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, 2021
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: 0-056223 (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 outstanding as of August 12, 2021: 149,662,549
EXPLANATORY NOTE
On December 15, 2020, Apartment Investment and Management Company (“Aimco” or “the Company”) completed the separation of its business into two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp. (“AIR”). The separation was effected by way of a pro rata distribution, in which stockholders of Aimco received one share of Class A common stock of AIR for every one share of Class A common stock of Aimco held as of the close of business on December 5, 2020. Apartment Income REIT, L.P. (“AIR Operating Partnership”), formerly known as “Aimco Properties, L.P.” until July 7, 2021, also completed a pro rata distribution of all of the outstanding common limited partnership units of Aimco OP L.P. (“Aimco Operating Partnership” and such units, “Aimco OP Units”) to holders of AIR Operating Partnership common limited partnership units and AIR Operating Partnership Class I High Performance partnership units as of the close of business on December 5, 2020. The transactions described in this paragraph are collectively referred to as the “Separation” and are governed by the terms of the Separation and Distribution Agreement (the “Separation Agreement”).
Notwithstanding the legal form of the Separation, for accounting and financial reporting purposes, Aimco is presented as being spun-off from AIR. This presentation is in accordance with generally accepted accounting principles in the United States and is due primarily to the relative significance of Aimco’s business, as measured in terms of revenue, net income, assets, and other relevant indicators, as compared to those indicators for AIR before the Separation. Therefore, Aimco is considered “spun” for accounting purposes and AIR is considered the divesting entity and treated as the accounting spinner, or accounting predecessor. A separate capital structure did not exist since the assets, liabilities and operations of Aimco prior to the Separation (Aimco and AIR together, as they existed prior to the Separation, “Aimco Predecessor”) were spread across multiple legal entities. The historical financial statements of Aimco do not represent the financial position and results of operations of one legal entity, but rather a combination of entities under common control that have been “carved out” from Aimco Predecessor’s financial statements.
This filing combines the quarterly reports on Form 10-Q for the quarterly period ended June 30, 2021, 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.
Aimco, a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. Aimco, through a wholly-owned subsidiary, is the general partner and directly is the special limited partner of Aimco Operating Partnership. As of June 30, 2021, Aimco owned 93.6% 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 6.4% 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 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).
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
1
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, which we refer to as Aimco OP Units, 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 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.
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
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO OP L.P.
TABLE OF CONTENTS
FORM 10-Q
|
|
|
Page |
|
|
|
|
|
ITEM 1. |
|
|
|
|
|
|
|
|
4 |
|
|
|
5 |
|
|
|
6 |
|
|
|
8 |
|
|
|
|
|
|
|
9 |
|
|
|
10 |
|
|
|
Condensed Consolidated Statements of Partners’ Capital (Unaudited) |
11 |
|
|
13 |
|
|
|
14 |
|
|
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
29 |
|
ITEM 3. |
40 |
|
|
ITEM 4. |
40 |
|
|
|
|
|
|
ITEM 1A. |
41 |
|
|
ITEM 2. |
41 |
|
|
ITEM 6. |
43 |
|
|
|
44 |
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Buildings and improvements |
|
$ |
1,107,929 |
|
|
$ |
995,116 |
|
|
Land |
|
|
518,954 |
|
|
|
505,153 |
|
|
Total real estate |
|
|
1,626,883 |
|
|
|
1,500,269 |
|
|
Accumulated depreciation |
|
|
(527,976 |
) |
|
|
(495,010 |
) |
|
Net real estate |
|
|
1,098,907 |
|
|
|
1,005,259 |
|
|
Cash and cash equivalents |
|
|
286,066 |
|
|
|
289,582 |
|
|
Restricted cash |
|
|
9,167 |
|
|
|
9,153 |
|
|
Mezzanine investment |
|
|
322,380 |
|
|
|
307,362 |
|
|
Right-of-use lease assets |
|
|
443,460 |
|
|
|
98,280 |
|
|
Other assets, net |
|
|
152,159 |
|
|
|
130,856 |
|
|
Total assets |
|
$ |
2,312,139 |
|
|
$ |
1,840,492 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
Non-recourse property debt, net |
|
$ |
427,881 |
|
|
$ |
447,967 |
|
|
Construction loans, net |
|
|
114,309 |
|
|
|
— |
|
|
Notes payable to AIR |
|
|
534,127 |
|
|
|
534,127 |
|
|
Total indebtedness |
|
|
1,076,317 |
|
|
|
982,094 |
|
|
Deferred tax liabilities |
|
|
128,279 |
|
|
|
131,560 |
|
|
Lease liabilities |
|
|
450,648 |
|
|
|
100,496 |
|
|
Accrued liabilities and other |
|
|
91,496 |
|
|
|
62,988 |
|
|
Total liabilities |
|
|
1,746,740 |
|
|
|
1,277,138 |
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest in consolidated real estate partnership |
|
|
4,177 |
|
|
|
4,263 |
|
|
Commitments and contingencies (Note 4) |
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
Common Stock, $0.01 par value, 510,587,500 shares authorized, 149,662,549 and 149,036,263 shares issued/outstanding at June 30, 2021 and December 31, 2020, respectively |
|
|
1,496 |
|
|
|
1,490 |
|
|
Additional paid-in capital |
|
|
517,540 |
|
|
|
515,127 |
|
|
Accumulated deficit |
|
|
(16,315 |
) |
|
|
(16,839 |
) |
|
Total Aimco equity |
|
|
502,721 |
|
|
|
499,778 |
|
|
Noncontrolling interests in consolidated real estate partnerships |
|
|
31,847 |
|
|
|
31,877 |
|
|
Common noncontrolling interests in Aimco Operating Partnership |
|
|
26,654 |
|
|
|
27,436 |
|
|
Total equity |
|
|
561,222 |
|
|
|
559,091 |
|
|
Total liabilities and equity |
|
$ |
2,312,139 |
|
|
$ |
1,840,492 |
|
See notes to condensed consolidated financial statements.
4
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues |
|
$ |
40,418 |
|
|
$ |
37,165 |
|
|
$ |
80,222 |
|
|
$ |
75,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
|
16,403 |
|
|
|
15,322 |
|
|
|
33,345 |
|
|
|
30,671 |
|
|
Depreciation and amortization |
|
|
20,639 |
|
|
|
19,030 |
|
|
|
41,356 |
|
|
|
38,377 |
|
|
General and administrative expenses |
|
|
7,383 |
|
|
|
1,625 |
|
|
|
13,694 |
|
|
|
3,387 |
|
|
Total operating expenses |
|
|
44,425 |
|
|
|
35,977 |
|
|
|
88,395 |
|
|
|
72,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(12,638 |
) |
|
|
(5,809 |
) |
|
|
(25,315 |
) |
|
|
(11,460 |
) |
|
Mezzanine investment income, net |
|
|
7,551 |
|
|
|
6,936 |
|
|
|
15,018 |
|
|
|
13,683 |
|
|
Unrealized gains (losses) on interest rate options |
|
|
(16,970 |
) |
|
|
(1,080 |
) |
|
|
8,377 |
|
|
|
(1,080 |
) |
|
Other expenses, net |
|
|
2,918 |
|
|
|
(154 |
) |
|
|
3,281 |
|
|
|
(569 |
) |
|
(Loss) income before income tax benefit |
|
|
(23,146 |
) |
|
|
1,081 |
|
|
|
(6,812 |
) |
|
|
3,613 |
|
|
Income tax benefit |
|
|
2,760 |
|
|
|
2,032 |
|
|
|
7,860 |
|
|
|
4,055 |
|
|
Net (loss) income |
|
|
(20,386 |
) |
|
|
3,113 |
|
|
|
1,048 |
|
|
|
7,668 |
|
|
Noncontrolling interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to redeemable noncontrolling interest in consolidated real estate partnership |
|
|
(66 |
) |
|
|
125 |
|
|
|
86 |
|
|
|
228 |
|
|
Net (income) attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
(275 |
) |
|
|
(10 |
) |
|
|
(566 |
) |
|
|
(5 |
) |
|
Net (income) loss attributable to common noncontrolling interests in Aimco Operating Partnership |
|
|
1,037 |
|
|
|
(165 |
) |
|
|
(44 |
) |
|
|
(400 |
) |
|
Net (loss) income attributable to Aimco common stockholders |
|
$ |
(19,690 |
) |
|
$ |
3,063 |
|
|
$ |
524 |
|
|
$ |
7,491 |
|
|
Net (loss) income attributable to Aimco per common share – basic |
|
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
Net (loss) income attributable to Aimco per common share – diluted |
|
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – basic |
|
|
149,166 |
|
|
|
148,549 |
|
|
|
149,082 |
|
|
|
148,549 |
|
|
Weighted average common shares outstanding – diluted |
|
|
149,166 |
|
|
|
148,569 |
|
|
|
149,442 |
|
|
|
148,569 |
|
See notes to condensed consolidated financial statements.
5
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended June 30, 2021 and 2020
(In thousands)
(Unaudited)
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests in |
|
|
Common Noncontrolling Interests in |
|
|
|
|
|
|||||||
|
|
|
Shares Issued |
|
|
Amount |
|
|
Additional Paid- in Capital |
|
|
Retained Earnings (Accumulated Deficit) |
|
|
Aimco Predecessor Equity |
|
|
Total Aimco Equity |
|
|
Consolidated Real Estate Partnerships |
|
|
Aimco Operating Partnership |
|
|
Total Equity |
|
|||||||||
|
Balances at March 31, 2020 |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
511,497 |
|
|
$ |
511,497 |
|
|
$ |
103 |
|
|
$ |
424 |
|
|
$ |
512,024 |
|
|
Net income attributable to Aimco Predecessor |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,063 |
|
|
|
3,063 |
|
|
|
— |
|
|
|
— |
|
|
|
3,063 |
|
|
Net income attributable to noncontrolling interests in consolidated partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
10 |
|
|
Net income attributable to common noncontrolling interests in Aimco Operating Partnership |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
165 |
|
|
|
165 |
|
|
Contributions from Aimco Predecessor, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,202 |
|
|
|
6,202 |
|
|
|
— |
|
|
|
— |
|
|
|
6,202 |
|
|
Balances at June 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
520,762 |
|
|
$ |
520,762 |
|
|
$ |
113 |
|
|
$ |
589 |
|
|
$ |
521,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2021 |
|
|
149,208 |
|
|
$ |
1,491 |
|
|
$ |
516,051 |
|
|
$ |
3,375 |
|
|
$ |
— |
|
|
$ |
520,917 |
|
|
$ |
31,884 |
|
|
$ |
28,551 |
|
|
$ |
581,352 |
|
|
Redemption of Aimco Operating Partnership units |
|
|
440 |
|
|
|
4 |
|
|
|
909 |
|
|
|
— |
|
|
|
— |
|
|
|
913 |
|
|
|
— |
|
|
|
(913 |
) |
|
|
— |
|
|
Cash paid on redemption of Aimco Operating Partnership units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
|
(4 |
) |
|
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
580 |
|
|
|
— |
|
|
|
— |
|
|
|
580 |
|
|
|
— |
|
|
|
58 |
|
|
|
638 |
|
|
Distribution to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(295 |
) |
|
|
— |
|
|
|
(295 |
) |
|
Net income attributable to noncontrolling interests in consolidated partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
275 |
|
|
|
— |
|
|
|
275 |
|
|
Net loss attributable to common noncontrolling interests in Aimco Operating Partnership |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,037 |
) |
|
|
(1,037 |
) |
|
Net loss attributable to Aimco common stockholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,690 |
) |
|
|
— |
|
|
|
(19,690 |
) |
|
|
— |
|
|
|
— |
|
|
|
(19,690 |
) |
|
Other, net |
|
|
15 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
(17 |
) |
|
|
(1 |
) |
|
|
(17 |
) |
|
Balances at June 30, 2021 |
|
|
149,663 |
|
|
$ |
1,496 |
|
|
$ |
517,540 |
|
|
$ |
(16,315 |
) |
|
$ |
— |
|
|
$ |
502,721 |
|
|
$ |
31,847 |
|
|
$ |
26,654 |
|
|
$ |
561,222 |
|
See notes to condensed consolidated financial statements.
6
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Six Months Ended June 30, 2021 and 2020
(In thousands)
(Unaudited)
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests in |
|
|
Common Noncontrolling Interests in |
|
|
|
|
|
|||||||
|
|
|
Shares Issued |
|
|
Amount |
|
|
Additional Paid- in Capital |
|
|
Accumulated Deficit |
|
|
Aimco Predecessor Equity |
|
|
Total Aimco Equity |
|
|
Consolidated Real Estate Partnerships |
|
|
Aimco Operating Partnership |
|
|
Total Equity |
|
|||||||||
|
Balances at December 31, 2019 |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
513,264 |
|
|
$ |
513,264 |
|
|
$ |
108 |
|
|
$ |
188 |
|
|
$ |
513,560 |
|
|
Net income attributable to Aimco Predecessor |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,491 |
|
|
|
7,491 |
|
|
|
— |
|
|
|
— |
|
|
|
7,491 |
|
|
Net income attributable to noncontrolling interests in consolidated partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
Net income attributable to Common noncontrolling interests in Aimco Operating Partnership |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
400 |
|
|
|
400 |
|
|
Contributions from Aimco Predecessor, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
|
|
7 |
|
|
|
— |
|
|
|
1 |
|
|
|
8 |
|
|
Balances at June 30, 2020 |
|
|
— |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
520,762 |
|
|
$ |
520,762 |
|
|
$ |
113 |
|
|
$ |
589 |
|
|
$ |
521,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2020 |
|
|
149,036 |
|
|
$ |
1,490 |
|
|
$ |
515,127 |
|
|
$ |
(16,839 |
) |
|
$ |
— |
|
|
$ |
499,778 |
|
|
$ |
31,877 |
|
|
$ |
27,436 |
|
|
$ |
559,091 |
|
|
Redemption of Aimco Operating Partnership units |
|
|
440 |
|
|
|
4 |
|
|
|
898 |
|
|
|
— |
|
|
|
— |
|
|
|
902 |
|
|
|
— |
|
|
|
(902 |
) |
|
|
— |
|
|
Cash paid on redemption of Aimco Operating Partnership units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(40 |
) |
|
|
(40 |
) |
|
Issuance of common stock in connection with share-base arrangements |
|
|
232 |
|
|
|
2 |
|
|
|
1,069 |
|
|
|
— |
|
|
|
— |
|
|
|
1,071 |
|
|
|
— |
|
|
|
— |
|
|
|
1,071 |
|
|
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
751 |
|
|
|
— |
|
|
|
— |
|
|
|
751 |
|
|
|
— |
|
|
|
116 |
|
|
|
867 |
|
|
Distribution to noncontrolling interest in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(582 |
) |
|
|
— |
|
|
|
(582 |
) |
|
Net income attributable to noncontrolling interest in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
566 |
|
|
|
— |
|
|
|
566 |
|
|
Net income attributable to to common noncontrolling interests in Aimco Operating Partnership |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
44 |
|
|
|
44 |
|
|
Net income attributable to Aimco common stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
524 |
|
|
|
|
|
|
|
524 |
|
|
|
|
|
|
|
|
|
|
|
524 |
|
|
Other, net |
|
|
(45 |
) |
|
|
— |
|
|
|
(305 |
) |
|
|
— |
|
|
|
— |
|
|
|
(305 |
) |
|
|
(14 |
) |
|
|
— |
|
|
|
(319 |
) |
|
Balances at June 30, 2021 |
|
|
149,663 |
|
|
$ |
1,496 |
|
|
$ |
517,540 |
|
|
$ |
(16,315 |
) |
|
$ |
— |
|
|
$ |
502,721 |
|
|
$ |
31,847 |
|
|
$ |
26,654 |
|
|
$ |
561,222 |
|
See notes to condensed consolidated financial statements.
