns 3,165 apartment homes and future development rights in San Francisco, California, and our passive equity investments in IQHQ, Inc. ("IQHQ"), a privately-held life sciences real estate development company, and in property technology funds consisting of entities that develop technology related to the real estate industry. In June 2023, we made significant progress on our plan to reduce capital allocated to alternative investments through the partial sale of the Mezzanine Investment, as discussed further below.

•
Maintaining sufficient liquidity and utilizing safe financial leverage

We will guard our liquidity at all times by maintaining sufficient cash and committed credit.

From time-to-time, we will allocate capital to financial assets designed to mitigate risks. Existing examples include our use of interest rate caps to provide protection against increases in interest rates on in-place loans.

We expect to capitalize our activities through a combination of non-recourse property debt, construction loans, third-party equity, and the recycling of Aimco equity, including retained earnings. We plan to limit the use of recourse leverage, with a strong preference towards non-recourse property-level debt to limit risk to the Aimco enterprise. When warranted, we plan to seek equity capital from joint venture partners to improve our cost of capital, further leverage Aimco equity, reduce exposure to a single investment and, in certain cases, for strategic benefits.

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The results from the execution of our business plan during the three and six months ended June 30, 2023 are further described below.

Financial Results and Recent Highlights

•
For the three and six months ended June 30, 2023, net loss attributable to Aimco common stockholders per share, on a fully dilutive basis, was ($0.02) and ($0.09), respectively, compared to net income per share of $1.57 and $1.62, respectively, for the same periods in 2022 due primarily to the second quarter 2022 recognition of income resulting from the agreement to terminate the leased property agreements with AIR and gains in the same period related to the sale of an apartment community.
•
For the three months ended June 30, 2023, revenue and net operating income from our Stabilized Operating Properties were up 9.5% and 9.8%, respectively, year over year, with average monthly revenue per apartment home of $2,291, up $230 year over year. For the six months ended June 30, 2023, revenue and net operating income from our Stabilized Operating Properties were up 10.4% and 11.4%, respectively, year over year, with average monthly revenue per apartment home of $2,259, up $234 year over year.
•
During the three months ended June 30, 2023, we closed on the partial sale of the Parkmerced mezzanine loan, making significant progress on our planned reduction of capital allocated to alternative investments. In total, we have monetized $91.5 million of our Parkmerced investments and, subject to closing the remaining investment, may realize additional proceeds of approximately $156 million.
•
During the three months ended June 30, 2023, we repaid a $60 million floating interest rate land loan when it became prepayable at par reducing our weighted average cost of debt for our developments and land holdings, at the time of payoff, by approximately 90 basis points.

Value Add, Opportunistic & Alternative Investments

Development and Redevelopment

We generally seek development and redevelopment opportunities where barriers to entry are high, target customers can be clearly defined, and where we have a comparative advantage over others in the market. We will focus our new investment activity in Southeast Florida, the Washington D.C. Metro Area and Colorado's Front Range. Our Value Add and Opportunistic investments may also target portfolio acquisitions, operational turnarounds, and re-entitlements.

We currently have five active development and redevelopment projects, located in four U.S. markets, in varying phases of construction and lease-up. These projects remain on track, as measured by budget, lease-up metrics, and current market valuations. Additionally, we have a pipeline of future value-add opportunities totaling approximately 14 million gross square feet of development in our target markets of Southeast Florida, the Washington D.C. Metro, and Colorado's Front Range. During the three and six months ended June 30, 2023, we invested $81.1 million and $145.9 million, respectively, in development and redevelopment activities.

Updates include:

•
Construction and repositioning of The Hamilton, a 276 unit bayfront apartment community in Miami, Florida, is now complete. Demand for rental housing in Southeast Florida remains robust, especially for unique waterfront properties, and the property was 95% leased or pre-leased as of June 30, 2023, at rates more than 20% ahead of underwritten rents. Aimco now expects occupancy to stabilize in the third quarter, ahead of prior expectations.
•
Construction is progressing on plan at the first phase of Strathmore Square in Bethesda, Maryland, which will contain 220 highly tailored apartment homes with initial delivery on track for the second half of 2024. This suburban infill project is located adjacent to the Grosvenor-Strathmore Metro station and the Strathmore Performing Arts Campus, and is 1.5 miles from The National Institutes of Health main campus. Funding for the $164.0 million project is fully secured with Aimco having already funded 100% of its equity commitment.
•
Construction continues on schedule and on budget at Upton Place in Northwest Washington, D.C. We plan to start pre-leasing Upton’s 689 apartment homes in July 2023 in anticipation of initial delivery in the fourth quarter of 2023. As of June 30, 2023, 80% of the project's 105,000 square feet of retail space has been leased and Aimco has received letters of intent from, or is in lease negotiations with, retailers on another 18%.

