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APARTMENT INVESTMENT & MANAGEMENT CO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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Forward Looking Statements


The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. Certain information
included in this 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: the ongoing
relationship between Aimco and AIR (the "Separate Entities") following the
Separation; the impact of the COVID-19 pandemic, including on our ability to
maintain current or meet projected occupancy, rental rate and property operating
results; the effect of acquisitions, dispositions, developments, and
redevelopments; including our ability to meet budgeted costs and timelines, and
achieve budgeted rental rates related to our development and redevelopment
investments; expectations regarding sales of our apartment communities and the
use of proceeds thereof; the availability and cost of corporate debt; and our
ability to comply with debt covenants, including financial coverage ratios.

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 effects of the coronavirus pandemic on Aimco's business and on the
global and U.S. economies generally, and the ongoing, dynamic and uncertain
nature and duration of the pandemic, geopolitical events which may adversely
affect the markets in which our securities trade, and other macroeconomic
conditions, including, among other things, supply chain challenges and rising
interest rates, all of which heightens the impact of the other risks and factors
described herein, and the impact on entities in which Aimco holds a partial
interest, including its indirect interest in the partnership that owns
Parkmerced Apartments, and the impact of coronavirus related governmental
lockdowns on Aimco's residents, commercial tenants, and operations; real estate
and operating risks, including fluctuations in real estate values and the
general economic climate in the markets in which we operate and competition for
residents in such markets; national and local economic conditions, including the
pace of job growth and the level of unemployment; the amount, location and
quality of competitive new housing supply; the timing and effects of
acquisitions, dispositions, developments and redevelopments; expectations
regarding sales of apartment communities and the use of proceeds thereof;
insurance risks, including the cost of insurance, and natural disasters and
severe weather such as hurricanes; supply chain disruptions, particularly with
respect to raw materials such as lumber, steel, and concrete; financing risks,
including the availability and cost of financing; the risk that cash flows from
operations may be insufficient to meet required payments of principal and
interest; the risk that earnings may not be sufficient to maintain compliance
with debt covenants, including financial coverage ratios; legal and regulatory
risks, including costs associated with prosecuting or defending claims and any
adverse outcomes; the terms of laws and governmental regulations that affect us
and interpretations of those laws and regulations; possible environmental
liabilities, including costs, fines or penalties that may be incurred due to
necessary remediation of contamination of real estate presently or previously
owned by Aimco; the relationship between Aimco and Separate Entities after the
Separation; the ability and willingness of the Separate Entities and their
subsidiaries to meet and/or perform their obligations under the contractual
arrangements that were entered into among the parties in connection with the
Separation and any of their obligations to indemnify, defend and hold the other
party harmless from and against various claims, litigation and liabilities; and
the ability to achieve some or all the benefits that we expect to achieve from
the Separation; 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,
2021, 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.

Executive Overview

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

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Our value proposition includes our national platform organized around four
regional and two satellite offices, consisting of a cohesive, talented, and
tenured team and our proven investment process; a diversified portfolio,
consisting of high-performing in-process value-add investments, a deep and
growing pipeline, alternative investments, and stabilized assets; and our
capital redeployment plan of reallocating our equity to higher returning
investments and prudent recycling of capital. Our primary goal is outsized risk
adjusted returns and accelerating growth for our shareholders.

Platform: We have a talented leadership team with an average Aimco tenure of
over 10 years and nearly 20 years of diverse real estate industry experience
combined with a disciplined and proven investment process.

Portfolio: We benefit from a deep and growing investment pipeline with $1.0
billion of development and redevelopment projects currently underway, over $2.5
billion of future opportunities under Aimco-control and more being explored. We
add to this alternative investment strategies and a diversified portfolio of
stabilized real estate to provide risk management and produce predictable cash
flow.

Growth Plan: We have more than $500.0 million of equity targeted for
redeployment into high returning activities over the next 4-5 years offering
investors a high performing, high return vehicle with expected annualized
returns on equity from 12-16% once optimal capital allocation is achieved.


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 has been designed to leverage our investment
platform and optimize risk-adjusted returns for our shareholders.