7
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
$ |
1,048 |
|
|
$ |
7,668 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
41,356 |
|
|
|
38,377 |
|
|
Income from unconsolidated real estate partnerships |
|
(508 |
) |
|
|
(352 |
) |
|
Unrealized (gains) losses on interest rate options |
|
(8,377 |
) |
|
|
1,080 |
|
|
Income tax benefit |
|
(7,860 |
) |
|
|
(4,055 |
) |
|
Mezzanine investment income, net |
|
(15,018 |
) |
|
|
(13,683 |
) |
|
Share based compensation |
|
1,814 |
|
|
|
— |
|
|
Amortization of debt issuance costs and other |
|
609 |
|
|
|
466 |
|
|
Changes in operating assets and operating liabilities: |
|
|
|
|
|
|
|
|
Other assets, net |
|
(11,160 |
) |
|
|
(3,058 |
) |
|
Accounts payable, accrued liabilities and other |
|
14,562 |
|
|
|
1,970 |
|
|
Net cash provided by operating activities |
|
16,466 |
|
|
|
28,413 |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of real estate |
|
(18,215 |
) |
|
|
— |
|
|
Capital expenditures (1) |
|
(82,352 |
) |
|
|
(10,721 |
) |
|
Other investing activities |
|
(1,484 |
) |
|
|
(35 |
) |
|
Net cash used in investing activities |
|
(102,051 |
) |
|
|
(10,756 |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from construction loans |
|
120,123 |
|
|
|
— |
|
|
Payments of deferred loan costs |
|
(6,178 |
) |
|
|
— |
|
|
Principal repayments on non-recourse property debt |
|
(20,331 |
) |
|
|
(4,913 |
) |
|
Payments on financing leases |
|
(5,133 |
) |
|
|
— |
|
|
Purchase of interest rate option |
|
(5,772 |
) |
|
|
(12,245 |
) |
|
Change in Aimco Predecessor investment, net |
|
— |
|
|
|
(574 |
) |
|
Other financing activities |
|
(626 |
) |
|
|
(74 |
) |
|
Net cash provided by (used in) financing activities |
|
82,083 |
|
|
|
(17,806 |
) |
|
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
(3,502 |
) |
|
|
(149 |
) |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
|
298,735 |
|
|
|
10,120 |
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD |
$ |
295,233 |
|
|
$ |
9,971 |
|
|
|
(1) |
Capital expenditures net of accrued capital costs of $17.1 million and $0.8 million for the six months ended June 30, 2021 and 2020, respectively. |
See notes to condensed consolidated financial statements.
8
|
|
AIMCO OP L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Buildings and improvements |
|
$ |
1,107,929 |
|
|
$ |
995,116 |
|
|
Land |
|
|
518,954 |
|
|
|
505,153 |
|
|
Total real estate |
|
|
1,626,883 |
|
|
|
1,500,269 |
|
|
Accumulated depreciation |
|
|
(527,976 |
) |
|
|
(495,010 |
) |
|
Net real estate |
|
|
1,098,907 |
|
|
|
1,005,259 |
|
|
Cash and cash equivalents |
|
|
286,066 |
|
|
|
289,582 |
|
|
Restricted cash |
|
|
9,167 |
|
|
|
9,153 |
|
|
Mezzanine investment |
|
|
322,380 |
|
|
|
307,362 |
|
|
Right-of-use lease assets |
|
|
443,460 |
|
|
|
98,280 |
|
|
Other assets, net |
|
|
152,159 |
|
|
|
130,856 |
|
|
Total assets |
|
$ |
2,312,139 |
|
|
$ |
1,840,492 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
Non-recourse property debt, net |
|
$ |
427,881 |
|
|
$ |
447,967 |
|
|
Construction loans, net |
|
|
114,309 |
|
|
|
— |
|
|
Notes payable to AIR |
|
|
534,127 |
|
|
|
534,127 |
|
|
Total indebtedness |
|
|
1,076,317 |
|
|
|
982,094 |
|
|
Deferred tax liabilities |
|
|
128,279 |
|
|
|
131,560 |
|
|
Lease liabilities |
|
|
450,648 |
|
|
|
100,496 |
|
|
Accrued liabilities and other |
|
|
91,496 |
|
|
|
62,988 |
|
|
Total liabilities |
|
|
1,746,740 |
|
|
|
1,277,138 |
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest in consolidated real estate partnership |
|
|
4,177 |
|
|
|
4,263 |
|
|
Commitments and contingencies (Note 4) |
|
|
|
|
|
|
|
|
|
Partners’ capital: |
|
|
|
|
|
|
|
|
|
General Partner and Special Limited Partner |
|
|
502,721 |
|
|
|
499,778 |
|
|
Limited Partners |
|
|
26,654 |
|
|
|
27,436 |
|
|
Partners’ capital attributable to Aimco Operating Partnership |
|
|
529,375 |
|
|
|
527,214 |
|
|
Noncontrolling interests in consolidated real estate partnerships |
|
|
31,847 |
|
|
|
31,877 |
|
|
Total partners’ capital |
|
|
561,222 |
|
|
|
559,091 |
|
|
Total liabilities and partners’ capital |
|
$ |
2,312,139 |
|
|
$ |
1,840,492 |
|
See notes to condensed consolidated financial statements.
9
AIMCO OP L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues |
|
$ |
40,418 |
|
|
$ |
37,165 |
|
|
$ |
80,222 |
|
|
$ |
75,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
|
16,403 |
|
|
|
15,322 |
|
|
|
33,345 |
|
|
|
30,671 |
|
|
Depreciation and amortization |
|
|
20,639 |
|
|
|
19,030 |
|
|
|
41,356 |
|
|
|
38,377 |
|
|
General and administrative expenses |
|
|
7,383 |
|
|
|
1,625 |
|
|
|
13,694 |
|
|
|
3,387 |
|
|
Total operating expenses |
|
|
44,425 |
|
|
|
35,977 |
|
|
|
88,395 |
|
|
|
72,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(12,638 |
) |
|
|
(5,809 |
) |
|
|
(25,315 |
) |
|
|
(11,460 |
) |
|
Mezzanine investment income, net |
|
|
7,551 |
|
|
|
6,936 |
|
|
|
15,018 |
|
|
|
13,683 |
|
|
Unrealized gains (losses) on interest rate options |
|
|
(16,970 |
) |
|
|
(1,080 |
) |
|
|
8,377 |
|
|
|
(1,080 |
) |
|
Other expenses, net |
|
|
2,918 |
|
|
|
(154 |
) |
|
|
3,281 |
|
|
|
(569 |
) |
|
(Loss) Income before income tax benefit |
|
|
(23,146 |
) |
|
|
1,081 |
|
|
|
(6,812 |
) |
|
|
3,613 |
|
|
Income tax benefit |
|
|
2,760 |
|
|
|
2,032 |
|
|
|
7,860 |
|
|
|
4,055 |
|
|
Net (loss) income |
|
|
(20,386 |
) |
|
|
3,113 |
|
|
|
1,048 |
|
|
|
7,668 |
|
|
Net (income) loss attributable to redeemable noncontrolling interest in consolidated real estate partnership |
|
|
(66 |
) |
|
|
125 |
|
|
|
86 |
|
|
|
228 |
|
|
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
(275 |
) |
|
|
(10 |
) |
|
|
(566 |
) |
|
|
(5 |
) |
|
Net (loss) income attributable to the Aimco Operating Partnership’s common unitholders |
|
$ |
(20,727 |
) |
|
$ |
3,228 |
|
|
$ |
568 |
|
|
$ |
7,891 |
|
|
Net (loss) income attributable to the Aimco Operating Partnership per common unit – basic |
|
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
Net (loss) income attributable to the Aimco Operating Partnership per common unit – diluted |
|
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common units outstanding – basic |
|
|
157,134 |
|
|
|
156,480 |
|
|
|
157,093 |
|
|
|
156,480 |
|
|
Weighted-average common units outstanding – diluted |
|
|
157,134 |
|
|
|
156,500 |
|
|
|
157,453 |
|
|
|
156,500 |
|
See notes to condensed consolidated financial statements.
10
AIMCO OP L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Three Months Ended June 30, 2021 and 2020
(In thousands)
(Unaudited)
|
|
|
General Partner and Special Limited Partner |
|
|
Limited Partners |
|
|
Partners’ Capital Attributable to the Aimco Operating Partnership |
|
|
Noncontrolling Interests in Consolidated Real Estate Partnerships |
|
|
Aimco Predecessor Capital |
|
|
Total Partners’ Capital |
|
||||||
|
Balances at March 31, 2020 |
|
$ |
— |
|
|
$ |
424 |
|
|
$ |
424 |
|
|
$ |
103 |
|
|
$ |
511,497 |
|
|
$ |
512,024 |
|
|
Net income attributable to Aimco Predecessor |
|
|
— |
|
|
|
165 |
|
|
|
165 |
|
|
|
— |
|
|
|
3,063 |
|
|
|
3,228 |
|
|
Net income attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
10 |
|
|
Contributions from Aimco Predecessor, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,202 |
|
|
|
6,202 |
|
|
Balances at June 30, 2020 |
|
$ |
— |
|
|
$ |
589 |
|
|
$ |
589 |
|
|
$ |
113 |
|
|
$ |
520,762 |
|
|
$ |
521,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2021 |
|
$ |
520,917 |
|
|
$ |
28,551 |
|
|
$ |
549,468 |
|
|
$ |
31,884 |
|
|
$ |
— |
|
|
$ |
581,352 |
|
|
Redemption of Aimco Operating Partnership units |
|
|
913 |
|
|
|
(913 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Cash paid on redemption of Aimco Operating Partnership units |
|
|
— |
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
Share-based compensation expense |
|
|
580 |
|
|
|
58 |
|
|
|
638 |
|
|
|
— |
|
|
|
— |
|
|
|
638 |
|
|
Distribution to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(295 |
) |
|
|
— |
|
|
|
(295 |
) |
|
Net income attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
275 |
|
|
|
— |
|
|
|
275 |
|
|
Net loss |
|
|
(19,690 |
) |
|
|
(1,037 |
) |
|
|
(20,727 |
) |
|
|
— |
|
|
|
— |
|
|
|
(20,727 |
) |
|
Other, net |
|
|
1 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(17 |
) |
|
|
— |
|
|
|
(17 |
) |
|
Balances at June 30, 2021 |
|
$ |
502,721 |
|
|
$ |
26,654 |
|
|
$ |
529,375 |
|
|
$ |
31,847 |
|
|
$ |
— |
|
|
$ |
561,222 |
|
See notes to condensed consolidated financial statements.
11
AIMCO OP L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Six Months Ended June 30, 2021 and 2020
(In thousands)
(Unaudited)
|
|
|
General Partner and Special Limited Partner |
|
|
Limited Partners |
|
|
Partners’ Capital Attributable to the Aimco Operating Partnership |
|
|
Noncontrolling Interests in Consolidated Real Estate Partnerships |
|
|
Aimco Predecessor Capital |
|
|
Total Partners’ Capital |
|
||||||
|
Balances at December 31, 2019 |
|
$ |
— |
|
|
$ |
188 |
|
|
$ |
188 |
|
|
$ |
108 |
|
|
$ |
513,264 |
|
|
$ |
513,560 |
|
|
Net income attributable to Aimco Predecessor |
|
|
— |
|
|
|
400 |
|
|
|
400 |
|
|
|
— |
|
|
|
7,491 |
|
|
|
7,891 |
|
|
Net income attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
Contributions from Aimco Predecessor, net |
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
7 |
|
|
|
8 |
|
|
Balances at June 30, 2020 |
|
$ |
— |
|
|
$ |
589 |
|
|
$ |
589 |
|
|
$ |
113 |
|
|
$ |
520,762 |
|
|
$ |
521,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2020 |
|
$ |
499,778 |
|
|
$ |
27,436 |
|
|
$ |
527,214 |
|
|
$ |
31,877 |
|
|
$ |
— |
|
|
$ |
559,091 |
|
|
Redemption of Aimco Operating Partnership units |
|
|
902 |
|
|
|
(902 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Cash paid on redemption of Operating Partnership units |
|
|
— |
|
|
|
(40 |
) |
|
|
(40 |
) |
|
|
— |
|
|
|
— |
|
|
|
(40 |
) |
|
Issuance of common stock in connection with share-base arrangements |
|
|
1,071 |
|
|
|
— |
|
|
|
1,071 |
|
|
|
— |
|
|
|
— |
|
|
|
1,071 |
|
|
Share-based compensation expense |
|
|
751 |
|
|
|
116 |
|
|
|
867 |
|
|
|
— |
|
|
|
|
|
|
|
867 |
|
|
Distribution to noncontrolling interest in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(582 |
) |
|
|
— |
|
|
|
(582 |
) |
|
Net income attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
566 |
|
|
|
— |
|
|
|
566 |
|
|
Net income |
|
|
524 |
|
|
|
44 |
|
|
|
568 |
|
|
|
— |
|
|
|
— |
|
|
|
568 |
|
|
Other, net |
|
|
(305 |
) |
|
|
— |
|
|
|
(305 |
) |
|
|
(14 |
) |
|
|
— |
|
|
|
(319 |
) |
|
Balances at June 30, 2021 |
|
$ |
502,721 |
|
|
$ |
26,654 |
|
|
$ |
529,375 |
|
|
$ |
31,847 |
|
|
$ |
— |
|
|
$ |
561,222 |
|
See notes to condensed consolidated financial statements.
12
AIMCO OP L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
$ |
1,048 |
|
|
$ |
7,668 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
41,356 |
|
|
|
38,377 |
|
|
Income from unconsolidated real estate partnerships |
|
(508 |
) |
|
|
(352 |
) |
|
Unrealized (gains) losses on interest rate options |
|
(8,377 |
) |
|
|
1,080 |
|
|
Income tax benefit |
|
(7,860 |
) |
|
|
(4,055 |
) |
|
Mezzanine investment income, net |
|
(15,018 |
) |
|
|
(13,683 |
) |
|
Share based compensation |
|
1,814 |
|
|
|
— |
|
|
Amortization of debt issuance costs and other |
|
609 |
|
|
|
466 |
|
|
Changes in operating assets and operating liabilities: |
|
|
|
|
|
|
|
|
Other assets, net |
|
(11,160 |
) |
|
|
(3,058 |
) |
|
Accounts payable, accrued liabilities and other |
|
14,562 |
|
|
|
1,970 |
|
|
Net cash provided by operating activities |
|
16,466 |
|
|
|
28,413 |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of real estate |
|
(18,215 |
) |
|
|
— |
|
|
Capital expenditures (1) |
|
(82,352 |
) |
|
|
(10,721 |
) |
|
Other investing activities |
|
(1,484 |
) |
|
|
(35 |
) |
|
Net cash used in investing activities |
|
(102,051 |
) |
|
|
(10,756 |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from construction loans |
|
120,123 |
|
|
|
— |
|
|
Payments of deferred loan costs |
|
(6,178 |
) |
|
|
— |
|
|
Principal repayments on non-recourse property debt |
|
(20,331 |
) |
|
|
(4,913 |
) |
|
Payments on financing leases |
|
(5,133 |
) |
|
|
— |
|
|
Purchase of interest rate option |
|
(5,772 |
) |
|
|
(12,245 |
) |
|
Change in Aimco Predecessor investment, net |
|
— |
|
|
|
(574 |
) |
|
Other financing activities |
|
(626 |
) |
|
|
(74 |
) |
|
Net cash provided by (used in) financing activities |
|
82,083 |
|
|
|
(17,806 |
) |
|
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
(3,502 |
) |
|
|
(149 |
) |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
|
298,735 |
|
|
|
10,120 |
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD |
$ |
295,233 |
|
|
$ |
9,971 |
|
|
|
(1) |
Capital expenditures net of accrued capital costs of $17.1 million and $0.8 million for the six months ended June 30, 2021 and 2020, respectively. |
See notes to condensed consolidated financial statements.