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•
Construction is ongoing at Oak Shore, in Corte Madera, California, where 16 luxury single family rental homes and eight accessory dwelling units are being developed. We expect to deliver the first homes in the third quarter with pre-leasing efforts underway.
•
Construction of the Benson Hotel and Faculty Club, a 106-key boutique hotel and event center, with 18,000 square feet of event space, located on the Anschutz Medical Campus in Aurora, Colorado is complete and open to guests. As the only ‘on campus’ accommodations, The Benson is garnering strong interest from the many departments and offices located on the surrounding Anschutz Medical Campus, which includes The University of Colorado Medical School, UC Health Hospital, Children’s Hospital Colorado, The Rocky Mountain VA Medical Center and the burgeoning Fitzsimons Innovation Community.
•
In the three months ended June 30, 2023, we invested $4.0 million into our future development pipeline projects located in Southeast Florida, the Washington D.C. Metro, and Colorado’s Front Range. Programming, design, documentation and entitlement efforts continue with projected unit counts and rentable square footage on track to meet or exceed initial projections. As part of our capital allocation strategy, we may choose to monetize certain of our pipeline assets prior to vertical construction in an effort to maximize value add and risk adjusted returns.

Alternative Investments

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

Updates for our alternative investments include:

•
In June, Aimco made significant progress on its plan to reduce capital allocated to alternative investments through the partial sale of the Parkmerced mezzanine loan. Aimco closed a 20% non-controlling position for $33.5 million with the purchaser having the option to acquire the remaining 80% for an additional $134 million plus interest accruing at no less than 19% annually through May 2024. At the time of closing the purchaser pre-paid $4 million of interest to Aimco and is expected to pay another $7 million prior to year end.

Investment Activity

We are focused on growing the business, and delivering strong investment returns, through development and redevelopment activities, funded primarily through third-party capital. In the three months ended June 30, 2023, no new investments were made.

Operating Property Results

We own a diversified portfolio of stabilized apartment communities located in eight major U.S. markets with average rents in line with local market averages. We also own a commercial office building that is part of an assemblage with an adjacent apartment building.

Highlights for the three months ended June 30, 2023 include:

•
Revenue for our Operating segment for the three months ended June 30, 2023, was $37.0 million, up 9.5% year over year, resulting from a $230 increase in average monthly revenue per apartment home to $2,291, partially offset with a 140-basis point decrease in Average Daily Occupancy to 96.2%.
•
Expenses for our Operating segment for the three months ended June 30, 2023, were $11.5 million, up 8.8% year-over-year due primarily to higher real estate taxes and insurance.
•
Net operating income for our Operating segment for the three months ended June 30, 2023 was $25.5 million, up 9.8% year-over-year.
•
1001 Brickell Bay Drive, a waterfront office building in Miami, Florida, is owned as part of a larger assemblage with substantial development potential. Following first quarter lease expirations, as of June 30, 2023, the building was 77% occupied.

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Balance Sheet and Financing Activity

We are highly focused on maintaining a strong balance sheet, including having at all times ample liquidity. As of June 30, 2023, we had access to $342.4 million in liquidity, including $165.0 million of cash on hand, $27.4 million of restricted cash, and the capacity to borrow up to $150.0 million on our revolving credit facility. Refer to the Liquidity and Capital Resources section for additional information regarding our leverage.

Financial Results of Operations

We have three segments: (i) Development and Redevelopment, (ii) Operating, and (iii) Other.

Our Development and Redevelopment segment includes properties that are under construction or have not achieved stabilization, as well as land assemblages that are being held for future development. Our Operating segment includes 21 residential apartment communities that have achieved stabilized levels of operations as of January 1, 2022 and maintained it throughout the current year and comparable period. We aggregate all our apartment communities that have reached stabilization into our Operating segment. Our Other segment consists of properties currently owned that are not included in our Development and Redevelopment or Operating segments.

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

Results of Operations for the three and six months ended June 30, 2023 and 2022

Net income attributable to Aimco common stockholders decreased by $242.7 million and $259.8 million, respectively, for the three and six months ended June 30, 2023, compared to the same period in 2022, as described more fully below.

Property Results

As of June 30, 2023, our Development and Redevelopment segment included 12 properties, three of which were properties that were under construction and two of which were recently completed, while the remaining were land held for development. Our Operating segment included 21 communities with 5,600 apartment homes, and our Other segment included 1001 Brickell Bay Drive, our only office building, and St. George Villas. During the first quarter of 2023, we reclassified one residential apartment community from the Other segment to the Operating segment because it reached stabilization. Prior period segment information has been recast based upon our current segment population, and is consistent with how our CODM evaluates the business. The recast conforms with our reportable segment classification as of June 30, 2023.