Overall, we target a growth-oriented capital allocation, primarily weighted
toward direct investment in “Value Add” and “Opportunistic” multifamily real
estate.

From time to time, we will allocate a defined portion of our capital into
alternative investments including passive debt and equity investments (both
direct and indirect). We may also utilize our established platform and existing
relationships to generate fees through service offerings.


We have policies in place that support our strategy, guide our investment
allocations, and manage risk, including to hold at all times a sizeable portion
of its net equity in a diversified portfolio of "Core" and "Core-Plus" assets
and before starting a project, require cash or committed credit necessary for
completion.

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 the Aimco 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 Bethesda, Maryland. Our
investment platform is managed by experienced professionals based in four
regions: West Coast, Central and Mountain West, Mid-Atlantic and Northeast, and
Southeast. 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.

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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, across our national
platform. The Aimco Development and Redevelopment portfolio currently includes
$1.0 billion of projects in construction and lease-up, located across five major
U.S. markets. In addition, we currently have over $2.5 billion worth of pipeline
opportunities under our control and have the opportunity to add to our
investment pipeline based on strategic relationships and through sourcing by
regional investment teams. 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.

Managing and investing in other alternative investments

Our current allocation to alternative investments includes: our indirect
interest mezzanine loan to the Parkmerced partnership which owns 3,165 apartment
homes and future development rights in San Francisco, California, and our
passive equity investments in IQHQ, Inc. (“IQHQ”), a privately held life
sciences real estate development company, and in property technology funds
consisting of entities that develop technology related to the real estate
industry.


We expect to allocate a portion of our capital to passive debt and equity
investments, both directly and at the entity level. These prove attractive when
warranted by risk adjusted returns, when we have special knowledge or expertise
relevant to the particular investment or when the opportunity exists for
positive asymmetric outcomes whether through strategic partnerships or
otherwise. In addition, from time to time, we will use our established platform
and existing relationships to generate fees through service offerings to
third-party real estate investors, owners, and capital allocators.

Owning a portfolio of stabilized core and core plus real estate


Our entire portfolio of operating properties includes 28 apartment communities
(24 consolidated properties and four unconsolidated properties) located in ten
major U.S. markets and with average rents in line with local market averages
(generally defined as B class). We also own one commercial office building that
is part of 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 nationally diversified portfolio and 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.

Maintaining sufficient liquidity and utilizing safe financial leverage

At all times, we will guard our liquidity by maintaining sufficient cash and
committed credit.


From time-to-time, we will allocate capital to financial assets designed to
mitigate risks elsewhere in the Aimco enterprise. Existing examples include our
option to acquire an interest rate swap designed to protect against repricing
risk on our maturing liabilities and the 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 in
order 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.

The results from the execution of our business plan during the three and six
months ended June 30, 2022 are further described below.

Financial Results and Recent Highlights

Net income per share attributable to Aimco, on a fully dilutive basis, was $1.57
for the three months ended June 30, 2022, compared to a loss of ($0.13) for the
three months ended June 30, 2021, due primarily to the recognition of income
resulting from the agreement to terminate the AIR leases and gains related to
the sale of Pathfinder Village. Net income per share attributable to Aimco, on a
fully dilutive basis was $1.65 for the six months ended June 30, 2022, compared
to net income per share of $0.00 for the six months ended June 30, 2021.

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For the three months ended June 30, 2022, revenue and net operating income from
our Operating Properties were up 11.2% and 14.4%, respectively, year over year,
with occupancy of 97.7%, up 20 basis points year over year.

We reached an agreement with AIR to terminate four leases on September 1, 2022
that will result in more than $100 million of realized value creation (net of
costs) for Aimco shareholders and eliminate $469 million of obligations related
to the four leased properties.

In July 2022, we completed the early repayment of the $534 million of Notes
Payable to AIR, originally scheduled to mature in January 2024 and carrying an
annual rate of 5.2% with proceeds from property level financings, the sale of
Pathfinder Village, and the placement of preferred equity secured by a portfolio
of stabilized properties.