13
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO OP L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(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”). 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.
The Separation
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”).
Prior to the Separation, the condensed consolidated financial statements were prepared on a carve-out basis and reflect significant assumptions and allocations. The condensed consolidated financial statements reflect our historical consolidated financial position, results of operations, and cash flows in conformity with generally accepted accounting principles in the United States (“GAAP”). The historical financial statements of Aimco do not represent the financial position and results of operations of one legal entity, but rather a combination of entities under common control that have been “carved out” from Aimco Predecessor’s financial statements. All significant intercompany balances have been eliminated in consolidation.
All separation related transactions between Aimco and Aimco Predecessor are considered effectively settled through partners’ capital in our condensed consolidated financial statements, other than the notes payable to AIR as discussed in Note 3. The settlement of these transactions is reflected as contributions from Aimco Predecessor, net in our condensed consolidated statements of equity and partners’ capital and as a net change in Aimco Predecessor investment in financing activity in our condensed consolidated statements of cash flows.
Business
As of June 30, 2021, Aimco owned 93.6% 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 6.4% 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.
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 24 operating apartment communities with 6,067 apartment homes, diversified by both geography and price point, in 12 states; one commercial office building owned as part of a land assemblage; three residential apartment communities, with 1,331 planned apartment homes, a single family rental community, with 16 planned homes plus 8 accessory dwelling units, and one hotel, with 106 planned rooms, that we are actively developing or redeveloping; land parcels held for development; and three residential apartment communities, with 499 apartment homes, for which we have completed the redevelopment and are in lease-up, but have not achieved stabilization. In addition, we own an interest in four unconsolidated operating apartment communities.
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 GAAP have been condensed or omitted in accordance with such rules and
14
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, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
The condensed consolidated balance sheets of Aimco and Aimco Operating Partnership as of December 31, 2020, 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, 2020. Except where indicated, the footnotes refer to both Aimco and Aimco Operating Partnership.
Principles of Consolidation
Aimco’s 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.
Allocations
The 2020 condensed consolidated statements of operations include allocations of general and administrative expenses from Aimco Predecessor. We consider the basis on which expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us during the periods presented. However, the allocations may not include all of the actual expenses that we would have incurred and may not reflect our consolidated results of operations, financial position, and cash flows had it been a stand-alone company during the periods presented. Actual costs that might have been incurred had we been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions we might have performed ourselves or outsourced, and strategic decisions we might have made in areas such as information technology and infrastructure. Following the Separation, AIR, through its subsidiaries, provides Aimco with certain property management and other services, and we perform certain functions using our own resources or purchase services from third parties.
Common Noncontrolling Interests in Aimco Operating Partnership
Common noncontrolling interests in Aimco Operating Partnership consist of common Aimco Operating Partnership Units (“OP Units”) 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 common OP Units, other than Aimco, based on the weighted-average number of common OP Units (including Aimco) outstanding during the period. For the three and six months ended June 30, 2021 and 2020, the holders of common OP Units had a weighted-average economic ownership interest in Aimco Operating Partnership of 5.1% and 5.0% respectively. Substantially all of the assets and liabilities of Aimco are held by Aimco Operating Partnership.
Redeemable Noncontrolling Interest in Consolidated Real Estate Partnership
Redeemable noncontrolling interest consists of equity interests held by a limited partner in a consolidated real estate partnership that has a finite life. We generally attribute to noncontrolling interests their share of income or loss of consolidated partnerships based on their proportionate interest in the results of operations of the partnerships, including their share of losses even if such attribution results in a deficit noncontrolling interest balance within our equity accounts.
15
If a real estate partnership includes redemption rights that are not within our control, the noncontrolling interest is included as temporary equity. If the redemption right is not currently redeemable but probable of being redeemable in the future, changes in redemption value are recognized each quarter with the change in value being reflected in additional paid-in-capital.
The assets of our consolidated real estate partnerships must first be used to settle the liabilities of the consolidated real estate partnerships. The consolidated real estate partnerships’ creditors do not have recourse to the general credit of Aimco Operating Partnership.
The following table presents a reconciliation of our redeemable noncontrolling interest in consolidated real estate partnership from December 31, 2020, to June 30, 2021 (in thousands):
|
Balance at December 31, 2020 |
|
$ |
4,263 |
|
|
Net loss |
|
|
(86 |
) |
|
Balance at June 30, 2021 |
|
$ |
4,177 |
|
Revenue from Leases
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, 2021 and 2020, our total lease income was comprised of the following amounts for all operating leases (in thousands):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Fixed lease income |
|
$ |
37,554 |
|
|
$ |
34,605 |
|
|
$ |
74,343 |
|
|
$ |
69,993 |
|
|
Variable lease income |
|
|
2,760 |
|
|
|
2,372 |
|
|
|
5,714 |
|
|
|
5,231 |
|
|
Total lease income |
|
$ |
40,314 |
|
|
$ |
36,977 |
|
|
$ |
80,057 |
|
|
$ |
75,224 |
|
Lessee Arrangements
We, as lessee, and AIR, as lessor, have entered into finance leases on five properties currently under construction or in lease-up. Four leases commenced January 1, 2021, two of which have rent escalations that start at the point the property reaches stabilization. The term of three of the leases is 25 years and one lease is for 10 years. During the three months ended June 30, 2021, we, as lessee, and AIR, as lessor, entered into a finance lease for a 15-acre plot of land in the San Francisco Bay Area on which we began construction of 16 single family rental homes and 8 accessory dwelling units. The lease commenced on June 1, 2021 and has a term of 25 years. We recorded a right-of-use asset in the amount of $4.7 million and a corresponding lease liability of $4.7 million.
We have provided AIR with residual value guarantees aggregating to $250.8 million, which provide that if the residual value of the leased assets are less than the specified residual value guarantees at the earlier of lease expiration or termination, we are required to pay the difference. See Note 3 for further details.
As of June 30, 2021, operating and financing right-of-use lease assets of $5.3 million and $438.2 million, respectively, are included in the condensed consolidated balance sheets. For the three months and six months ended June 30, 2021, amortization related to our finance leases was $2.1 million and $3.4 million, respectively, net of amounts capitalized. For the three months and six months ended June 30, 2021, interest expense related to our finance leases was $1.7 million and $3.9 million, respectively.
As of June 30, 2021, Aimco’s operating leases and financing leases have weighted-average remaining terms of 8.2 years, and 38.5 years, respectively, and weighted-average discount rates of 3.2% and 5.3%, respectively.
Combined minimum annual lease payments, under operating and financing leases, reconciled to the lease liabilities in our condensed consolidated balance sheets, are as follows (in thousands):
16
|
|
Sublease Income |
|
|
Operating Lease Future Minimum Rent |
|
|
Financing Leases Future Minimum Payments |
|
|||
|
Remainder of 2021 |
$ |
694 |
|
|
$ |
814 |
|
|
$ |
13,527 |
|
|
2022 |
$ |
1,393 |
|
|
$ |
1,841 |
|
|
$ |
27,197 |
|
|
2023 |
$ |
1,403 |
|
|
$ |
1,871 |
|
|
$ |
27,597 |
|
|
2024 |
$ |
1,413 |
|
|
$ |
1,900 |
|
|
$ |
28,597 |
|
|
2025 |
$ |
1,423 |
|
|
$ |
1,930 |
|
|
$ |
29,208 |
|
|
Thereafter |
$ |
4,959 |
|
|
$ |
6,807 |
|
|
$ |
1,644,911 |
|
|
Total |
$ |
11,285 |
|
|
$ |
15,163 |
|
|
$ |
1,771,037 |
|
|
Less: Discount |
|
|
|
|
$ |
(1,897 |
) |
|
$ |
(1,333,655 |
) |
|
Total lease liabilities |
|
|
|
|
$ |
13,266 |
|
|
$ |
437,382 |
|
17
For the three and six months ended June 30, 2021, we capitalized $5.8 million and $12.7 million of lease costs associated with active development and redevelopment projects on certain of the underlying property and ground lease assets. No lease costs were capitalized on leased assets for the three and six months ended June 30, 2020.
Mezzanine Investment
On November 26, 2019, Aimco made a five-year, $275.0 million mezzanine loan to Maximus PM Mezzanine A LLC, 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.
The Separation Agreement provides for AIR to transfer ownership of the subsidiaries that originated and hold the mezzanine loan, 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 through 2024 to Aimco. At the time of the Separation and as of the date of this filing, legal title of these subsidiaries had not yet transferred to Aimco. Until legal title of the subsidiaries is transferred, AIR is obligated to pass payments on such loan 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.
We recognize as income the net amounts recognized by AIR on its equity investment that are due to be paid to us when collected, which primarily represent the interest accrued under the terms of the underlying mezzanine loan. As of June 30, 2021, the Mezzanine Investment in our condensed consolidated balance sheets represents the assets associated with our indirect interest in the subsidiary that owns Parkmerced Apartments, which we do not consolidate.
The loan is subject to certain risks, including, but not limited to, those resulting from the severe downturn in San Francisco rents, the ongoing disruption due to the COVID-19 pandemic and associated governmental response, and the current economic situation, which may result in all or a portion of the loan not being repaid. In the event we determine that a portion of the Mezzanine Investment is not recoverable, we will recognize an impairment, if appropriate.
Income Tax Benefit
Certain 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, 2021, we had consolidated net losses subject to tax of $9.0 million and $18.5 million, respectively. For the three and six months ended June 30, 2020, we had consolidated net income subject to tax of $4.4 million and $8.8 million, respectively.
For the three months ended June 30, 2021, we recognized income tax benefit of $2.8 million compared to $2.0 million, during the same period ended 2020. The change is due primarily to higher losses at our TRS entities.
For the six months ended June 30, 2021, we recorded $7.9 million, compared to $4.1 million during the same period ended 2020. The change is due primarily to income tax benefit associated with internal restructuring, changes to our effective state rate expected to apply to the reversal of our existing deferred items, and higher losses at our TRS entities.
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.
18
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, 2021 |
|
|
December 31, 2020 |
|
||
|
Notes receivable |
$ |
37,656 |
|
|
$ |
37,045 |
|
|
Deferred costs, deposits, and other |
|
22,899 |
|
|
|
17,557 |
|
|
Interest rate options |
|
27,434 |
|
|
|
13,315 |
|
|
Corporate fixed assets |
|
11,220 |
|
|
|
12,860 |
|
|
Unconsolidated real estate partnerships |
|
13,054 |
|
|
|
12,829 |
|
|
Investment in IQHQ |
|
12,500 |
|
|
|
12,500 |
|
|
Prepaid expenses and other |
|
18,618 |
|
|
|
10,493 |
|
|
Intangible lease assets, net |
|
4,820 |
|
|
|
7,264 |
|
|
Due from affiliates |
|
2,086 |
|
|
|
4,333 |
|
|
Accounts receivable, net of allowances of $1,473 and $1,467 as of June 30, 2021 and December 31, 2020, respectively |
|
1,872 |
|
|
|
2,660 |
|
|
Total other assets, net |
$ |
152,159 |
|
|
$ |
130,856 |
|
Note 3 —Significant Transactions
Transactions with AIR
In conjunction with the Separation, we entered into various separation and transition services agreements with AIR that provide for a framework of our relationship with AIR after the Separation, including: (i) a separation agreement setting forth the mechanics of the Separation, the key provisions relating to the separation of our assets and liabilities from those of AIR, and certain organizational matters and conditions; (ii) an employee matters agreement to allocate liabilities and responsibilities relating to employment matters, employee compensation, benefits plans and programs, and other related matters (the “Employee Matters Agreement”); (iii) agreements pursuant to which AIR will provide property management and related services to us (collectively, the “Property Management Agreements”); (iv) an agreement pursuant to which AIR will provide us with customary administrative and support services on an ongoing basis (the “Master Services Agreement”); and (v) a master leasing agreement where we may enter into leases with AIR with the option to redevelop, develop, or lease-up the subject leased properties, and under which we will have certain lease termination rights (the “Master Leasing Agreement”).
Master Services Agreement
We and AIR entered into a Master Services Agreement, in which AIR will provide us with customary administrative and support services. We are obligated to pay AIR the fully burdened costs in performing the services. We may terminate any or all services on 60 days’ prior written notice, and AIR may terminate individual services, at any time after December 31, 2023. During the three and six months ended June 30, 2021, we incurred administrative and support fees of $0.4 million and $0.8 million, respectively, which are included in general and administrative expenses in our condensed consolidated statements of operations. We did not incur any fees for the three and six months ended June 30, 2020.
Property Management Agreements
We entered into several Property Management Agreements with AIR, pursuant to which AIR will provide us with certain property management, property accounting and related services for the majority of our operating properties, and we will pay AIR a property management fee equal to 3% of each respective property’s revenue collected and such other fees as may be mutually agreed upon for various other services. The initial term of each Property Management Agreement is one-year, with automatic one-year renewal periods, unless either party elects to terminate upon delivery of 60 days’ prior written notice to the other party before the end of the term. Neither party is obligated to pay to the other party a termination fee or other penalty upon such termination.
19
During the three and six months ended June 30, 2021, we recorded property management and property accounting fees of $1.3 million and $2.6 million, respectively, which we included in property operating expenses in our condensed consolidated statements of operations. We did not incur any fees for the three and six months ended June 30, 2020.
Notes Payable to AIR
On December 14, 2020, we entered into $534.1 million of notes payable to AIR that are secured by a pledge of the equity interest in the entity that holds a portfolio of assets, however, the assets secure existing senior loans of $197.5 million as of June 30, 2021. The notes mature on January 31, 2024 and bear interest at 5.2%, with accrued interest payable quarterly on January 1, April 1, July 1 and October 1, commencing on April 1, 2021. For the three and six months ended June 30, 2021, we recognized interest expense of $6.9 million and $13.9 million, respectively associated with the notes payable to AIR. We made interest payments of $6.9 million in the quarter which are included in interest payments on notes payable to AIR in operating activities in the condensed consolidated statement of cash flows for the six months ended June 30, 2021
Master Leasing Agreement
The Master Leasing Agreement governs the current and any future leasing arrangements between us, as lessee, and AIR, as lessor. The initial term of the Master Leasing Agreement is 18 months (expiring on or about June 14, 2022), with automatic annual extensions (subject to each party’s right to terminate upon notice prior to the end of any such extension term). The Master Leasing Agreement provides that each time the parties thereto wish to execute a lease for a particular property, such parties will cause their applicable affiliates to execute a stand-alone lease. The initial annual rent for any leased property is based on the then-current fair market value of the subject property and market NOI cap rates, subject to certain adjustments, and is further subject to periodic escalation as set forth in the applicable lease, and the other terms thereof, including the initial term and extensions. We have the right to terminate any such lease prior to the end of its term once the leased property is stabilized. In connection with such an early termination, AIR will generally have an option (and not an obligation) to pay us an amount equal to the difference between the property’s fair value at stabilization and the initial value of the leasehold interest, at a five percent discount thereto; if AIR does not exercise such option, we will have the right to cause such property to be sold to a third party, with AIR guaranteed to receive an amount equal to the difference between the property’s fair market value at stabilization and the initial value of the leasehold interest and we will retain any excess proceeds. In the event of such sale of the property, we may also elect to purchase the property at a purchase price equal to the fair market value as agreed upon at the time of lease inception (and may subsequently sell the property to a third party, subject to AIR’s right of first refusal during the first year following our acquisition). If AIR elects not to pay the fee for the development or redevelopment-related improvements, and we decline to purchase the property or cause its sale to a third party, we may elect to rescind our termination of the applicable lease and instead continue such lease in effect in accordance with its terms.