We use proportionate property net operating income to assess the operating performance of our segments. Proportionate property net operating income is defined as our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, including utility reimbursements, for the consolidated communities; but

•
excluding the results of four apartment communities with an aggregate 142 apartment homes that we neither manage nor consolidate, our investment in IQHQ and the Mezzanine Investment; and
•
excluding property management costs and casualty gains or losses, reported in consolidated amounts, in our assessment of segment performance.

Please refer to Note 8 to the condensed consolidated financial statements in Item 1 for further discussion regarding our segments, including a reconciliation of these proportionate amounts to consolidated rental and other property revenues and property operating expenses.

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Proportionate Property Net Operating Income

The results of our segments for the three months ended June 30, 2023 and 2022, as presented below, are based on segment classifications as of June 30, 2023:

| Three Months Ended June 30, |  |  |  |
(in thousands) | 2023 |  |  | 2022 |  |  | $ Change |  |  | % Change |
Rental and other property revenues, before utility reimbursements: |  |  |  |  |  |  |  |  |  |  |
Development and Redevelopment | $ | 3,640 |  |  | $ | 33 |  |  | $ | 3,607 |  |  |  | 100.0 | %
Operating |  | 37,011 |  |  |  | 33,809 |  |  |  | 3,202 |  |  |  | 9.5 | %
Other |  | 3,432 |  |  |  | 3,645 |  |  |  | (213 | ) |  |  | (5.8 | %)
Total |  | 44,083 |  |  |  | 37,487 |  |  |  | 6,596 |  |  |  | 17.6 | %
Property operating expenses, net of utility reimbursements: |  |  |  |  |  |  |  |  |  |  |
Development and Redevelopment |  | 2,684 |  |  |  | 363 |  |  |  | 2,321 |  |  |  | 100.0 | %
Operating |  | 11,496 |  |  |  | 10,563 |  |  |  | 933 |  |  |  | 8.8 | %
Other |  | 1,520 |  |  |  | 1,138 |  |  |  | 382 |  |  |  | 33.6 | %
Total |  | 15,700 |  |  |  | 12,064 |  |  |  | 3,636 |  |  |  | 30.1 | %
Proportionate property net operating income: |  |  |  |  |  |  |  |  |  |  |
Development and Redevelopment |  | 956 |  |  |  | (330 | ) |  |  | 1,286 |  |  |  | (100.0 | %)
Operating |  | 25,515 |  |  |  | 23,246 |  |  |  | 2,269 |  |  |  | 9.8 | %
Other |  | 1,912 |  |  |  | 2,507 |  |  |  | (595 | ) |  |  | (23.7 | %)
Total | $ | 28,383 |  |  | $ | 25,423 |  |  | $ | 2,960 |  |  |  | 11.6 | %

For the three months ended June 30, 2023, compared to the same period in 2022:

•
Development and Redevelopment proportionate property net operating income increased by $1.3 million due to the lease up of apartment homes at The Hamilton.
•
Operating proportionate property net operating income increased by $2.3 million, or 9.8%. The increase was attributable primarily to a $3.2 million, or 9.5% increase in rental and other property revenues due to higher average revenues of $230 per apartment home, offset with a 140-basis point decrease in Average Daily Occupancy to 96.2%.
•
Other proportionate property net operating income decreased by $0.6 million, or 23.7%, primarily at our commercial office building in Miami, Florida from lower occupancy following lease expirations earlier in 2023.

The results of our segments for the six months ended June 30, 2023 and 2022, as presented below, are based on segment classifications as of June 30, 2023:

| Six Months Ended June 30, |  |  |  |
(in thousands) | 2023 |  |  | 2022 |  |  | $ Change |  |  | % Change |
Rental and other property revenues, before utility reimbursements: |  |  |  |  |  |  |  |  |  |  |
Development and Redevelopment | $ | 5,842 |  |  | $ | 81 |  |  | $ | 5,761 |  |  |  | 100.0 | %
Operating |  | 73,683 |  |  |  | 66,739 |  |  |  | 6,944 |  |  |  | 10.4 | %
Other |  | 7,129 |  |  |  | 8,000 |  |  |  | (871 | ) |  |  | (10.9 | %)
Total |  | 86,654 |  |  |  | 74,820 |  |  |  | 11,834 |  |  |  | 15.8 | %
Property operating expenses, net of utility reimbursements: |  |  |  |  |  |  |  |  |  |  |
Development and Redevelopment |  | 4,708 |  |  |  | 572 |  |  |  | 4,136 |  |  |  | 100.0 | %
Operating |  | 22,683 |  |  |  | 20,960 |  |  |  | 1,723 |  |  |  | 8.2 | %
Other |  | 2,712 |  |  |  | 2,577 |  |  |  | 135 |  |  |  | 5.2 | %
Total |  | 30,103 |  |  |  | 24,109 |  |  |  | 5,994 |  |  |  | 24.9 | %
Proportionate property net operating income: |  |  |  |  |  |  |  |  |  |  |
Development and Redevelopment |  | 1,134 |  |  |  | (491 | ) |  |  | 1,625 |  |  |  | (100.0 | %)
Operating |  | 51,000 |  |  |  | 45,779 |  |  |  | 5,221 |  |  |  | 11.4 | %
Other |  | 4,417 |  |  |  | 5,423 |  |  |  | (1,006 | ) |  |  | (18.5 | %)
Total | $ | 56,551 |  |  | $ | 50,711 |  |  | $ | 5,840 |  |  |  | 11.5 | %

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For the six months ended June 30, 2023, compared to the same period in 2022:

•
Development and Redevelopment proportionate property net operating income increased by $1.6 million due to the lease up of apartment homes at The Hamilton.
•
Operating proportionate property net operating income increased by $5.2 million, or 11.4%. The increase was attributable primarily to a $6.9 million, or 10.4% increase in rental and other property revenues due to higher average revenues of $234 per apartment home, offset with a 100-basis point decrease in occupancy.
•
Other proportionate property net operating income decreased by $1.0 million, or 18.5%, primarily at our commercial office building in Miami, Florida from lower occupancy following lease expirations earlier in 2023.

Non-Segment Real Estate Operations

Operating income amounts not attributed to our segments include property management costs, casualty losses, and, if applicable, the results of apartment communities sold or held for sale, reported in consolidated amounts, which we do not allocate to our segments for purposes of evaluating segment performance.

Depreciation and Amortization

For the three and six months ended June 30, 2023, compared to the same periods in 2022, Depreciation and amortization decreased by $17.8 million, or 51.1%, and $24.7 million, or 42.6%, respectively, due primarily to the disposition of three properties and the termination of leases of four properties and related relinquishment of the associated leasehold improvements during the year ended December 31, 2022.

General and Administrative Expenses

For the three and six months ended June 30, 2023, compared to the same periods in 2022, General and administrative expenses decreased by $1.1 million, or 12.0%, and $2.1 million, or 11.6%, respectively, due primarily to a decrease in expenses for consulting services per the Separation Agreement with AIR, which concluded at December 31, 2022.

Interest Income

For the three and six months ended June 30, 2023, compared to the same periods in 2022, interest income increased by $1.9 million, or 100.0%, and $3.4 million, or 100.0%, respectively, due primarily to increased interest earned on greater amounts of invested cash at higher rates in the current year versus the prior year.

Interest Expense

For the three and six months ended June 30, 2023, compared to the same periods in 2022, interest expense decreased by $31.9 million, or 76.8%, and $36.8 million, or 65.5%, respectively, due primarily to the prepayment of the notes payable due to AIR and other property debt, partially offset by an increase related to the placement of certain property debt during the year ended December 31, 2022.

Mezzanine Investment Income (Loss), Net

For the three and six months ended June 30, 2023, compared to the same periods in 2022, Mezzanine Investment income decreased by $8.5 million, or 100%, and $16.8 million or 100.0%, respectively, due primarily to our cessation of income recognition after the non-cash impairment recorded during the year ended December 31, 2022.

Realized and Unrealized Gains (Losses) on Interest Rate Options

We are required to adjust our interest rate options to fair value on a quarterly basis. As a result of the mark-to-market adjustments, we recorded unrealized gains of $2.5 million and $0.6 million, respectively, for the three and six months ended June 30, 2023, compared to unrealized gains of $11.9 million and $30.7 million, respectively, for the three and six months ended June 30, 2022. In addition, we recorded realized gains of $0.9 million and $1.7 million, respectively, for the three and six months ended June 30, 2023, compared to realized gains of $8.0 million in both the three and six months ended June 30, 2022.

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Realized and Unrealized Gains (Losses) on Equity Investments

We measure our investment in stock based on its market price at period end and our investments in property technology funds at NAV as a practical expedient. As a result of changes in the values of these investments, we recorded unrealized gains of $1.1 million and $1.2 million, respectively, for the three and six months ended June 30, 2023, compared to unrealized gains of $0.5 million and unrealized losses of $3.9 million, respectively, for the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2022, we recognized realized and unrealized gains on our investment in IQHQ totaling $26.2 million resulting from a partial redemption of our investment during that period.