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

We currently have eight active development and redevelopment projects, located
across five 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. During the three and six months ended June 30, 2022, we
invested $62.5 million and $128.2 million respectively, in development and
redevelopment activities. Updates include:

As previously announced, following the successful development and lease-up of
707 Leahy in Redwood City, California, Prism in Cambridge, Massachusetts,
Flamingo Point North Tower in Miami Beach, Florida, and The Fremont on the
Anschutz Medical Campus in Aurora, Colorado, Aimco and AIR have agreed to cancel
our leasehold interest in each property on or before September 1, 2022. In
return for the termination of the leases, we will receive $200 million,
resulting in value creation, net of costs, of approximately $100 million, which
will be realized about 18 months sooner than originally anticipated.

At The Hamilton in Miami, Florida, we now expect to welcome the first residents
into redesigned and fully renovated units in August, 2022. As of July 31, 2022,
61 units were leased or pre-leased at rental rates more than 20% ahead of
underwriting.

Construction continues on schedule and on budget at Upton Place in Northwest
Washington, D.C., the Benson Hotel and Faculty Club on the Anschutz Medical
Campus in Aurora, Colorado and at our single-family home development project,
Oak Shore, in Corte Madera, California.

Alternative Investments


Aimco makes alternative investments where it has special knowledge or expertise
relevant to the venture and opportunity exists for positive asymmetric outcomes.
Aimco's current alternative investments include a mezzanine loan secured by a
stabilized multifamily property with an option to participate in future
multi-family development as well as three passive equity investments. Updates
include:

The borrower on our $354.4 million mezzanine loan, which is secured by the
Parkmerced stabilized multifamily property plus phases two through nine of the
site's future development opportunity, remains current on its first mortgage
obligations. The neighboring San Francisco State University is expected to
return to full in-person learning this fall, with hybrid options, increasing the
demand for the apartments that serve as collateral for the Aimco loan. Due to
the relative size of our investment and alternative accretive uses of capital,
we recently initiated a marketing effort to explore potential opportunities to
monetize all or a portion of our investment.

We redeemed 22% of our passive equity investment in IQHQ Inc., a life sciences
developer. In July, we received proceeds of $16.5 million from the sale
resulting in a greater than 50% internal rate of return over the hold period for
this portion of our investment. Aimco retained 2.4 million shares worth $59.7
million and the opportunity to collaborate with IQHQ on future development
opportunities that include a multifamily component.

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Investment Activity

Aimco is focused on development and redevelopment, funded through our joint
ventures. Aimco will also consider opportunistic investments in related
activities. Updates include:

In May, we executed joint venture agreements to act as a co-GP on the
development of a phased multifamily community in Bethesda, Maryland. The project
is fully entitled and includes approvals for over 2,200 units in six phases. We
plan to participate in the first two multifamily phases totaling 574 units with
an expected Aimco investment of $18.3 million, we also have rights to increase
our investment and to choose to participate in future phases of development.

In June, July, and August, we closed on the purchase of three development
parcels we contracted to acquire, for $100 million, in February 2022. The
nine-acre site is located in the rapidly growing Flagler Village neighborhood of
Fort Lauderdale, Florida, and allows for approximately three million square feet
of phased, mixed-use development, which could contain up to 1,500 residential
units, more than 300 hotel keys, and more than 100,000 square feet of retail
space at full build-out. We intend to execute the planned development activity
through joint venture financing.

Operating Property Results


Aimco owns a diversified portfolio of stabilized apartment communities located
in ten 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, 2022 include:

Revenue in the second quarter of 2022 was $33.1 million, up 11.2% year over
year, resulting from a $203 increase in average monthly revenue per apartment
home to $2,039, and a 20-basis point increase in Average Daily Occupancy to
97.7%.

Expenses the second quarter of 2022 were $10.4 million, up 4.8% year over year.

Net operating income in the second quarter of 2022 was $22.7 million, up 14.4%
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. In
the first half of 2022, we executed leases on over 60,000 square feet of office
space, at rates per square foot 20% higher than leases executed in the first
half of 2021. At the end of the second quarter 2022, the building was 85%
occupied, up from 73% at the same time last year.