We, as lessee, and AIR, as lessor, have entered into leases of five properties currently under construction or in lease-up. Four of the property leases commenced on January 1, 2021: (i) North Tower at Flamingo Point in Miami Beach, Florida, (ii) The Fremont Residences on the Anschutz Medical Campus in Aurora, Colorado, (iii) Prism in Cambridge, Massachusetts (“Prism”), and (iv) 707 Leahy Apartments in Redwood City, California. According to the terms of the respective lease agreements, we had the option to complete the on-going development and redevelopment of such properties and their lease-ups, which we elected on January 1, 2021. The term of each lease is 25 years except for Prism, which has a lease term of 10 years. During the three months ended June 30, 2021, we, as lessee, and AIR, as lessor, entered into a 25 year finance lease for a 15-acre plot of land in the San Francisco Bay Area on which we began construction of 16 single family rental homes and 8 accessory dwelling units in June 2021.
Initial monthly lease payments approximate $2.2 million with aggregate total lease payments of approximately $621.1 million.
The initial fair market values of the leased assets at the time of lease inception was determined to be $475.1 million in the aggregate. In connection with the commencement of the leases, we assumed $70.8 million of estimated obligations pursuant to certain construction contracts. As of June 30, 2021, the estimated obligations pursuant to the construction contracts associated with these leases was $65.7 million.
Due to and from AIR
20
As of June 30, 2021, we have amounts due to and from AIR of $16.9 million and $2.1 million, respectively. The amounts due to AIR primarily consist of invoices paid on our behalf and accrued interest on the notes payable to AIR. The amounts due from AIR primarily consist of net cash flows generated by our operating properties.
Terry Considine Service Agreement
In conjunction with the Separation, we entered into an arrangement with AIR with respect to the services of Terry Considine, an Aimco board member and our former Chief Executive Officer, for services to be rendered by Mr. Considine separate from his services as a board member, including, but not limited to (i) short and long term strategic direction and advice; (ii) transition and executive support to officers and; (iii) advice and consultation with respect to strategic growth and acquisition activities. We are obligated to reimburse AIR for all base salary, short-term incentive amounts and long-term incentive amounts payable by AIR to Mr. Considine for the calendar year 2021 under the terms of his employment agreement with AIR that are in excess of $1 million, collectively. For the three and six months ended June 30, 2021, we have recorded $1.45 million and $2.9 million, respectively, in associated service fees in general and administrative expenses in our condensed consolidated statements of operations. As of June 30, 2021, accrued service fees of $2.9 million are included in accrued liabilities and other in our condensed consolidated balance sheets.
Guarantee Liability
Legal liabilities that relate to occurrences prior to the Separation, including environmental liabilities related to properties that were no longer owned by Aimco or AIR at the time of the Separation, pursuant to the terms of the Separation Agreement, are borne by Aimco Operating Partnership up to the first $17.5 million of such liabilities, in the aggregate, and borne by AIR Operating Partnership for any such liabilities in excess of $17.5 million.
On the date of Separation, we recognized a guarantee liability of $16.4 million based on an estimate of the expected future cash flows required to settle the legal liabilities, including, but not limited to, remediation, settlement and legal costs, discounted by an estimated market discount rate of 4.25%. The guarantee liability is systematically reduced as costs related to the legal liabilities are incurred, which we estimate will occur through 2023. For the six months ended June 30, 2021, the guarantee liability was reduced by $2.5 million. As of June 30, 2021, the guarantee liability of $13.9 million is included in accrued liabilities and other in our condensed consolidated balance sheets.
Acquisition
In February 2021, we acquired The Benson Hotel and Faculty Club (“The Benson Hotel”) development property for $6.2 million, net of outstanding construction liabilities of $0.9 million. The development property consists of land and initial construction costs. The project is expected to be completed in the first quarter of 2023.
Other Significant Transactions
Construction Loans
On April 15, 2021, we entered into a $150 million variable-rate non-recourse construction loan collateralized by our leasehold interest and AIR’s fee ownership interest in Flamingo North Tower. The initial term of the loan is three years and bears interest at one month LIBOR plus 360 basis points subject to a minimum all-in per annum interest rate of 3.85%. As of June 30, 2021, we had $107.9 million of principal outstanding. Certain consolidated subsidiaries have indemnified AIR for any losses it incurs as a result of a default on the loan by Aimco. We recorded $3.8 million of deferred financing costs which will be amortized over the three year term of the loan.
On June 21, 2021, we entered into a $100.7 million variable-rate non-recourse construction loan collateralized by our fee ownership interest in Hamilton on the Bay. The initial term of the loan is three years and bears interest at one month LIBOR plus 320 basis points subject to a minimum all-in per annum interest rate of 3.45%. As of June 30, 2021, we had $12.2 million of principal outstanding. We recorded $2.3 million of deferred financing costs which will be amortized over the three year term of the loan.
If LIBOR ceases to exist during the term of these agreements, the documents associated with these agreements contain language to address a transition to another bench mark rate. It is anticipated LIBOR will be replaced with SOFR, however, if SOFR were to not be available the agreements contain alternate provisions.
Acquisitions
During the three months ended June 30, 2021, we acquired six land parcels adjacent to our Hamilton on the Bay apartment community, located in Miami’s Edgewater neighborhood, for $12.0 million and we began major redevelopment of the existing apartment building at Hamilton on the Bay. The scope of our investment will completely renew the waterfront high-rise which benefits from spacious apartment homes (averaging 1,411 square feet) and an abundance of outdoor and amenity space that was previously underutilized. Subsequent to June 30, 2021, we acquired an additional two parcels for $7 million.
21
In February 2021, we acquired The Benson Hotel and Faculty Club (“The Benson Hotel”) development property for $6.2 million, net of outstanding construction liabilities of $0.9 million. The development property consists of land and initial construction costs. The project is expected to be completed in the first quarter of 2023.
Note 4 — Commitments and Contingencies
Commitments
In connection with our development, redevelopment, and other capital additions activities, we have entered into various construction-related contracts and we have made commitments to complete development and redevelopment of certain real estate, pursuant to financing or other arrangements. As of June 30, 2021, our commitments related to these capital activities totaled approximately $335.2 million, most of which we expect to incur during the next 24 months.
We enter into certain commitments for future purchases of goods and services in connection with the operations of our apartment communities. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.
We have a commitment to fund an additional $37.5 million to IQHQ and currently expect to incur this investment over the next two years. We also have unfunded commitments related to three investments in privately held entities that develop technology related to the real estate industry (“RETV”). During the six months ended June 30, 2021, we contributed $0.1 million, leaving an additional funding commitment in the amount of $1.0 million, the timing of which is uncertain.
Legal Matters
From time to time, the Company may be a party to certain legal proceedings, incidental to the normal course of business. While the outcome of the legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon our financial condition or results of operations.
Note 5 — Earnings and Dividends per Share and Unit
Aimco and Aimco Operating Partnership calculate basic earnings per share of common stock and basic earnings per common unit based on the weighted-average number of shares of common stock and common partnership units outstanding. We calculate diluted earnings per share of common stock and diluted earnings per unit taking into consideration dilutive shares of common stock and common partnership unit equivalents and dilutive convertible securities outstanding during the period.
The shares of common stock and common partnership units outstanding at the Separation date are reflected as outstanding for all periods prior to the Separation for purposes of determining earnings per share and per unit. Each of our executives and AIR’s executives received one share of AIV stock and one share of AIR stock at Separation date for unvested shares. We include AIR’s executives’ rights to receive AIV shares upon vesting in our dilutive calculations.
Our common stock and common partnership unit equivalents include options to purchase shares of common stock, which, if exercised, would result in Aimco’s issuance of additional shares of common stock and Aimco Operating Partnership’s issuance to Aimco of additional common partnership units equal to the number of shares of common stock purchased under the options. These equivalents also include unvested TSR restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of common stock and common partnership units outstanding equal to the number of the shares that vest. Common partnership unit equivalents also include unvested long-term incentive partnership units. We include in the denominator securities with dilutive effect in calculating diluted earnings per share and per unit during these periods.
Our time-based restricted stock awards receive non-forfeitable dividends similar to shares of common stock and common partnership units prior to vesting, and our TSR LTIP I units and TSR LTIP II units receive non-forfeitable distributions based on specified percentages of the distributions paid to common partnership 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. No such items were included in the computation of diluted loss per share for the three months ended June 30, 2021 because the effect of inclusion would be anti-dilutive.
22
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, 2021 and 2020, are as follows (in thousands, except per share and per unit data):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Aimco common stockholders |
$ |
(19,690 |
) |
|
$ |
3,063 |
|
|
$ |
524 |
|
|
$ |
7,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator – shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common stock outstanding |
|
149,166 |
|
|
|
148,549 |
|
|
|
149,082 |
|
|
|
148,549 |
|
|
Diluted share equivalents outstanding |
|
— |
|
|
|
20 |
|
|
|
360 |
|
|
|
20 |
|
|
Diluted weighted-average common stock outstanding |
|
149,166 |
|
|
|
148,569 |
|
|
|
149,442 |
|
|
|
148,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic |
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
Earnings per share – diluted |
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Aimco Operating Partnership's common unitholders |
$ |
(20,727 |
) |
|
$ |
3,228 |
|
|
$ |
568 |
|
|
$ |
7,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator – units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common partnership units outstanding |
|
157,134 |
|
|
|
156,480 |
|
|
|
157,093 |
|
|
|
156,480 |
|
|
Diluted partnership unit equivalents outstanding |
|
— |
|
|
|
20 |
|
|
|
360 |
|
|
|
20 |
|
|
Diluted weighted-average common partnership units outstanding |
|
157,134 |
|
|
|
156,500 |
|
|
|
157,453 |
|
|
|
156,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per unit – basic |
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
Earnings per unit – diluted |
$ |
(0.13 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 6 — Fair Value Measurements
Recurring Fair Value Measurements
In 2020, we paid an upfront premium of $12.1 million for the option to enter into an interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against exposure to rising interest rates between now and October 2024. We receive a cash settlement in the future if the prevailing interest rate is higher than the 1.68% five year swap strike price. The amount of future cash settlement is capped if the prevailing interest rate exceeds 2.78%. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement.
During the six months ended June 30, 2021, we paid an upfront premium of $5.6 million (including transaction costs) for the option to enter into an interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against our refinancing interest rate risk relative to our notes payable to AIR and is intended to mitigate interest rate increases between now and January 2024. We receive a cash settlement in the future if the prevailing interest rate is higher than the 3% strike price on the five year swap rate. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement.
From time to time we purchase interest rate caps to provide protection against increases in interest rates on our floating rate debt. The fair value of these interest rate caps are included in the fair value table below.
We measure at fair value on a recurring basis our interest rate options, which are presented in other assets in our condensed consolidated balance sheets. 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 Unrealized gains 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, and the upfront premium is reflected in purchase of interest rate option in our condensed consolidated statements of cash flows.
23
We have investments of $3.3 million in RETV consisting of three privately held entities that develop technology related to the real estate industry. These investments are measured at net asset value (“NAV”) as a practical expedient.
The following table summarizes fair value for our interest rate options and our investment in RETV (in thousands):
|
|
|
As of June 30, 2021 |
|
|
As of December 31, 2020 |
|
||||||||||||||||||||||||||
|
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||||
|
Interest rate options |
|
$ |
27,434 |
|
|
$ |
— |
|
|
$ |
27,434 |
|
|
$ |
— |
|
|
$ |
13,315 |
|
|
$ |
— |
|
|
$ |
13,315 |
|
|
$ |
— |
|
|
Investment in RETV (1) |
|
|
3,264 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,293 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1) |
Investments measured at fair value using the NAV 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, 2021, and December 31, 2020, due to their relatively short-term nature and high probability of realization. We estimate the fair value of our non-recourse property debt, construction loans, and notes payable to AIR 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 debt within Level 2 of the GAAP fair value hierarchy based on the significance of certain of the unobservable inputs used to estimate its fair value.
The carrying amount of the notes payable to AIR approximated their fair value at both June 30, 2021 and December 31, 2020.
The following table summarizes carrying value and fair value for our non-recourse property debt and construction loans debt (in thousands):
|
|
As of June 30, 2021 |
|
|
As of December 31, 2020 |
|
||||||||||
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
|
Non-recourse property debt |
$ |
430,951 |
|
|
$ |
458,733 |
|
|
$ |
449,510 |
|
|
$ |
467,010 |
|
|
Construction loans debt |
|
120,123 |
|
|
|
120,123 |
|
|
|
— |
|
|
|
— |
|
Note 7 — Variable Interest Entities
Consolidated Entities
Aimco consolidates Aimco Operating Partnership, a VIE of which Aimco is the primary beneficiary. Aimco, through Aimco Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Substantially all of the assets and liabilities of Aimco are that of Aimco Operating Partnership.
24
The VIEs that Aimco Operating Partnership consolidates own interests in real estate. We are the primary beneficiary of the VIEs because we have the power to direct the activities that most significantly impact the entities’ economic performance and have a substantial economic interest. We have six unconsolidated VIEs for which we are not the primary beneficiary because we are not the decision maker.
The details of our consolidated and unconsolidated VIEs, excluding those of Aimco Operating Partnership, are summarized in the table below as of June 30, 2021 and December 31, 2020 (in thousands, except for VIE count):
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||||||||||
|
|
Consolidated |
|
|
Unconsolidated |
|
|
Consolidated |
|
|
Unconsolidated |
|
||||
|
Count of VIEs |
7 |
|
|
6 |
|
|
2 |
|
|
6 |
|
||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net |
$ |
482,501 |
|
|
$ |
— |
|
|
$ |
310,552 |
|
|
$ |
— |
|
|
Mezzanine investment |
|
— |
|
|
|
322,380 |
|
|
|
— |
|
|
|
307,362 |
|
|
Right-of-use lease assets |
|
438,198 |
|
|
|
— |
|
|
|
92,709 |
|
|
|
— |
|
|
Other assets, net |
|
19,853 |
|
|
|
25,670 |
|
|
|
16,949 |
|
|
|
25,329 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
128,279 |
|
|
|
— |
|
|
|
133,842 |
|
|
|
— |
|
|
Accrued liabilities and other |
|
29,147 |
|
|
|
— |
|
|
|
7,106 |
|
|
|
— |
|
|
Lease liabilities |
|
437,382 |
|
|
|
— |
|
|
|
86,781 |
|
|
|
— |
|
For the three months ended June 30, 2021, two of our consolidated VIEs closed construction loans. In conjunction with these loans, we made customary guarantees. In certain situations, the lenders may have recourse to our general credit. At June 30, 2021, we estimate the maximum exposure equals the $120 million outstanding loan balances. Other consolidated VIE’s creditors do not have recourse to our general credit.