Gain on Dispositions of Real Estate

During the three and six months ended June 30, 2023, we recognized a gain on disposition of $1.9 million for the contribution of real estate to an unconsolidated joint venture compared to $94.6 million for the three and six months ended June 30, 2022 related to the sale of an apartment community.

Lease Modification Income

During the three and six months ended June 30, 2022, we recognized $205.4 million of lease modification income related to the agreement entered into with AIR for the termination of the leases of four properties.

Other Income (Expense), Net

Other income (expense), net, includes costs associated with our risk management activities, partnership administration expenses, fee income, and certain non-recurring items. For the three months ended June 30, 2023, compared to the same period in 2022, other expenses, net decreased by $0.6 million, or 30.2%. For the six months ended June 30, 2023, compared to the same period in 2022, other expenses, net increased by $2.0 million, or 68.8%, primarily due to the incremental expense associated with pre-existing long-term incentive partnership units recorded upon the resignation of one of our board members during the first quarter of 2023.

Income Tax Benefit (Expense)

Certain aspects of our operations, including our development and redevelopment activities, are conducted through taxable REIT subsidiaries, or TRS entities. Additionally, our TRS entities hold investments in one of our apartment communities and 1001 Brickell Bay Drive.

Our income tax benefit calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities. Income taxes, as well as changes in valuation allowance and incremental deferred tax items in conjunction with intercompany asset transfers and internal restructurings (if applicable), are included in Income tax benefit (expense) in our Condensed Consolidated Statements of Operations.

Consolidated GAAP income or loss subject to tax consists of pretax income or loss of our taxable entities and gains retained by the REIT. For the three and six months ended June 30, 2023, we had a consolidated net losses subject to tax of $2.5 million and $7.4 million, respectively, compared to consolidated net income subject to tax of $181.4 million and $166.6 million, respectively, for the same periods in 2022.

For the three months ended June 30, 2023, we recognized an income tax benefit of $0.4 million, compared to income tax expense of $46.0 million for the same period in 2022. The change is due primarily to GAAP income taxes associated with the lease modification income recognized in the second quarter of 2022.

For the six months ended June 30, 2023, we recognized an income tax benefit of $4.6 million, compared to income tax expense of $41.9 million for the same period in 2022. The change is primarily due to a change in the first quarter of 2023 to the effective state tax rate expected to apply to the reversal of deferred taxes, as well as the GAAP income taxes associated with the lease modification income recognized in the second quarter of 2022.

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Critical Accounting Policies and Estimates

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

Our critical accounting policies are described in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes in our critical accounting policies from those reported in our Form 10-K and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented.

Non-GAAP Measures

We use EBITDAre and Adjusted EBITDAre in managing our business and in evaluating our financial condition and operating performance. These key financial indicators are non-GAAP measures and are defined and described below. We provide reconciliations of the non-GAAP financial measures to the most comparable financial measure computed in accordance with GAAP.

Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization for Real Estate ("EBITDAre")

EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are useful to investors, creditors, and rating agencies as a supplemental measure of our ability to incur and service debt because they are recognized measures of performance by the real estate industry and allow for comparison of our credit strength to different companies. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income (loss) as determined in accordance with GAAP as indicators of liquidity. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts. Nareit defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation, and amortization expense, further adjusted for:

•
gains and losses on the dispositions of depreciated property;
•
impairment write-downs of depreciated property;
•
impairment write-downs of investments in unconsolidated partnerships caused by a decrease in the value of the depreciated property in such partnerships; and
•
adjustments to reflect our share of EBITDAre of investments in unconsolidated entities.

EBITDAre is defined by Nareit and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted to exclude the effect of net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests, and realized and unrealized (gains) losses on interest rate options, which we believe allow investors to compare a measure of our earnings before the effects of our capital structure and indebtedness with that of other companies in the real estate industry. Additionally, we exclude the (income) loss recognized on our Mezzanine Investment.

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The reconciliation of net income (loss) to EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2023 and 2022, is as follows (in thousands):