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, 2022, we had access to $215.5 million
in liquidity, including $81.8 million of cash on hand, $12.5 million of
restricted cash, and the capacity to borrow up to $121.2 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 consists of properties that are under
construction or have not achieved stabilization, as well as land assemblages
that are being held for development adjacent to The Hamilton community and other
land purchases. Our Operating segment includes 21 residential apartment
communities that have achieved stabilized level of operations as of January 1,
2021 and maintained it throughout the current year and comparable period. We
aggregate all our

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apartment communities that have reached stabilization into our Operating
segment. Our Other segment consists of properties that are not included in our
Development and Redevelopment or Operating segments.

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

Three and Six Months Ended June 30, 2022 compared with the Three and Six Months
Ended June 30, 2021


Net income increased by $258.8 million and by $246.8 million during the three
and six months ended June 30, 2022, respectively, compared to the same periods
in 2021, as described more fully below.

Property Results


As of June 30, 2022, our Development and Redevelopment segment included four
properties that were under construction and four properties in lease-up. Our
Operating segment included 21 communities with 5,582 apartment homes, and our
Other segment included our recent Eldridge Townhomes acquisition, and one office
building.

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, less direct property
operating expenses, but

excluding utility reimbursements, for the consolidated communities. In our
Condensed Consolidated Statements of Operations, utility reimbursements are
included in rental and other property revenues, in accordance with GAAP;

excluding the results of four apartment communities with an aggregate 142
apartment homes that we neither manage nor consolidate, notes receivable, 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 10 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.

Proportionate Property Net Operating Income


The results of our segments for the three months ended June 30, 2022 and 2021,
as presented below, are based on segment classifications as of June 30, 2022:

                                              Three Months Ended June 30,
(in thousands)                                 2022                 2021          $ Change      % Change
Rental and other property revenues,
before utility reimbursements:
  Development and Redevelopment           $        8,899       $        2,489     $   6,410         257.5 %
  Operating                                       33,122               29,782         3,340          11.2 %
  Other                                            4,333                3,138         1,195          38.1 %
   Total                                          46,354               35,409        10,945          30.9 %
Property operating expenses, net of
utility reimbursements:
  Development and Redevelopment                    3,212                2,101         1,111          52.9 %
  Operating                                       10,435                9,954           481           4.8 %
  Other                                            1,267                1,090           177          16.2 %
   Total                                          14,914               13,145         1,769          13.5 %
Proportionate property net operating
income:
  Development and Redevelopment                    5,687                  388         5,299       1,365.7 %
  Operating                                       22,687               19,828         2,859          14.4 %
  Other                                            3,066                2,048         1,018          49.7 %
   Total                                  $       31,440       $       22,264     $   9,176          41.2 %

For the three months ended June 30, 2022, compared to the same period in 2021:

Development and Redevelopment proportionate property net operating income
increased by $5.3 million due primarily to the delivery and lease up of units at
newly constructed or redeveloped apartment communities. Development and
Redevelopment proportionate property net operating income will decrease in the
third quarter due to the termination of the four leases.

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Operating proportionate property net operating income increased by $2.9 million,
or 14.4%. The increase was attributable primarily to a $3.3 million, or 11.2%
increase in rental and other property revenues due to higher average revenues of
$203 per apartment home, and a 20-basis point increase in occupancy.

Other proportionate property net operating income increased by $1.0 million, or
49.7%.

The results of our segments for the six months ended June 30, 2022 and 2021, as
presented below, are based on segment classifications as of June 30, 2022:


                                              Six Months Ended June 30,            Historical Change
(in thousands)                                2022                2021              $             %
Rental and other property revenues,
before utility reimbursements:
  Development and Redevelopment           $      15,831       $       4,746     $   11,085        100.0 %
  Operating                                      65,361              59,051          6,310         10.7 %
  Other                                           9,378               6,324          3,054         48.3 %
   Total                                         90,570              70,121         20,449         29.2 %
Property operating expenses, net of
utility reimbursements:
  Development and Redevelopment                   5,728               3,968          1,760        100.0 %
  Operating                                      20,697              20,160            537          2.7 %
  Other                                           2,822               2,127            695         32.7 %
   Total                                         29,247              26,255          2,992         11.4 %
Proportionate property net operating
income:
  Development and Redevelopment                  10,103                 778          9,325        100.0 %
  Operating                                      44,664              38,891          5,773         14.8 %
  Other                                           6,556               4,197          2,359         56.2 %
   Total                                  $      61,323       $      43,866     $   17,457         39.8 %