Unconsolidated Real Estate Partnerships
We own an interest in four apartment communities in San Diego, California, of which we are not the primary beneficiary. Our investment balance of $13.1 million and $12.8 million as of June 30, 2021 and December 31, 2020, respectively, represents our maximum exposure to loss in these VIEs. One of our other unconsolidated VIE is insignificant to our condensed consolidated balance sheets for both periods presented.
Under the terms of the Separation Agreement, AIR has legally assigned all risks and rewards of ownership in its interest in a partnership that owns Parkmerced Apartments, of which it is not the primary beneficiary. Our investment balance of $322.4 million as of June 30, 2021, reflected in Mezzanine investment in our condensed consolidated balance sheets, represents our indirect interest in Parkmerced Apartments notes receivable and related accrued interest through our agreement with AIR and represents our maximum exposure to loss in this VIE.
Note 8 — Business Segments
We have three segments: (i) Development and Redevelopment, (ii) Operating Portfolio, 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 our Hamilton on the Bay community. Our Operating Portfolio segment includes 24 majority owned residential communities that have achieved stabilized level of operations as of January 1, 2020 and maintained it throughout the current year and comparable period. We aggregate all our apartment communities that have reached stabilization into our Operating Portfolio. Our Other segment consists of properties that are not included in our Developments and Redevelopment or Operating segment. We realigned our segments during the fourth quarter 2020 and have restated historical periods to conform with current segment presentation.
Our chief operating decision maker (“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 Portfolio. Proportionate property net operating income is defined as our share of rental and other property revenues, excluding reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues, in accordance with GAAP.
As of June 30, 2021, our Development and Redevelopment segment includes four real estate investments: Upton Place, Hamilton on the Bay, The Benson Hotel, and our land parcels adjacent to our Hamilton on the Bay community. The Development and Redevelopment segment also includes our five leased properties of which, two are under construction and three are in lease-up but have not achieved stabilization. Our Operating Portfolio segment includes 24 consolidated apartment communities with 6,067 apartment homes. Our Other segment includes 1001 Brickell Bay Drive, our only office building.
25
The following tables present the revenues, proportionate property net operating income, and income before income tax benefit of our segments on a proportionate basis, excluding amounts related to our proportionate share of four apartment communities with apartment homes that we neither manage nor consolidate, for the three and six months ended June 30, 2021 and 2020 (in thousands):
|
|
Development and Redevelopment |
|
|
Operating Portfolio |
|
|
Other |
|
|
Proportionate and Other Adjustments (1) |
|
|
Corporate and Amounts Not Allocated to Segments |
|
|
Consolidated |
|
||||||
|
Three months ended June 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues |
$ |
2,489 |
|
|
$ |
33,329 |
|
|
$ |
2,981 |
|
|
$ |
1,619 |
|
|
$ |
— |
|
|
$ |
40,418 |
|
|
Property operating expenses |
|
2,102 |
|
|
|
10,959 |
|
|
|
1,036 |
|
|
|
1,501 |
|
|
|
805 |
|
|
|
16,403 |
|
|
Other operating expenses not allocated to segments (2) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28,022 |
|
|
|
28,022 |
|
|
Total operating expenses |
|
2,102 |
|
|
|
10,959 |
|
|
|
1,036 |
|
|
|
1,501 |
|
|
|
28,827 |
|
|
|
44,425 |
|
|
Proportionate property net operating income (loss) |
|
387 |
|
|
|
22,370 |
|
|
|
1,945 |
|
|
|
118 |
|
|
|
(28,827 |
) |
|
|
(4,007 |
) |
|
Other items included in income before income tax benefit (3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,139 |
) |
|
|
(19,139 |
) |
|
Income (loss) before income tax benefit |
$ |
387 |
|
|
$ |
22,370 |
|
|
$ |
1,945 |
|
|
$ |
118 |
|
|
$ |
(47,966 |
) |
|
$ |
(23,146 |
) |
|
|
Development and Redevelopment |
|
|
Operating Portfolio |
|
|
Other |
|
|
Proportionate and Other Adjustments (1) |
|
|
Corporate and Amounts Not Allocated to Segments |
|
|
Consolidated |
|
||||||
|
Three months ended June 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues |
$ |
— |
|
|
$ |
32,599 |
|
|
$ |
3,074 |
|
|
$ |
1,492 |
|
|
$ |
— |
|
|
$ |
37,165 |
|
|
Property operating expenses |
|
— |
|
|
|
10,396 |
|
|
|
955 |
|
|
|
1,373 |
|
|
|
2,598 |
|
|
|
15,322 |
|
|
Other operating expenses not allocated to segments (2) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20,655 |
|
|
|
20,655 |
|
|
Total operating expenses |
|
— |
|
|
|
10,396 |
|
|
|
955 |
|
|
|
1,373 |
|
|
|
23,253 |
|
|
|
35,977 |
|
|
Proportionate property net operating income (loss) |
|
— |
|
|
|
22,203 |
|
|
|
2,119 |
|
|
|
119 |
|
|
|
(23,253 |
) |
|
|
1,188 |
|
|
Other items included in income before income tax benefit (3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(107 |
) |
|
|
(107 |
) |
|
Income (loss) before income tax benefit |
$ |
— |
|
|
$ |
22,203 |
|
|
$ |
2,119 |
|
|
$ |
119 |
|
|
$ |
(23,360 |
) |
|
$ |
1,081 |
|
|
|
Development and Redevelopment |
|
|
Operating Portfolio |
|
|
Other |
|
|
Proportionate and Other Adjustments (1) |
|
|
Corporate and Amounts Not Allocated to Segments |
|
|
Consolidated |
|
||||||
|
Six months ended June 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues |
$ |
4,746 |
|
|
$ |
66,018 |
|
|
$ |
6,008 |
|
|
$ |
3,450 |
|
|
$ |
— |
|
|
$ |
80,222 |
|
|
Property operating expenses |
|
3,969 |
|
|
|
22,129 |
|
|
|
2,021 |
|
|
|
3,208 |
|
|
|
2,018 |
|
|
|
33,345 |
|
|
Other operating expenses not allocated to segments (2) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55,050 |
|
|
|
55,050 |
|
|
Total operating expenses |
|
3,969 |
|
|
|
22,129 |
|
|
|
2,021 |
|
|
|
3,208 |
|
|
|
57,068 |
|
|
|
88,395 |
|
|
Proportionate property net operating income (loss) |
|
777 |
|
|
|
43,889 |
|
|
|
3,987 |
|
|
|
242 |
|
|
|
(57,068 |
) |
|
|
(8,173 |
) |
|
Other items included in income before income tax benefit (3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,361 |
|
|
|
1,361 |
|
|
Income (loss) before income tax benefit |
$ |
777 |
|
|
$ |
43,889 |
|
|
$ |
3,987 |
|
|
$ |
242 |
|
|
$ |
(55,707 |
) |
|
$ |
(6,812 |
) |
26
|
|
Development and Redevelopment |
|
|
Operating Portfolio |
|
|
Other |
|
|
Proportionate and Other Adjustments (1) |
|
|
Corporate and Amounts Not Allocated to Segments |
|
|
Consolidated |
|
||||||
|
Six months ended June 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues |
$ |
— |
|
|
$ |
65,960 |
|
|
$ |
6,351 |
|
|
$ |
3,163 |
|
|
$ |
— |
|
|
$ |
75,474 |
|
|
Property operating expenses |
|
— |
|
|
|
20,906 |
|
|
|
1,945 |
|
|
|
2,920 |
|
|
|
4,900 |
|
|
|
30,671 |
|
|
Other operating expenses not allocated to segments (2) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41,764 |
|
|
|
41,764 |
|
|
Total operating expenses |
|
— |
|
|
|
20,906 |
|
|
|
1,945 |
|
|
|
2,920 |
|
|
|
46,664 |
|
|
|
72,435 |
|
|
Proportionate property net operating income (loss) |
|
— |
|
|
|
45,054 |
|
|
|
4,406 |
|
|
|
243 |
|
|
|
(46,664 |
) |
|
|
3,039 |
|
|
Other items included in income before income tax benefit (3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
574 |
|
|
|
574 |
|
|
Income (loss) before income tax benefit |
$ |
— |
|
|
$ |
45,054 |
|
|
$ |
4,406 |
|
|
$ |
243 |
|
|
$ |
(46,090 |
) |
|
$ |
3,613 |
|
|
|
(1) |
Represents adjustments for the redeemable noncontrolling interest in consolidated real estate partnership’s 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 from revenues to property operating expenses for the purpose of evaluating segment results. Utility reimbursements are included in rental and other property revenues in our condensed consolidated statements of operations prepared in accordance with GAAP. |
|
|
(2) |
Other operating expenses not allocated to segments consists of depreciation and amortization, general and administrative expense, and other operating expenses which are not included in our measure of segment performance. |
|
|
(3) |
Other items included in income before income tax benefit consists primarily of interest expense, unrealized gain on our interest rate options and mezzanine investment income, net. |
Net real estate and non-recourse property debt, net, of our segments were as follows (in thousands):
|
|
Development and Redevelopment |
|
|
Operating Portfolio |
|
|
Other |
|
|
Total |
|
||||
|
As of June 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings and improvements |
$ |
169,474 |
|
|
$ |
777,568 |
|
|
$ |
160,887 |
|
|
$ |
1,107,929 |
|
|
Land |
|
70,476 |
|
|
|
298,459 |
|
|
|
150,019 |
|
|
|
518,954 |
|
|
Total real estate |
|
239,950 |
|
|
|
1,076,027 |
|
|
|
310,906 |
|
|
|
1,626,883 |
|
|
Accumulated depreciation |
|
(1,210 |
) |
|
|
(493,784 |
) |
|
|
(32,982 |
) |
|
|
(527,976 |
) |
|
Net real estate |
$ |
238,740 |
|
|
$ |
582,243 |
|
|
$ |
277,924 |
|
|
$ |
1,098,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse property debt, net |
$ |
114,309 |
|
|
$ |
427,881 |
|
|
$ |
— |
|
|
$ |
542,190 |
|
|
|
Development and Redevelopment |
|
|
Operating Portfolio |
|
|
Other |
|
|
Total |
|
||||
|
As of December 31, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings and improvements |
$ |
61,813 |
|
|
$ |
772,786 |
|
|
$ |
160,517 |
|
|
$ |
995,116 |
|
|
Land |
|
56,676 |
|
|
|
298,459 |
|
|
|
150,018 |
|
|
|
505,153 |
|
|
Total real estate |
|
118,489 |
|
|
|
1,071,245 |
|
|
|
310,535 |
|
|
|
1,500,269 |
|
|
Accumulated depreciation |
|
(447 |
) |
|
|
(469,873 |
) |
|
|
(24,690 |
) |
|
|
(495,010 |
) |
|
Net real estate |
$ |
118,042 |
|
|
$ |
601,372 |
|
|
$ |
285,845 |
|
|
$ |
1,005,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse property debt, net |
$ |
— |
|
|
$ |
447,967 |
|
|
$ |
— |
|
|
$ |
447,967 |
|
27
In addition to the amounts disclosed in the tables above, the Development and Redevelopment segment right-of-use lease assets and lease liabilities as of June 30, 2021 aggregated to $438.2 million and $437.4 million, respectively, related to our investments in Upton Place, North Tower of Flamingo Point, 707 Leahy, The Fremont, Prism, and Robin Drive Land. As of December 31, 2020, the Development and Redevelopment segment right-of-use lease assets and lease liabilities totaled $92.7 million and $86.8 million, respectively, related to our investment in Upton Place.
Note 9 – Subsequent Events
Fort Lauderdale Florida Joint Venture
In July 2021, we entered into a joint venture to purchase three underdeveloped land parcels located in downtown Fort Lauderdale, FL. The total contract price for the land is $49.0 million (of which $25.0 million is our 51% share) and entitlements are in place for the development of approximately three million square feet of multifamily homes and commercial space. The land purchase is expected to close in January 2022. We have paid $2.4 million of the $25.0 million commitment.
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF 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: 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; 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. Risks and uncertainties that could cause actual results to differ materially from our expectations include, but are 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, 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; 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 filings by Aimco or the Separate Entities 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, 2020, 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, or GAAP. These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading.
29
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.
Our value proposition includes the benefits of an established multifamily investment platform coupled with significant growth potential resulting from the redeployment of Aimco equity in to a deep and growing pipeline of highly accretive investment opportunities.
|
|
• |
Platform: We have successfully developed or redeveloped multifamily assets worth in excess of $4.5 billion and have overseen real estate transactions totaling more than $7 billion over the past decade. |
|
|
• |
Growth: We offer investors a high performing, high return, vehicle with expected annualized returns on equity between 12-16% once target capital allocation is achieved. |
|
|
• |
Pipeline: Aimco benefits from a deep and growing investment pipeline with $1.0 billion of development and redevelopment projects currently underway, over nine million square feet of future opportunities under Aimco-control and more being explored. |
Our financial objectives are to 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 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 do not plan to pay a regular cash dividend.
Our capital allocation strategy has been designed to leverage the Aimco investment platform and optimize risk adjusted returns for Aimco shareholders.
Overall, we target a growth-oriented capital allocation, primarily weighted toward direct investment in ‘Value Add’ and ‘Opportunistic’ multifamily real estate.
We have policies in place that support its strategy and guide its investment allocations, including to hold at all times a sizeable portion of its net equity in a diversified portfolio of ‘Core’ and ‘Core-Plus’ assets.
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). Aimco also plans to utilize its established platform and existing relationships to generate fees through service offerings.
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:
|
|
• |
Managing and investing in the development and redevelopment of real property |
Our dedicated team will source and execute development and redevelopment projects 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 US markets. We are actively advancing planning efforts on pipeline projects under our control with the potential for an additional five million square feet of development and redevelopment. Our portfolio contains additional assets that have the capacity for an approximately four million square feet of development over time. In addition, we have the opportunity to add to our investment pipeline based on strategic relationships and through sourcing by regional investment teams. Generally, we seek Development and Redevelopment 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 current portfolio includes 28 apartment communities (24 consolidated properties and 4 unconsolidated properties) located in ten major US 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 fundamental and state and regional governance. Core Plus opportunities offer
30
the opportunity for incremental capital investment while maintaining stabilized cashflow to accelerate income growth and improve asset values.
|
|
• |
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; our passive equity investments in IQHQ, Inc. (“IQHQ”), a privately-held life sciences real estate development company; and RET Ventures, an early-stage real estate technology fund. 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.
|
|
• |
Maintaining sufficient liquidity and utilizing financial leverage |
At all times, we will guard our liquidity by maintaining sufficient cash and equivalents at no less than 5% of total equity.
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 maturing Aimco liabilities.
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.
|
|
• |
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.
Results for the Three Months and Six Months Ended June 30, 2021
The results from the execution of our business plan during the three and six months ended June 30, 2021, are further described below.