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Net income (loss) |  | $ | 144 |  |  | $ | 253,211 |  |  | $ | (5,609 | ) |  | $ | 263,323 |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 9,656 |  |  |  | 41,546 |  |  |  | 19,381 |  |  |  | 56,147 |
Income tax (benefit) expense |  |  | (417 | ) |  |  | 45,957 |  |  |  | (4,613 | ) |  |  | 41,901 |
Gain on disposition of real estate |  |  | (1,878 | ) |  |  | (94,598 | ) |  |  | (1,878 | ) |  |  | (94,465 | )
Lease modification income |  |  | — |  |  |  | (205,387 | ) |  |  | — |  |  |  | (205,387 | )
Depreciation and amortization |  |  | 17,031 |  |  |  | 34,863 |  |  |  | 33,302 |  |  |  | 57,981 |
Adjustment related to EBITDAre of unconsolidated partnerships |  |  | 342 |  |  |  | 259 |  |  |  | 564 |  |  |  | 516 |
EBITDAre |  | $ | 24,878 |  |  | $ | 75,851 |  |  | $ | 41,147 |  |  | $ | 120,016 |
Net (income) loss attributable to redeemable noncontrolling interests in consolidated real estate partnerships |  |  | (3,576 | ) |  |  | (1,069 | ) |  |  | (6,849 | ) |  |  | (2,539 | )
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships |  |  | (348 | ) |  |  | (346 | ) |  |  | (613 | ) |  |  | (344 | )
EBITDAre adjustments attributable to noncontrolling interests |  |  | 4 |  |  |  | (221 | ) |  |  | (12 | ) |  |  | (232 | )
Mezzanine investment (income) loss, net |  |  | 128 |  |  |  | (8,330 | ) |  |  | 257 |  |  |  | (16,567 | )
Realized and unrealized (gains) losses on interest rate options |  |  | (3,383 | ) |  |  | (20,017 | ) |  |  | (2,326 | ) |  |  | (38,795 | )
Unrealized (gains) losses on IQHQ investment |  |  | - |  |  |  | (20,501 | ) |  |  | - |  |  |  | (20,501 | )
Adjusted EBITDAre |  | $ | 17,703 |  |  | $ | 25,367 |  |  | $ | 31,604 |  |  | $ | 41,038 |

Liquidity and Capital Resources

Liquidity

Liquidity is the ability to meet present and future financial obligations. Our primary sources of liquidity are cash flows from operations and borrowing capacity under our loan agreements.

As of June 30, 2023, our available liquidity was $342.4 million, which consisted of:

•
$165.0 million in cash and cash equivalents; and
•
$27.4 million of restricted cash, including amounts related to tenant security deposits and escrows held by lenders for capital additions, property taxes, and insurance; and
•
$150.0 million of available capacity to borrow under our revolving secured credit facility.

As of June 30, 2023, we had sufficient capacity on our construction loans to cover our commitments of approximately $165.5 million. The initial allocation to our joint ventures have remaining unfunded commitments of $3.2 million. We also have unfunded commitments in the amount of $2.1 million related to four investments in entities that develop technology related to the real estate industry. Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, and future investments. Additionally, our third-party property managers may enter into commitments on our behalf to purchase goods and services in connection with the operation of our apartment communities and our office building. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to historical levels.

We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for the next twelve months.

In the event that our cash and cash equivalents, revolving secured credit facility, and cash provided by operating activities are not sufficient to cover our liquidity needs, we have the means to generate additional liquidity, such as from additional property financing activity and proceeds from apartment community sales. We expect to meet our long-term liquidity requirements, including debt maturities, development and redevelopment spending, and future investment activity, primarily through property financing activity, cash generated from operations, and the recycling of our equity. Our revolving secured credit facility matures in December 2023, prior to consideration of its two one-year extension options.

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Leverage and Capital Resources

The availability and cost 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. Any adverse changes in the lending environment could negatively affect our liquidity. We have taken steps to mitigate a portion of our short-term refunding risk. However, if property or development financing options become unavailable, we may consider alternative sources of liquidity, such as reductions in capital spending or apartment community dispositions.

As of June 30, 2023, approximately 88% of our outstanding non-recourse property debt had a fixed interest rate and approximately 12% had a variable interest rate. In addition, the weighted-average contractual rate on our non-recourse debt was 4.9% and 4.7% inclusive of interest rate caps, and the average remaining term to maturity was 7.0 years. At June 30, 2023, all of our outstanding non-recourse property debt was either fixed or hedged. Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates.

While our primary source of leverage is property-level debt and construction loans, we also have a secured $150.0 million credit facility with a syndicate of financial institutions. As of June 30, 2023, we had no outstanding borrowings under our revolving secured credit facility. Under our revolving secured credit facility, we have agreed to maintain a fixed charge coverage ratio of 1.25X minimum tangible net worth of $625.0 million, and maximum leverage of 60.0% as defined in the credit agreement. We are currently in compliance and expect to remain in compliance with these covenants during the next twelve months.

Changes in Cash, Cash Equivalents, and Restricted Cash

The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash due to operating, investing and financing activities, which are presented in our Condensed Consolidated Statements of Cash Flows in Item 1 of this report.