For the six months ended June 30, 2022, compared to the same period in 2021:

Development and Redevelopment proportionate property net operating income
increased by $9.3 million, due primarily to the delivery and lease up of units
at newly constructed or redeveloped apartment communities. Development and
Redevelopment proportionate property net operating income will decrease in the
third quarter due to the termination of the four leases.

Operating proportionate property net operating income increased by $5.8 million,
or 14.8%. The increase was attributable primarily to a $6.3 million, or 10.7%
increase in rental and other property revenues due to higher average rental
rates of $185 per apartment home, and a 50-basis point increase in occupancy.

Other proportionate property net operating income increased by $2.4 million, or
56.2%.

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, 2022, depreciation and amortization
expense increased by $14.2 million, or 68.9%, and $16.6 million, or 40.2%,
respectively, when compared to the same periods in 2021, primarily due to
additional assets being placed into service.

General and Administrative Expenses


For the three months ended June 30, 2022, general and administrative expenses
increased by $1.6 million, or 21.4% compared to the three months ended June 30,
2021. For the six months ended June 30, 2022, general and administrative
expenses increased by $4.7 million, or 34.6% compared to the six months ended
June 30, 2021. General and administrative expenses incurred for the three and
six months ended June 30, 2021 were prior to the full build out of our platform
and are not representative of what we believe our anticipated expenses will be
going forward. Additionally, for the three and six months ended June 30, 2022
and 2021, general and administrative expenses included $1.0 million and $2.0
million of expenses, respectively, to be reimbursed to AIR, per agreement upon
separation, for consulting services with respect to strategic growth, direction,
and advice. This agreement will conclude at year end.

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Interest Expense

For the three and six months ended June 30, 2022, compared to the same periods
in 2021, interest expense increased by $28.9 million, or 228.7%, and increased
by $30.8 million, or 121.8%, respectively, due primarily to $26.4 million of
spread maintenance costs related to early payoff of the Notes Payable to AIR and
refinance of certain property debt.

Mezzanine Investment Income, Net


On November 26, 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 loan was retained by AIR
following the Separation. The Separation Agreement provides for AIR to transfer
ownership of the subsidiaries that originated and hold the mezzanine loan, once
required third-party consents to transfer are received. Until legal title of the
subsidiaries is transferred, AIR is obligated to pass payments on the mezzanine
loan to us.

As of June 30, 2022 and December 31, 2021, the total receivable, including
accrued and unpaid interest, was $354.4 million and $337.8 million,
respectively. During the three and six months ended June 30, 2022, we recognized
$8.3 million and $16.6 million, respectively, of income in connection with the
mezzanine loan, compared to $7.6 million and $15.0 million during the three and
six months ended June 30, 2021, respectively.

The loan is subject to certain risks, including, but not limited to, those
resulting from the lingering disruption due to the COVID-19 pandemic and
associated response, and any similar events that might occur in the future,
which may result in all or a portion of the loan not being repaid. In the event
we determine that a portion of the related Mezzanine Investment is not
recoverable, we will recognize an impairment. With the neighboring San Francisco
State University returning to full in-person learning this fall, we now expect
increasing demand for the local apartments that serve as collateral for our
loan.

Realized and Unrealized Gains (Losses) on Interest Rate Options

During the six months ended June 30, 2022, we monetized our $500.0 million
notional amount interest rate swaption for $13.7 million and recognized a
realized a gain of $8.0 million.


We adjust our interest rate options to fair value on a quarterly basis. As a
result of the mark-to-market adjustment, we recorded unrealized gains of $11.9
million and $30.7 million, respectively, during the three and six months ended
June 30, 2022, compared to an unrealized loss of $17.0 million and an unrealized
gain of $8.4 million during the three and six months ended June 30, 2021,
respectively.