Financial Results and Recent Highlights
|
|
• |
Net income (loss) attributable to Aimco common stockholders per share was $(0.13) for the three months ended June 30, 2021, compared to net income per share of $0.02 for the three months ended June 30, 2020, and $0.00 per share for the six months ended June 30, 2021, compared to net income per share of $0.05 for the six months ended June 30, 2020. |
|
|
• |
We invested $49 million in development and redevelopment in the three months ended June 30, 2021 and leased more than 200 homes at properties currently in lease-up. |
|
|
• |
We closed $251 million of construction financing and ended the second quarter with $445 million of liquidity including cash and capacity on our revolving credit facility. |
|
|
• |
In July, we entered into agreements totaling $53 million to acquire property for redevelopment and development in, Colorado Springs, Colorado, and Fort Lauderdale, Florida. |
|
|
• |
In June, we acquired, for $12 million, property adjacent to our Hamilton on the Bay asset located in Miami, FL and in July acquired, for $7 million, additional adjacent properties. The acquired properties provide additional development opportunity. |
|
|
• |
Revenue from Aimco Operating Properties was up 2.2% year-over-year, with occupancy up 140 basis points and average revenue per apartment home up 0.8%. |
|
|
• |
Net Operating Income from Aimco Operating Properties was up 4.0% from the first quarter of 2021 and up 0.7% year-over-year. |
31
Our business is organized around five areas of strategic focus: development and redevelopment; asset management; investment activity; balance sheet; and team and culture.
Development and Redevelopment
Construction Activity
During the three and six months ended June 30, 2021, we invested approximately $49 million and $94 million, respectively, at our development and redevelopment projects.
|
|
• |
At the North Tower of Flamingo Point in Miami Beach, Florida, the major redevelopment continues on plan with approximately $27 million remaining to invest. Apartment homes are planned for initial delivery in the third quarter with construction completion scheduled for 2022 and stabilization targeted for 2024. As of June 30, 2021, approximately one-fourth of the units were leased at rates ahead of initial targets. |
|
|
• |
Upton Place in Upper-Northwest Washington, D.C., is progressing on schedule and on-budget, with approximately $213 million remaining to complete construction. The project is scheduled for completion in 2024 and stabilization is targeted for 2026. |
|
|
• |
At The Benson Hotel and Faculty Club on the Anschutz Medical Campus in Aurora, Colorado, the project is on-budget and on schedule with a remaining investment of approximately $53 million. The project is scheduled for completion in early 2023 and stabilization in late 2026. |
|
|
• |
In Corte Madera, CA, we began development activity on 16 luxury single family rental homes, each averaging approximately 3,200 square feet, plus eight accessory dwelling units. The land for this development is being leased from AIR Communities and is located adjacent to AIR’s Preserve at Marin apartment community. We expect the total development cost to be $47 million with deliveries beginning in 2023 and stabilization occurring in 2025. |
|
|
• |
In the Edgewater neighborhood of Miami, FL, we began the major redevelopment of the existing apartment building at Hamilton on the Bay. The scope of our investment is intended to completely renew the waterfront high-rise which benefits from spacious apartment homes (averaging 1,411 sf) and an abundance of outdoor and amenity space that was previously underutilized. We expect the redevelopment investment at Hamilton on the Bay will be $92 million with apartment homes coming back online in 2022 and stabilization targeted for 2024. |
Lease-up Progress
During the three and six months ended June 30, 2021, we held three properties where newly constructed or renovated homes had been delivered but stabilization had not yet been reached.
|
|
• |
At 707 Leahy, in Redwood City, California, all apartment homes had been delivered and construction was complete as of 4Q 2020. As of June 30, 2021, the 110-unit property was 91% leased. |
|
|
• |
At The Fremont on the Anschutz Medical Campus in Aurora, Colorado, all apartment homes had been delivered and construction was complete as of 4Q 2020. As of June 30, 2021, the 253-unit property was 69% leased. |
|
|
• |
At Prism, located in Cambridge, Massachusetts, all apartment homes had been delivered and construction was complete as of 1Q 2021. As of June 30, 2021, the 136-unit property was 73% leased. |
Asset Management
Operating Properties
We own a geographically diversified portfolio of operating properties that produces stable cash flow and serves to balance the risk and highly variable cash flows associated with its portfolio of development and redevelopments and value-add investments. Our operating portfolio produced solid results for the three and six months ended June 30, 2021.
Highlights for the three months ended June 30, 2021 include:
|
|
• |
Average daily occupancy at our operating portfolio of 97.3% for the three months ended June 30, 2021, a 140-basis point improvement from the three months ended June 30, 2020. |
|
|
• |
Average revenue per occupied unit at our operating portfolio of $1,894 for the three months ended June 30, 2021, up 0.8% year over year. |
|
|
• |
Revenue, before utility reimbursements, of $33.3 million for the three months ended June 30, 2021, up 2.2% year over year. |
|
|
• |
Expenses, net of utility reimbursements were $11.0 million for the three months ended June 30, 2021, up 5.4% year over year, due primarily to higher real estate taxes and insurance. |
32
|
|
• |
Net operating income of our operating portfolio for the three months ended June 30, 2021 increased by 0.8% year over year. |
We measure residential rent collection as the amount of payments received as a percentage of all residential amounts owed. During the three months ended June 30, 2021, we collected 98.3% of all amounts owed by Aimco residents and recognized 98.8% of revenue, reserving 120 basis points as bad debt.
1001 Brickell Bay Drive, a waterfront office building in Miami, FL owned as part of a larger assemblage, is currently 73.3% occupied with the pace of tours and inquiries showing favorable indications of future leasing. Through July 2021, 99.8% of second quarter rents due have been collected.
Other Investments
Parkmerced Mezzanine Investment: On November 26, 2019, Aimco made a five-year, $275.0 million mezzanine loan to a partnership owning 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. The Separation Agreement provides for AIR to transfer ownership of the subsidiaries that originated and hold the mezzanine loan, 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 through 2024 to Aimco. At the time of the Separation and as of the date of this report, legal title of these subsidiaries had not yet transferred to Aimco. Until legal title of the subsidiaries is transferred, AIR is obligated to pass payments on such loan 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.
The loan is subject to certain risks, including, but not limited to, those resulting from the severe downturn in San Francisco rents, the ongoing disruption due to the COVID-19 pandemic and associated governmental response, and the current economic situation which may result in all or a portion of the loan not being repaid. In the event we determine that a portion of the Mezzanine Investment is not recoverable, we will recognize an impairment, if appropriate.
Life Science Developer Investment: In the third quarter of 2020, Aimco made a $50 million commitment to IQHQ, a privately-held life sciences real estate development company. In addition, Aimco gained the right to collaborate with IQHQ on any multifamily component at its future development sites.
Investment Activity
Leasehold Agreements: On January 1, 2021, terms commenced on the leasehold agreements with AIR for 707 Leahy, The Fremont, Prism, and Flamingo Point North Tower. On June 1, 2021, terms commenced on the leasehold agreement with AIR for Robin Drive Land, a 15-acre plot of land in the San Francisco Bay Area on which we began construction of 16 single family rental homes and 8 accessory dwelling units in June 2021. The combined initial value of leasehold interest, as indicative of the initial fair market values of the leased assets at the time of lease inception, was $475.1 million. The combined annual leasehold payment for these five assets is $26.0 million. We expect the total development and redevelopment expenditures related to these assets to be approximately $117.9 million with $42.0 million having been invested as of June 30, 2021. The lease agreements provide Aimco the right to terminate each lease once the leased property is stabilized with AIR then having the option to retain ownership of the land and purchase the improvements from Aimco. Should AIR exercise its option, Aimco would be due the difference between the property’s fair-market value at stabilization and the initial value of the leasehold interest, less a 5% discount.
Acquisitions: During the three months ended June 30, 2021 we acquired six properties adjacent to our Hamilton on the Bay apartment community in Miami’s Edgewater neighborhood, for $12 million. Subsequent to quarter end, we acquired for $7 million an additional two parcels adjacent to our Hamilton on the Bay apartment community. In total this land assemblage allows for, as-of-right, the construction of more than 700,000 square feet. As part of our initial acquisition of Hamilton on the Bay, we acquired waterfront land that allows for the future development of more than 400,000 square feet. Combined, we can now construct more than 1.1 million square feet of new development in this rapidly growing submarket. During the six months ended June 30, 2021, we also acquired The Benson Hotel and Faculty Club (“Benson Hotel”) development property for $6.2 million, net of outstanding construction liabilities of $0.9 million. The development property consists of land and initial construction costs. The project is expected to be completed in the first quarter of 2023.
Balance Sheet
33
Aimco capitalizes its 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 its cost of capital, further leverage Aimco equity, reduce exposure to a single investment and, in certain cases, for strategic benefits.
We are highly focused on maintaining ample liquidity. As of June 30, 2021, we had access to $445 million, including $286 million of cash on hand, $9 million of restricted cash, and the capacity to borrow up to $150 million on our revolving credit facility. Please refer to the Liquidity and Capital Resources section for additional information regarding our leverage.
In evaluating our financial condition and operating performance we use non-GAAP measures, including Adjusted EBITDAre, which we believe is useful to investors and creditors as a supplemental measure of our ability to incur and service debt. Our Adjusted EBITDAre for the three and six months ended June 30, 2021 was $19.5 million and $36.2 million, respectively. Please refer to the Non-GAAP Measures section for further information about the calculation of Adjusted EBITDAre and our leverage ratios. Please refer to the Liquidity and Capital Resources section for additional information regarding our leverage.
Financing Activity
On April 15, 2021, the Company entered into a $150 million variable-rate non-recourse construction loan collateralized by our leasehold interest and AIR’s fee ownership interest in Flamingo North Tower. The initial term of the loan is three years and bears interest at one month LIBOR plus 360 basis points subject to a minimum all-in per annum interest rate of 3.85%. Certain consolidated subsidiaries have indemnified AIR for any losses it incurs as a result of a default on the loan by Aimco.
On June 21, 2021, we entered into a $100.7 million variable-rate non-recourse construction loan collateralized by our fee ownership interest in Hamilton on the Bay. The initial term of the loan is three years and bears interest at one month LIBOR plus 320 basis points subject to a minimum all-in per annum interest rate of 3.45%.
If LIBOR ceases to exist during the term of these agreements, the documents associated with these agreements contain language to address a transition to another bench mark rate. It is anticipated LIBOR will be replaced with SOFR, however, if SOFR were to not be available the agreements contain alternate provisions.
Financial Results of Operations
We have three segments: (i) Development and Redevelopment, (ii) Operating Portfolio, and (iii) Other. Our Development and Redevelopment segment includes properties that are under construction, in pre-construction, or have not achieved stabilization. The Development and Redevelopment segment also includes our five leased properties; two are under construction and three are operational but have not achieved stabilization. Our Operating Portfolio segment includes majority owned residential communities that have achieved stabilized levels of operations as of January 1, 2020 and maintained it throughout the current year and comparable period. Our Other segment consists of 1001 Brickell Bay Drive, our only commercial real estate property.
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.
Net income decreased by $23.5 million and $6.6 million during the three and six months ended June 30, 2021, respectively, compared to the same periods in 2020, as described more fully below.
Detailed Results of Operations for the three and six months ended June 30, 2021, compared to the three and six months ended June 30, 2020.
Property Results
As of June 30, 2021, our Development and Redevelopment segment included five properties that were under construction and three properties in lease-up, our Operating Portfolio segment included 24 communities with 6,067 apartment homes, and our Other segment includes 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, excluding utility reimbursements,
34
less direct property operating expenses, net of utility reimbursements, for consolidated communities. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues, in accordance with GAAP. Accordingly, the results of operations of our segments discussed below are presented on a proportionate basis and exclude 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.
We do not include property management costs and casualty gains or losses, reported in consolidated amounts, in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below.
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.
Proportionate Property Net Operating Income
The results of our segments for the three months ended June 30, 2021 and 2020, as presented below, are based on segment classifications as of June 30, 2021.
|
|
Three Months Ended June 30, |
|
|
Historical Change |
|
||||||||||
|
(in thousands) |
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
Rental and other property revenues, before utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development and Redevelopment |
$ |
2,489 |
|
|
$ |
— |
|
|
$ |
2,489 |
|
|
|
100 |
% |
|
Operating Portfolio |
|
33,329 |
|
|
|
32,599 |
|
|
|
730 |
|
|
|
2.2 |
% |
|
Other |
|
2,981 |
|
|
|
3,074 |
|
|
|
(93 |
) |
|
|
(3.0 |
%) |
|
Total |
|
38,799 |
|
|
|
35,673 |
|
|
|
3,126 |
|
|
|
8.8 |
% |
|
Property operating expenses, net of utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development and Redevelopment |
|
2,102 |
|
|
|
— |
|
|
|
2,102 |
|
|
|
100 |
% |
|
Operating Portfolio |
|
10,959 |
|
|
|
10,396 |
|
|
|
563 |
|
|
|
5.4 |
% |
|
Other |
|
1,036 |
|
|
|
955 |
|
|
|
81 |
|
|
|
8.5 |
% |
|
Total |
|
14,097 |
|
|
|
11,351 |
|
|
|
2,746 |
|
|
|
24.2 |
% |
|
Proportionate property net operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development and Redevelopment |
|
387 |
|
|
|
— |
|
|
|
387 |
|
|
|
100 |
% |
|
Operating Portfolio |
|
22,370 |
|
|
|
22,203 |
|
|
|
167 |
|
|
|
0.8 |
% |
|
Other |
|
1,945 |
|
|
|
2,119 |
|
|
|
(174 |
) |
|
|
(8.2 |
%) |
|
Total |
$ |
24,702 |
|
|
$ |
24,322 |
|
|
$ |
380 |
|
|
|
1.6 |
% |
For the three months ended June 30, 2021, compared to 2020, our Operating Portfolio proportionate property net operating income increased by $0.2 million, or 0.8%. The increase was attributable to a $0.7 million, or 2.2% increase in rental and other property revenues due to higher average revenues of $15 per apartment home, a 140-basis point increase in occupancy, offset partially by a $0.6 million, or 5.4%, increase in property operating expenses due primarily to higher real estate taxes and insurance.
For the three months ended June 30, 2021, compared to 2020, total proportionate property net operating income increased by $0.4 million, or 1.6%.
The results of our segments for the six months ended June 30, 2021 and 2020, as presented below, are based on segment classifications as of June 30, 2021.
|
|
Six Months Ended June 30, |
|
|
Historical Change |
|
||||||||||
|
(in thousands) |
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
Rental and other property revenues, before utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development and Redevelopment |
$ |
4,746 |
|
|
$ |
— |
|
|
$ |
4,746 |
|
|
|
100.0 |
% |
|
Operating Portfolio |
|
66,018 |
|
|
|
65,960 |
|
|
|
58 |
|
|
|
0.1 |
% |
|
Other |
|
6,008 |
|
|
|
6,351 |
|
|
|
(343 |
) |
|
|
(5.4 |
%) |
|
Total |
|
76,772 |
|
|
|
72,311 |
|
|
|
4,461 |
|
|
|
6.2 |
% |
|
Property operating expenses, net of utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development and Redevelopment |
|
3,969 |
|
|
|
— |
|
|
|
3,969 |
|
|
|
100.0 |
% |
|
Operating Portfolio |
|
22,129 |
|
|
|
20,906 |
|
|
|
1,223 |
|
|
|
5.8 |
% |
|
Other |
|
2,021 |
|
|
|
1,945 |
|
|
|
76 |
|
|
|
3.9 |
% |
|
Total |
|
28,119 |
|
|
|
22,851 |
|
|
|
5,268 |
|
|
|
23.1 |
% |
|
Proportionate property net operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development and Redevelopment |
|
777 |
|
|
|
— |
|
|
|
777 |
|
|
|
100.0 |
% |
|
Operating Portfolio |
|
43,889 |
|
|
|
45,054 |
|
|
|
(1,165 |
) |
|
|
(2.6 |
%) |
|
Other |
|
3,987 |
|
|
|
4,406 |
|
|
|
(419 |
) |
|
|
(9.5 |
%) |
|
Total |
$ |
48,653 |
|
|
$ |
49,460 |
|
|
$ |
(807 |
) |
|
|
(1.6 |
%) |
35
For the six months ended June 30, 2021, compared to 2020, our Operating Portfolio proportionate property net operating income decreased by $1.2 million, or 2.6%. This decrease was attributable to a $0.1 million, or 0.1%, increase in rental and other property revenues offset by a $1.2 million, or 5.8%, increase in property operating expenses due primarily to higher real estate taxes and insurance.