Operating Activities

For the six months ended June 30, 2023, net cash provided by operating activities was $17.7 million. Our operating cash flow is primarily affected by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment communities and general and administrative costs. Cash provided by operating activities for the six months ended June 30, 2023, decreased by $7.7 million compared to the same period ended in 2022, due primarily to lower net cash received from lease incentive, lower net operating income associated with apartment communities sold in the latter part of 2022, and timing of balance sheet position changes, partially offset by decreased interest payments.

Investing Activities

For the six months ended June 30, 2023, net cash used in investing activities of $126.5 million consisted primarily of capital expenditures of $129.9 million. Net cash used in investing activities for the six months ended June 30, 2023, increased by $1.2 million compared to the same period ended in 2022, due primarily to increased capital expenditures offset by decreased funding for net real estate and investment transactions. We have generally funded capital additions with available cash and cash provided by operating activities and construction loans.

Financing Activities

For the six months ended June 30, 2023, net cash provided by financing activities of $71.5 million consisted primarily of proceeds from construction loans, the sale of a participation in the Mezzanine Investment, and the monetization of interest rate options, partially offset by repayments on non-recourse property debt and common stock repurchases. Net cash provided by financing activities for the six months ended June 30, 2023, increased by $121.8 million compared to the same period ended in 2022, due primarily to prior year repayment and borrowing activity, offset by current year activity, including the sale of a participation in the Mezzanine Investment and the monetization of interest rate options.

Future Capital Needs

We expect to fund any future acquisitions, development and redevelopment, and other capital spending principally with operating cash flows, short-term borrowings, and debt and equity financing. Our near-term business plan does not contemplate the issuance of equity. We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for the next twelve months.

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ITEM 3. QUANTITATIVE AND QUALITATI VE 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 repricing risk, that is the possibility of increases in base interest rates and credit risk spreads. We primarily use long-dated, fixed-rate, non-recourse property debt on stabilized properties in order to avoid the refunding and repricing risks of short-term borrowings.

We use working capital primarily to fund short-term uses. We use derivative financial instruments as a risk management tool and do not use them for trading or other speculative purposes.

As of June 30, 2023, on a consolidated basis, we had approximately $104.2 million of variable-rate property-level debt outstanding and $172.9 million of variable rate construction loans. The impact of rising interest rates is mitigated by our use of interest rate caps, which as of June 30, 2023, provided protection for our variable interest rate debt. Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates. We estimate that an increase or decrease in our variable rate indices of 100 basis points with constant credit risk spreads, would have no impact on interest expense on an annual basis.

As of June 30, 2023, we held interest rate caps with $473.2 million notional value. These instruments were acquired for $5.1 million and at June 30, 2023 were valued at $9.0 million.

As of June 30, 2023, we had $192.4 million in cash and cash equivalents and restricted cash, a portion of which earns interest at variable rates.

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ITEM 4. 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 Aimco’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, 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 were effective.

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 quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, Aimco’s internal control over financial reporting.

Aimco Operating Partnership

Disclosure Controls and Procedures

Aimco Operating Partnership’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of both Aimco and Aimco OP GP, LLC, Aimco Operating Partnership’s general partner, has evaluated the effectiveness of Aimco Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange) 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 OP GP, LLC have concluded that, as of the end of such period, Aimco Operating Partnership’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no change in 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 quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, Aimco Operating Partnership’s internal control over financial reporting.

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PART II. OTHE R INFORMATION

ITEM 1A. RISK F ACTORS

As of the date of this report, there have been no material changes from the risk factors in Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2022. We may disclose changes to such factors or disclose additional factors from time to time in our filings with the SEC.

ITEM 2. UNREGISTERED SALES OF EQUITY S ECURITIES AND USE OF PROCEEDS

Aimco

Unregistered Sales of Equity Securities

From time to time, we may issue shares of our Common Stock in exchange for OP Units, defined under the Aimco Operating Partnership heading below. Such shares are issued based on an exchange ratio of one share for each OP Unit. We may also issue shares of our Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended June 30, 2023, no shares of Common Stock were issued in exchange for OP Units in such transactions.

Repurchases of Equity Securities

The following table summarizes Aimco's share repurchase for the three months ended June 30, 2023.

Fiscal Period |  | Total Number of Shares Repurchased |  |  | Weighted Average Price Paid per Share |  |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  |  | Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs (1) |
April 1 - 30, 2023 |  |  | 444,690 |  |  | $ | 7.74 |  |  |  | 444,690 |  |  |  | 9,819,997 |
May 1 - 31, 2023 |  |  | 315,213 |  |  | $ | 8.11 |  |  |  | 315,213 |  |  |  | 9,504,784 |
June 1 - 30, 2023 |  |  | 224,896 |  |  | $ | 8.24 |  |  |  | 224,896 |  |  |  | 9,279,888 |
Total |  |  | 984,799 |  |  | $ | 7.97 |  |  |  | 984,799 |  |  |  |

(1) Our Board of Directors has, from time to time, authorized us to repurchase shares of our outstanding Common Stock. This authorization has no expiration date. These repurchases may be made from time to time in the open market or in privately negotiated transactions

Aimco Operating Partnership

There is no public market for OP Units, and we have no intention of listing OP Units on any securities exchange. In addition, Aimco Operating Partnership’s Partnership Agreement restricts the transferability of OP Units.