Realized and Unrealized Gains (Losses) on Equity Investments


During the three and six months ended June 30, 2022, 22% of our original
investment in IQHQ was redeemed for $16.5 million and we recognized a realized
gain of $5.7 million. Our remaining investment in IQHQ was valued at a stepped
up basis at the same per share value as the cash redemption, and we recognized a
$20.5 million unrealized gain.

We measure our investments in property technology funds at NAV as a practical
expedient. As a result of changes in NAV, we recorded an unrealized gain of $0.5
million and an unrealized loss of $3.9 million, respectively, during the three
and six months ended June 30, 2022, compared to unrealized gains of $0.9 million
during the three and six months ended June 30, 2021.

Gains on Dispositions of Real Estate

During the three and six months ended June 30, 2022, we sold our Pathfinder
Village
property located in Fremont, California, for a gross sales price of
$127.0 million and recognized a gain from the sale of $94.6 million.

Lease Modification Income


For the three and six months ended June 30, 2022, we as lessee and AIR as
lessor, entered into a lease termination agreement pursuant to which AIR is
required to pay us a termination payment on September 1, 2022, and upon receipt
of such payment, the existing leases with respect to four properties will
terminate. The total lease modification income recognized in the quarter was
$205.4 million.

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Other Income (Expense), Net

Other income (expense), net, includes costs associated with our risk management
activities, partnership administration expenses, valuation changes associated
with equity investments, fee income, and certain non-recurring items. Other
income (expense), net, for the three months ended June 30, 2022 decreased by
$3.5 million, or 169.2%, compared to the three months ended June 30, 2021. For
the six months ended June 30, 2022 decreased by $3.9 million, or 161.8%.

Income Tax Benefit


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 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, 2022, we had consolidated net income subject to tax of
$181.4 million and $166.6 million, respectively. For the three and six months
ended June 30, 2021, we had consolidated net losses subject to tax of $9.0
million and $18.5 million, respectively.

For the three months ended June 30, 2022, we recognized income tax expense of
$46.0 million compared to an income tax benefit $2.8 million during the same
period in 2021. The change is primarily due to the GAAP income taxes associated
with the lease termination income recognized in the second quarter of 2022.

For the six months ended June 30, 2022, we recognized income tax expense of
$41.9 million compared to a $7.9 million benefit during the same period in 2021.
The change is primarily due to the GAAP income taxes associated with the lease
termination income recognized in the second quarter of 2022.

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 the impairment of long-lived assets and capitalized costs.

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, 2021. 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.

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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 Aimco’s 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 attributable to noncontrolling interests in
consolidated real estate partnerships and EBITDAre adjustments attributable to
noncontrolling interests, and unrealized gain 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 interest income recognized on our
Mezzanine Investment that was accrued but not paid.

The reconciliation of net income to EBITDAre and Adjusted EBITDAre for the three
and six months ended June 30, 2022 and 2021, is as follows (in thousands):

                                             Three Months Ended            Six Months Ended
                                                  June 30,                     June 30,
                                             2022          2021           2022          2021
Net income (loss) attributable to Aimco   $  253,211     $ (20,386 )   $  263,323     $   1,048
Adjustments:
Interest expense                              41,546        12,638         56,147        25,315
Income tax expense (benefit)                  45,957        (2,760 )       41,901        (7,860 )
Gain on dispositions of real estate          (94,598 )           -        (94,465 )           -
Lease modification income                   (205,387 )           -       (205,387 )           -
Depreciation and amortization                 34,863        20,639         57,981        41,356
Adjustment related to EBITDAre of
unconsolidated partnerships                      259           215            516           430
EBITDAre                                  $   75,851     $  10,346     $  120,016     $  60,289
Net (income) loss attributable to
redeemable noncontrolling interests in
consolidated real estate partnerships         (1,069 )         (66 )       (2,539 )          86
Net (income) loss attributable to
noncontrolling interests in
consolidated real estate partnerships           (346 )        (275 )         (344 )        (566 )
EBITDAre adjustments attributable to
noncontrolling interests                        (221 )          38           (232 )        (232 )
Mezzanine investment income, net (1)          (8,330 )      (7,551 )      (16,567 )     (15,018 )
Unrealized (gains) losses on interest
rate options                                 (20,017 )      16,970        (38,795 )      (8,377 )
Unrealized (gains) losses on IQHQ
investment                                   (20,501 )           -        (20,501 )           -
Adjusted EBITDAre                         $   25,367     $  19,462     $   41,038     $  36,182

(1) Includes the portion of accrued and unpaid income recognized
during the year

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.