For the six months ended June 30, 2021, compared to 2020, total proportionate property net operating income decreased by $0.8 million, or 1.6%.
Non-Segment Real Estate Operations
Operating income amounts not attributed to our segments include offsite costs associated with property management, casualty losses, write-off of straight-line rent receivables, and 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, 2021 depreciation and amortization expense was higher by $1.6 million and $3.0 million, respectively, when compared to the same periods in 2020, primarily due to additional assets being placed into service.
General and Administrative Expenses
For the three and six months ended June 30, 2021, compared to the same periods in 2020, general and administrative expenses increased by $5.8 million and $10.3 million, respectively, due primarily to the difference of allocating costs in 2020 and the actual costs experienced running the separate business in 2021.
Interest Expense
For the three and six months ended June 30, 2021, compared to the same periods in 2020, interest expense increased by $6.8 million, or 117.6%, and $13.9 million, or 120.9%, respectively, due primarily to interest associated with the notes payable to AIR entered into in conjunction with the Separation.
Mezzanine Investment Income, Net
On November 26, 2019, we made a five-year, $275.0 million mezzanine loan to a partnership owning Parkmerced Apartments, located in southwest San Francisco. The loan is junior to a $1.5 billion first mortgage position and bears interest at a 10% annual rate, accruing if not paid from property operations. As of June 30, 2021, the total receivable including accrued and unpaid interest was $322.4 million. During the three and six months ended June 30, 2021, we recognized $7.6 million and $15.0 million, respectively, of income in connection with the mezzanine loan, compared to $6.9 million and $13.7 million during the three and six months ended June 30, 2020, respectively.
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 adjustment we recorded an unrealized loss in the amount of $17.0 million and an unrealized gain in the amount of $8.4 million during the three and six months ended June 30, 2021, respectively, and we recorded an unrealized loss in the amount of $1.1 million during both three and six months ended June 30, 2020.
Other Expenses, Net
Other expenses, net, includes costs associated with our risk management activities, partnership administration expenses and certain non-recurring items. For the three and six months ended June 30, 2021, compared to the same periods in 2020, other expenses, net decreased by $3.1 million and $3.9 million, respectively, due primarily to $2.3 million of revenue for acquisition services fee received during three and six months ended June 30, 2021.
Income Tax Benefit
Certain 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
36
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, 2021, we had consolidated net losses subject to tax of $9.0 million and $18.5 million, respectively. For the three and six months ended June 30, 2020, we had consolidated net income subject to tax of $4.4 million and $8.8 million, respectively.
For the three months ended June 30, 2021, we recognized income tax benefit of $2.8 million, compared to $2.0 million during the same period in 2020. The change is due primarily to higher losses at our TRS entities.
For the six months ended June 30, 2021, we recognized income tax benefit of $7.9 million, compared to $4.1 million during the same period ended 2020. The change is due primarily to income tax benefit associated with internal restructuring, changes to our effective state rate expected to apply to the reversal of our existing deferred items, and higher losses at our TRS entities.
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, 2020. 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 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 during the three and six months ended June 30, 2021 and 2020.
37
The reconciliation of net (loss) income to EBITDAre and Adjusted EBITDAre for the three and six months ended June 30, 2021 and 2020, is as follows (in thousands):
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
||||
|
Net (loss) income |
|
$ |
(20,386 |
) |
|
$ |
3,113 |
|
|
$ |
1,048 |
|
|
$ |
7,668 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
12,638 |
|
|
|
5,809 |
|
|
|
25,315 |
|
|
|
11,460 |
|
|
Income tax benefit |
|
|
(2,760 |
) |
|
|
(2,032 |
) |
|
|
(7,860 |
) |
|
|
(4,055 |
) |
|
Depreciation and amortization |
|
|
20,639 |
|
|
|
19,030 |
|
|
|
41,356 |
|
|
|
38,377 |
|
|
Adjustment related to EBITDAre of unconsolidated partnerships |
|
|
215 |
|
|
|
212 |
|
|
|
430 |
|
|
|
423 |
|
|
EBITDAre |
|
$ |
10,346 |
|
|
$ |
26,132 |
|
|
$ |
60,289 |
|
|
$ |
53,873 |
|
|
Net loss (income) attributable to redeemable noncontrolling interest consolidated real estate partnership |
|
|
(66 |
) |
|
|
125 |
|
|
|
86 |
|
|
|
228 |
|
|
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
(275 |
) |
|
|
(10 |
) |
|
|
(566 |
) |
|
|
(5 |
) |
|
EBITDAre adjustments attributable to noncontrolling interests |
|
|
38 |
|
|
|
(111 |
) |
|
|
(232 |
) |
|
|
(352 |
) |
|
Interest income recognized on mezzanine investment |
|
|
(7,551 |
) |
|
|
(6,936 |
) |
|
|
(15,018 |
) |
|
|
(13,683 |
) |
|
Unrealized (gains) losses on interest rate options |
|
|
16,970 |
|
|
|
1,080 |
|
|
|
(8,377 |
) |
|
|
1,080 |
|
|
Adjusted EBITDAre |
|
$ |
19,462 |
|
|
$ |
20,280 |
|
|
$ |
36,182 |
|
|
$ |
41,141 |
|
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, 2021, our available liquidity was $445 million, which consisted of:
|
|
• |
$286 million in cash and cash equivalents; |
|
|
• |
$9 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 million of available capacity to borrow under our revolving secured credit facility. |
We have commitments for, and expect to spend, approximately $335.2 million on development and redevelopment projects underway, with $304.8 million undrawn on our construction loans as of June 30, 2021.
Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, and future investments.
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 Aimco 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, interest rates are low compared to historical levels, and 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
38
options become unavailable, we may consider alternative sources of liquidity, such as reductions in capital spending or apartment community dispositions.
As of June 30, 2021, approximately 40% of our leverage consisted of property-level, non-recourse, amortizing debt. Approximately 87.4% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates, and inflation. The weighted-average remaining term to maturity of our non-recourse property-level debt was 5.3 years at a weighted-average interest rate of 3.09%.
While our primary source of leverage is property-level debt, we also have a credit facility with a syndicate of financial institutions and construction loans. As of June 30, 2021, we had no outstanding borrowings under our revolving secured credit facility, swingline loan sub-facility and letter of credit sub-facility and had capacity to borrow up to $150 million.
As of June 30, 2021, approximately 49% of our leverage consisted of notes payable to AIR, with a fixed interest rate of 5.2% and a term to maturity of 2.6 years, and approximately 11% consisted of our variable-rate non-recourse construction loans.
Under our revolving secured credit facility, we have agreed to maintain a fixed charge coverage ratio of at least 1.25x, minimum tangible net worth of $625 million, and maximum leverage of 60% as defined in the credit agreement. We are currently in compliance and expect to remain in compliance with these covenants.
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, 2021, net cash provided by operating activities was $16.5 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, 2021, decreased by $11.9 million compared to the same period ended in 2020.
Investing Activities
For the six months ended June 30, 2021, our net cash used in investing activities of $102.1 million consisted primarily of capital expenditures and cash used in the purchase of The Benson Hotel and construction costs on our development properties.
Total capital additions totaled $100.2 million and $10.7 million during the six months ended June 30, 2021 and 2020, respectively. We have generally funded capital additions with available cash and cash provided by operating activities.
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.
For further details regarding our development and redevelopment activities, including apartment communities constructed and delivered refer to the Executive Overview section above.
Financing Activities
Net cash from financing activities for the six months ended June 30, 2021 increased by $99.9 million compared to the six months ended June 30, 2020, due primarily to proceeds from the $150 million and $100.7 million variable-rate non-recourse construction loans entered into during the six months ended June 30, 2021.
Future Capital Needs
We expect to fund any future acquisitions, redevelopment, development, 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 2021 and beyond.
39
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2021, on a consolidated basis, we had approximately $55.0 million of variable-rate property-level debt outstanding in addition to two variable rate construction loans that totaled $120.1 million. We estimate that a change in 30-day LIBOR of 100 basis points with constant credit risk spreads would reduce or increase interest expense by approximately $1.8 million.
In 2020, we paid an upfront premium of $12.1 million for the option to enter into an interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against exposure to rising interest rates between now and October 2024. We receive a cash settlement in the future if the prevailing interest rate is higher than the 1.68% strike price. The amount of a future cash settlement is capped if the prevailing interest rate exceeds 2.78%. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement nor would we have any liability to make a payment.
During the first quarter of 2021, we paid an upfront premium of $5.6 million (including transaction costs) for the option to enter into an interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against rising interest rates between now and January 2024 relative to our notes payable to AIR. We receive a cash settlement in the future if the prevailing interest rate is higher than the 3% strike price on the five year swap. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement nor would we have any liability to make a payment.
During the three months ended June 30, 2021, we paid an upfront premium of $0.2 million for an interest rate cap on our $150 million Flamingo construction loan. This interest rate cap, provides protection if one month LIBOR exceeds 3% during the initial term of the loan.
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 are 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 second quarter of 2021 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 second quarter of 2021 that has materially affected, or is reasonably likely to materially affect, Aimco Operating Partnership’s internal control over financial reporting.
40
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
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, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Aimco
Unregistered Sales of Equity Securities
From time to time, Aimco may issue shares of 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 common OP Unit. Aimco may also issue shares of common stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended June 30, 2021, Aimco issued approximately 440,000 shares of common stock in exchange for OP Units in these transactions. Such shares were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.
Repurchases of Equity Securities
There were no repurchases by Aimco of its common equity securities during the three months ended June 30, 2021. Aimco’s board of directors has, from time to time, authorized Aimco to repurchase shares of its outstanding common stock. As of June 30, 2021, Aimco was authorized to repurchase approximately 10.4 million shares. This authorization has no expiration date. These repurchases may be made from time to time in the open market or in privately negotiated transactions.
Aimco Operating Partnership
Unregistered Sales of Equity Securities
Aimco Operating Partnership did not issue any unregistered OP Units during the three months ended June 30, 2021.
Repurchases of Equity Securities
Aimco Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one-year, limited partners other than Aimco have the right to redeem their common OP Units for cash or, at our election, shares of Aimco Common Stock on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended June 30, 2021, approximately 440,000 of common OP Units were redeemed in exchange for shares of Common Stock.
The following table summarizes Aimco Operating Partnership’s repurchases, or redemptions in exchange for cash, of common OP Units for the three months ended June 30, 2021.
|
Fiscal period |
|
Total Number of Units Purchased |
|
|
Average Price Paid per Unit |
|
|
Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1) |
|
Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (1) |
||
|
April 1, 2021 ‒ April 30, 2021 |
|
|
— |
|
|
$ |
— |
|
|
N/A |
|
N/A |
|
May 1, 2021 ‒ May 30, 2021 |
|
|
— |
|
|
|
— |
|
|
N/A |
|
N/A |
|
June 1, 2021 ‒ June 30, 2021 |
|
|
694 |
|
|
|
6.34 |
|
|
N/A |
|
N/A |
|
Total |
|
|
694 |
|
|
$ |
6.34 |
|
|
|
|
|
|
(1) |
The terms of 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, Aimco Operating Partnership has no publicly announced plans or programs of repurchase. However, for Aimco to repurchase shares of its Common Stock, 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 its Common Stock at least 90% of its “real estate investment trust taxable income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income. Aimco’s board of directors determines and declares its dividends. In making a dividend determination, Aimco’s board of directors considers a variety of factors, including REIT distribution requirements; current market conditions; liquidity needs; and other uses of cash, such as deleveraging and accretive investment
41
activities. Aimco plans to reinvest earnings to facilitate growth and, therefore, does not presently intend to pay a regular quarterly cash dividend.
42
ITEM 6. EXHIBITS
The following exhibits are filed with this report:
|
EXHIBIT NO. |
|
DESCRIPTION |
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
3.3 |
|
|
|
|
|
|
|
|
|
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)
First Amendment to Master Lease Agreement, dated April 15, 2021, by and between MCZ/Centrum Flamingo II, L.L.C. and Flamingo North Lessee, LLC. |
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
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, 2021, 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). |
43
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 |
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
Date: August 13, 2021
44
Exhibit 10.2
First Amendment to Master Lease Agreement
This First Amendment to Master Lease Agreement (this “Amendment”), made as of April 15, 2021, by MCZ/CENTRUM FLAMINGO II, L.L.C., a Delaware limited liability company, as landlord (“Landlord”), and FLAMINGO NORTH LESSEE, LLC, a Delaware limited liability company, as tenant (“Tenant”).
W IT N E S S E T H:
WHEREAS, pursuant to that certain Master Lease Agreement, dated as of December 15, 2020 between Landlord and Tenant (the “Lease”), Landlord did demise and let to Tenant, and Tenant did hire and take from Landlord, the Property, as defined in the Lease;
WHEREAS, concurrently with the execution of this Amendment, Tenant, as borrower, is closing on a loan with ATHENE ANNUITY & LIFE ASSURANCE COMPANY (together with its successors and assigns, the “Lender”), in the maximum committed principal amount of up to
$150,000,000 (the “Loan”) to finance a portion of the redevelopment of the Property by Tenant contemplated under the Lease, which Loan is evidenced, secured and governed by the Loan Agreement dated as of the date hereof between Lender and Tenant and the other Loan Documents (as defined in the Loan Agreement), including without limitation the Security Instrument (as defined in the Loan Agreement);
WHEREAS, it is a condition to Lender’s willingness to make the Loan to Tenant that Landlord and Tenant amend the Lease pursuant to the terms of this Amendment; and
WHEREAS, Landlord and Tenant will each receive economic benefit from the redevelopment of the Property with the proceeds of the Loan.
NOW, THEREFORE, for good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the Landlord and Tenant agree that the Lease is hereby modified, amended and supplemented as follows:
1.Landlord hereby acknowledges that Lender is a “Leasehold Mortgagee” and the Security Instrument is a “Leasehold Mortgage”, in each case for all purposes of the Lease, and shall be entitled to all of the rights and remedies of a “Leasehold Mortgagee” thereunder.
2.In addition to the rights of Lender as a “Leasehold Mortgagee” under the Lease (including, without limitation, Section 14 of the Lease), until such time as all amounts secured by the Leasehold Mortgage have been paid in full, anything contained in the Lease to the contrary notwithstanding, the following shall apply:
A.Landlord, upon serving Tenant with any notice of default hereunder or under the provisions of, or with respect to, the Lease, shall also serve a copy of such notice upon Lender in the same manner as required by the Lease for notices to Tenant at the following address:
Exhibit 10.2
Athene Annuity & Life Assurance Company c/o Apollo Insurance Solutions Group LP 2121 Rosecrans Ave, Suite 5300
El Segundo, CA 90245 Attention: Daniel Brown
With copies to:
Apollo Insurance Solutions Group LP 2121 Rosecrans Ave, Suite 5300
El Segundo, CA 90245
Attention: Angelo Lombardo, Esq.