On August 4, 2023, there were 159,924,802 OP Units and equivalents outstanding (of which 147,916,884 were held by us), that were held by 2,081 unitholders of record.

Unregistered Sales of Equity Securities

Aimco Operating Partnership did not issue any unregistered OP Units during the three months ended June 30, 2023.

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Repurchases of Equity Securities

Aimco Operating Partnership’s Partnership Agreement generally provides that after holding OP Units for one year, limited partners other than Aimco have the right to redeem their OP Units for cash or, at our election, shares of our Common Stock on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended June 30, 2023, no common OP Units were redeemed in exchange for shares of Common Stock. The following table summarizes repurchases, or redemptions in exchange for cash, of the Aimco Operating Partnership’s equity securities for the three months ended June 30, 2023.

Fiscal Period |  | Total Number of Units Repurchased |  |  | Weighted Average Price Paid per Unit |  |  | 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 (1)
April 1 - 30, 2023 |  |  | — |  |  |  | — |  |  | N/A |  | N/A
May 1 - 31, 2023 |  |  | — |  |  |  | — |  |  | N/A |  | N/A
June 1 - 30, 2023 |  |  | 47,436 |  |  | $ | 7.72 |  |  | N/A |  | N/A
Total |  |  | 47,436 |  |  | $ | 7.72 |  |  |  |  |

(1) The terms of the Aimco Operating Partnership’s Partnership Agreement do not provide for a maximum number of units that may be repurchased, and other than the express terms of its Partnership Agreement, the Aimco Operating Partnership has no publicly announced plans or programs of repurchase. However, for Aimco to repurchase shares of its Common Stock, the Aimco Operating Partnership must make a concurrent repurchase of its common partnership units held by Aimco at a price per unit that is equal to the price per share Aimco pays for its Common Stock.

Dividend and Distribution Payments

As a REIT, Aimco is required to distribute annually to holders of shares of its Common Stock at least 90.0% 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. Aimco’s Board determines and declares Aimco's dividends. In making a dividend determination, Aimco’s Board considers a variety of factors, including REIT distribution requirements; current market conditions; liquidity needs; and other uses of cash, such as deleveraging and accretive investment activities.

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ITEM 6. E XHIBITS

The following exhibits are filed with this report:

EXHIBIT NO. |  | DESCRIPTION
3.1 |  | Charter – Articles of Restatement (Exhibit 3.1 to Aimco’s Annual Report on Form 10-K dated February 24, 2020, is incorporated herein by this reference)
3.2 |  | Amended and Restated Bylaws (Exhibit 3.1 to Aimco's Current Report on Form 8-K, dated April 28, 2023, is incorporated herein by this reference).
3.3 |  | Articles Supplementary of Apartment Investment Management Company (Exhibit 3.1 to Aimco’s Current Report on Form 8-K, dated December 15, 2020, is incorporated herein by this reference)
10.1 |  | Amended and Restated Agreement of Limited Partnership of Aimco OP L.P., effective as of December 14, 2020 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 15, 2020, is incorporated herein by this reference)
31.1 |  | 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
31.2 |  | 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
31.3 |  | 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
31.4 |  | 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
32.1 |  | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Aimco
32.2 |  | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Aimco Operating Partnership

EXHIBIT NO. |  | DESCRIPTION
101 |  | The following materials from Aimco’s and Aimco Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of equity and partners’ capital; (iv) condensed consolidated statements of cash flows; and (v) notes to condensed consolidated financial statements.
104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL document).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the 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/ H. Lynn C. Stanfield
|  | H. Lynn C. Stanfield
|  | Executive Vice President and Chief Financial Officer
| By: | /s/ Kellie E. Dreyer
|  | Kellie E. Dreyer
|  | Senior Vice President and Chief Accounting Officer

| AIMCO OP L.P.
| By: | Aimco OP GP, LLC, its General Partner
| By: | /s/ H. Lynn C. Stanfield
|  | H. Lynn C. Stanfield
|  | Executive Vice President and Chief Financial Officer
| By: | /s/ Kellie E. Dreyer
|  | Kellie E. Dreyer
|  | Senior Vice President and Chief Accounting Officer

Date: August 7, 2023

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