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As of June 30, 2022, our available liquidity was $215.5 million, which consisted
of:

$81.8 million in cash and cash equivalents; and

$12.5 million of restricted cash, including amounts related to tenant security
deposits and escrows held by lenders for capital additions, property taxes, and
insurance; and

$121.2 million of available capacity to borrow under our revolving secured
credit facility.


We have commitments for, and expect to spend, approximately $188.4 million on
development and redevelopment projects underway, with $231.3 million undrawn on
our construction loans as of June 30, 2022 and limited partner equity
commitments of $2.3 million. We are under contract to acquire, for $36.0
million, the two remaining land parcels of the nine-acre development site in
Fort Lauderdale. Our Edgewater joint venture and DC joint ventures have
remaining commitments of $12.0 million and we also have unfunded commitments in
the amount of $2.9 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.

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. Currently, financing is
readily available. Any adverse changes in the lending environment could
negatively affect our liquidity. We have taken steps to mitigate a portion of
our repricing 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, 2022, 70% of our leverage consisted of property-level,
non-recourse debt. Approximately 96% of our property-level debt is fixed-rate,
which provides a hedge against increases in interest rates, capitalization
rates, and inflation. As of June 30, 2022, the weighted-average interest rate on
our property-level debt was 4.4%, and the remaining term to maturity was 8.4
years.

While our primary source of leverage is property-level debt, we also have a
secured $150.0 million credit facility with a syndicate of financial
institutions, the Notes Payable to AIR, and construction loans. As of June 30,
2022, we had no outstanding borrowings under our revolving secured credit
facility. We had a $28.8 million letter of credit outstanding related to a
contract to purchase a nine-acre development site in Fort Lauderdale;
consequently, we had capacity to borrow up to $121.2 million under our 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.

As of June 30, 2022, 13% of our leverage consisted of the Notes Payable to AIR,
with a fixed interest rate of 5.2% and a term to maturity of 1.6 years. An
additional 18% consisted of our variable-rate non-recourse construction loans.
As previously disclosed, in July 2022, we paid off the Notes Payable to AIR in
full.

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.

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Operating Activities

For the six months ended June 30, 2022, net cash provided by operating
activities was $25.4 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, 2022 increased by $8.9
million compared to the same period ended in 2021 due to timing of balance sheet
position changes.

Investing Activities

For the six months ended June 30, 2022, our net cash used in investing
activities of $125.4 million consisted primarily of capital expenditures and
$100.8 million of cash used to acquire undeveloped land parcels in Fort
Lauderdale, Florida
, offset by $126.8 million of proceeds received from the
disposition of our property located in Freemont, California.


Total capital additions were $124.8 million and $100.2 million during the six
months ended June 30, 2022 and 2021, respectively, primarily used for
construction costs on our development properties. We have generally funded
capital additions with available cash and cash provided by operating activities
and construction loans.

Also, during the six months ended June 30, 2022, we funded the remaining $14.2
million of our total commitment of $50.0 of a passive equity investment in IQHQ,
a life sciences developer.

We exclude the amounts of capital spending related to commercial spaces and to
apartment communities sold or classified as held for sale at the end of the
period from the foregoing measures. We have also excluded from these measures
indirect capitalized costs, which are not yet allocated to communities with
capital additions, and their related capital spending categories.

Financing Activities


Net cash used by financing activities for the six months ended June 30, 2022
increased by $132.3 million compared to the six months ended June 30, 2021 due
primarily to $283.8 million in payoffs of non-recourse property debt, a $387.1
million paydown of Notes Payable to AIR, and a reduction in construction loan
proceeds of $86.5 million year over year offset by a $614.7 million increase in
proceeds received from non-recourse property debt issuances.

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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