Apollo Insurance Solutions Group LP 9 West 57th Street, Floor 15
New York, New York 10019 Attention: Jay A. Jablonski Email: jjablonski@apollo.com
Apollo Global Management – Real Estates Team 9 West 57th Street
New York, New York 10019 Attention: Ben Gray and Tyler Fenton
Email: bgray@apollo.com and tfenton@apollo.com
Gibson, Dunn & Crutcher LLP 200 Park Avenue
New York, New York 10166 Attention: Noam I. Haberman, Esq. Email: NHaberman@gibsondunn.com
B.In the event that Tenant shall be in default under the Lease, other than a Personal Default (as defined herein), Lender shall have the right, but not the obligation, to remedy such default, or cause the same to be remedied, within sixty (60) days after the expiration of all applicable grace or cure periods as provided to Tenant in the Lease. If such default cannot be remedied during such sixty (60) day period, then Lender shall have such period of time as is reasonably necessary to remedy such default (not to exceed ninety
(90) days in the aggregate unless possession by Lender is required to cure the default), provided Lender has commenced to cure such default (and the commencement of enforcement of remedies under the Security Instrument or the Pledge Agreement (as defined in the Loan Agreement) shall be deemed to be a commencement of a cure) within such sixty (60) day period, subject to any limitations on Lender’s ability to do so as a result of any government restrictions on foreclosures, force majeure events, bankruptcy or other insolvency proceedings, or other matters outside the control of Lender which prevent (or, based on advice of counsel, are inadvisable as a result of potential lender liability) Lender
Exhibit 10.2
from commencing an exercise of remedies (individual and/or collectively, as the context may require, a “Tolling Event”), in which case such sixty (60) day period shall be tolled for the duration of any such Tolling Event, (or, if possession of the Property is required to cure, Lender is, subject to any delays resulting from a Tolling Event, diligently pursuing its remedies to obtain possession and thereafter cures such default within sixty (60) days from obtaining possession) and continues to diligently prosecute the same. Any Personal Default or monetary default relating to the payment of rent shall be deemed cured whether or not such default is cured, but as to Lender only and not as to Tenant. Landlord shall accept such performance by or at the instance of Lender as if the same had been made by Tenant. A “Personal Default” is a default that (a) cannot be cured by the payment of money or performance of maintenance, repair, or construction work or (b) is otherwise not readily susceptible to cure by a party other than Tenant.
C.Notwithstanding anything in the Lease to the contrary, if, pursuant to the provisions of the Lease or as a matter of law, Landlord shall have the right to terminate the Lease, then Landlord shall take no action to terminate the Lease without first giving to Lender written notice of such right and an opportunity to cure as set forth in subsection (B) above. The time of the Lender to cure any default by Tenant which reasonably requires that Lender be in possession of the Property to do so (and it shall be deemed reasonably necessary to acquire possession of the Property if Lender is advised by counsel that it is prudent to do so to avoid lender liability claims), or the time for Lender to obtain Tenant’s interest in the Property in order to elect to enter into a new lease with Landlord as provided in subsection (D) below, shall be deemed extended to include the period of time required by Lender to obtain such possession or obtain Tenant’s interest in the Property (by foreclosure or otherwise) with due diligence (and in each case, such period of time shall be tolled for the duration of any Tolling Event); provided, that Lender shall have delivered to Landlord within sixty (60) days of Lender’s receipt of notice from Landlord of its right to terminate the Lease as set forth in this section, notice of Lender’s intent to cure outstanding defaults reasonably requiring possession of the Property and which are reasonably susceptible of being cured by Lender (excluding, for the avoidance of doubt, any Personal Defaults or monetary default relating to the payment of rent).
D.If the Lease is terminated in accordance with the terms of the Lease and the terms of this Amendment, Landlord shall give prompt written notice thereof to Lender. On written request of Lender made at any time within ninety (90) days after the receipt of such termination notice, Landlord shall, within ninety (90) days thereof, enter into a new lease ("New Lease") of the Property including all improvements thereon with Lender, its designee, or any Subsequent Owner (as defined below), for the remainder of the term of the Lease upon all of the covenants, conditions, limitations and agreements contained in the Lease solely to the extent arising from and after the date of such New Lease. “Subsequent Owner” means any individual or entity that acquires title to or control or possession of the Property or Tenant (or any part thereof) as a result of an exercise of remedies under the Loan Documents (including, without limitation, through a foreclosure of the Security Instrument or the Pledge Agreement or an assignment in lieu thereof (together with any successors or assigns thereof), including, without limitation, (i) Lender,
|
|
(ii) |
any purchaser of the Property (or any part thereof) or the interest in Tenant from Lender, |
|
|
(iii) |
any purchaser of the Property (or any part thereof) or the interest in Tenant at a |
Exhibit 10.2
foreclosure on the Security Instrument or at a UCC sale, or (iv) any court appointed receiver of the Property (or any part thereof).
E.In the event of any proceeding involving Landlord or Tenant under the United States Bankruptcy Code (Title 11 U.S.C.) as now or hereafter in effect:
(a)If the Lease is rejected in connection with a bankruptcy proceeding by Tenant or a trustee in bankruptcy (or other party to such proceeding) for Tenant, such rejection shall be deemed an assignment by Tenant to the Lender of the Property and all of Tenant’s interest under this Lease, and this Lease shall not terminate and the Lender shall have all rights of the Tenant as if such bankruptcy proceeding had not occurred, unless Lender shall reject such deemed assignment by notice in writing to Landlord within ninety (90) days following rejection of this Lease by Tenant or Tenant’s trustee in bankruptcy. If any court of competent jurisdiction shall determine that this Lease shall have been terminated notwithstanding the terms of the preceding sentence as a result of rejection by Tenant or the trustee in connection with any such proceeding, the rights of Lender to a new lease from Landlord pursuant to Section 2(D) hereof shall not be affected thereby.
(b)In the event of a proceeding involving Landlord under the Bankruptcy Code:
(i)In the event the bankruptcy trustee, Landlord (as debtor-in- possession) or any party to such proceeding seeks to reject the Lease pursuant to United States Bankruptcy Code §365(h)(1), Tenant shall not have the right to treat this Lease as terminated except with the prior written consent of Lender and the right to treat this Lease as terminated in such event shall be deemed assigned to Lender, whether or not specifically set forth in the Leasehold Mortgage, so that the concurrence in writing of Tenant and the Lender shall be required as a condition to treating this Lease as terminated in connection with such proceeding.
(ii)Unless this Lease is treated as terminated in accordance with subsection 2.E.(b)(i) above, then this Lease shall continue in effect upon all the terms and conditions set forth herein, including rent, but excluding requirements that are not then applicable or pertinent to the remainder of the term of this Lease. The lien of the Leasehold Mortgage shall extend to the continuing possessory rights of Tenant following such rejection with the same priority as it would have enjoyed had such rejection not taken place.
F.In the event that Lender (or its designee) or a Subsequent Owner succeeds to (y) the interests of the Tenant under the Lease by reason of a foreclosure of the Security Instrument or a conveyance in lieu thereof (whether voluntary or by operation of law) or
(z) the interests in Tenant by reason of a foreclosure of the Pledge Agreement or a conveyance in lieu thereof (whether voluntary or by operation of law) (either event describe in the foregoing clauses (y) and (z) shall be referred to hereinafter as a “Foreclosure Event”), then (a) Lender (or its designee) or such Subsequent Owner shall be bound to Landlord under all of the terms, covenants and conditions of the Lease for the balance of
Exhibit 10.2
the term thereof remaining, but shall not be required to cure any defaults of Tenant under the Lease arising prior to the date of such Foreclosure Event (and Landlord agrees to look solely to the constituent members of Tenant and their respective Affiliates (as Tenant was constituted prior to the date of such Foreclosure Event) for the payment or performance of any defaults or other obligations (including, without limitation, any indemnification obligation) arising under the Lease prior to such date, (b) Lender (or its designee) or such Subsequent Owner shall attorn to Landlord, as its landlord, (c) Landlord shall recognize and accept such attornment and the Lease shall continue as a direct lease between Landlord and Lender (or its designee) or such Subsequent Owner, subject to and in accordance with the terms thereof and hereof, and (d) all restrictions on transfers and assignments by the “Tenant” under the Lease shall become void and without further force or effect. The foregoing attornment and recognition shall be effective and self-operative without the execution of any further instruments by Landlord, provided that neither Lender (or its designee) nor any Subsequent Owner shall be obligated to pay any rent to Landlord until Lender (or its designee) or such Subsequent Owner has succeeded to Tenant’s interest under the Lease.
G.Any notice or other communication which Landlord shall desire or is required to give to or serve upon Lender shall be in writing and shall be served by certified mail, return receipt requested, except that such notice shall be delivered to Lender at the address set forth above or as otherwise designated by Lender in writing to Landlord. Any notice or other communication which the Lender shall desire or is required to give to or serve upon Landlord shall be deemed to have been duly given or served if sent to Landlord in accordance with the provisions of the Lease at the address set forth therein.
H.No union of the interests of Landlord and Tenant shall result in a merger of the Lease into any superior leasehold interest or the fee interest in the Property.
I.Landlord and Tenant acknowledge and agree that (a) for so long as the Lease or any New Lease shall be in effect, Tenant (or the holder of Tenant’s interest in the Lease or any New Lease) shall own any and all improvements, buildings and equipment on the Property, and (b) from and after a Foreclosure Event, Lender (or its designee) shall own any and all improvements, buildings and equipment on the Property.
J.Landlord hereby consents to Tenant’s grant, if any, to Lender of a security interest in the personal property owned by Tenant and located at the Property and a collateral assignment of subleases by Tenant of all or any portion of the Property and the rents, issues and profits therefrom, if any. Landlord agrees that (y) unless and until the Lease is terminated, and in the absence of a New Lease, and (z) from and after a Foreclosure Event, Landlord shall have no interest in such personal property or subleases, as the case may be, whether granted pursuant to the Lease or by statute.
K.Landlord shall not assign or transfer to an unaffiliated third party, or encumber or hypothecate, its interest in the Lease or the fee estate in the Property, without the prior written consent of the Lender.
Exhibit 10.2
L.Except as otherwise expressly set forth herein (including without limitation the provisions of Section 2(D) of this Amendment), no cancellation, termination, surrender, acceptance of surrender, amendment, or modification of the Lease shall be made by Landlord or Tenant and no consent by Tenant under the Lease shall be issued, in each case without Lender’s prior written consent, and unless such prior written consent is obtained, any such action shall be null and void and of no force or effect. The foregoing shall not be deemed to limit the rights of Landlord to terminate the Lease if Tenant shall be in default under the Lease beyond any applicable notice and cure period (excluding, for the avoidance of doubt, with respect to defaults which are deemed cured hereunder) and Lender shall not have proceeded to cure such default pursuant to the terms of Section 2(B) and Section 2(C) of this Amendment; provided, that any such termination of the Lease shall not vitiate Lender’s right to a New Lease pursuant to the terms of Section 2(D) of this Amendment.
M.Notwithstanding anything set forth in the Lease, in the event of casualty or condemnation of any portion of the Property, (a) the provisions of the Leasehold Mortgage shall control over the Lease with respect to the application of any insurance proceeds and condemnation awards and all such amounts, whether payable to Landlord or Tenant, shall be delivered to Lender for application in accordance with the Loan Documents, and (b) neither Lender (or its designee) nor any Subsequent Owner shall be obligated to repair or restore improvements (whether prior to or following a Foreclosure Event).
N.Landlord acknowledges and agrees that (a) in accordance with the Loan Documents, one or more mezzanine loans may be made to indirect owners of Tenant and secured by a pledge encumbering certain equity interests in indirect parent entities of Tenant, (b) neither the making or securing of any such mezzanine loan, nor the transfer of any such indirect equity interest in connection with such security interests granted thereon shall be deemed a violation of any restrictions on transfers imposed on the Tenant under the Lease, and (c) upon notice to Landlord by any such mezzanine lender of the existence of its mezzanine loan, and provided that such mezzanine lender (collectively with each affiliate of such mezzanine lender that is controlled by or under common control with such mezzanine lender) satisfies the net worth requirements set forth in Section 14(g) of the Lease, such mezzanine lender shall have all the rights and protections of a “Leasehold Mortgagee” under the Lease subject, in each case however, to the rights of Lender as a “Leasehold Mortgagee” under this Amendment.
O.Anything contained in Section 13(b)(iii) of the Lease to the contrary notwithstanding, in addition to causing the lease-up of the Property in connection with the Redevelopment Plan, Tenant is also permitted, without Landlord’s consent, to enter into leases generally with respect to the Property in connection with Tenant’s operation of the Property.
P.Anything contained in Section 14(a) of the Lease to the contrary notwithstanding, the Tenant may obtain financing secured by a Leasehold Mortgage in connection with the Redevelopment (as defined in the Lease), following the completion of the Redevelopment or for any other lawful purpose.
Exhibit 10.2
Q.For purposes of calculating minimum net worth of a Leasehold Mortgagee for purposes of Section 14(g) of the Lease, such Leasehold Mortgagee’s net worth shall be deemed to include the net worth of each affiliate of such Leasehold Mortgagee that is controlled by or under common control with Leasehold Mortgagee, together with such Leasehold Mortgagee’s individual net worth.
R.Landlord hereby appoints Tenant as Landlord’s attorney-in-fact (which appointment is coupled with an interest) empowered to exercise all rights and remedies in the name of Landlord under the (a) Reciprocal Maintenance, Use and Easement Agreement dated as of February 17, 2006, recorded at Book 24259, Page 0455 with the Clerk of Court for Miami-Dad County, Florida (as amended, and as the same may be further amended, modified or supplemented from time to time, the “REA”) (b) the Health Club Use Agreement (as defined in the REA) and (c) any other documents entered into by and among any of the “Parties” to the REA in connection with larger development of which the Property is a part (collectively, the “Property Documents”). Neither Landlord nor Tenant shall amend, modify, terminate, accept a surrender of, or grant a waiver of any provision or right of Landlord under any of the Property Documents without the prior written consent of Lender, Landlord and Tenant.
S.Anything contained in the Lease and this Amendment to the contrary notwithstanding,
(a)in the event Lender shall notify Landlord and Tenant in writing that an Event of Default under (and as defined in) the Loan Agreement has occurred, then during the period that such Event of Default shall exist, Tenant shall not pay and Landlord shall not accept payment of Base Rent, Additional Rent or any other amounts that become payable by Tenant to Landlord under the Lease during such period, which amounts shall continue to accrue as and when due in accordance with the Lease and shall be payable in full at such time as such Event of Default no longer exists; provided, that if such Event of Default is not cured, then Landlord agrees to look solely to the constituent members of Tenant and their respective Affiliates (as constituted prior to the date of such Foreclosure Event) for payment of all such amounts accruing from the commencement of such Event of Default through the date of any Foreclosure Event, and none of Lender, its designee or any Subsequent Owner shall have any liability or responsibility for any such amount;
(b)any amounts payable by Landlord to Tenant under the Lease, including, without limitation, any Added Improvement Value Payment (as defined in the Lease), shall be delivered by Landlord to Lender and applied by Lender to repay the outstanding principal balance of the Loan in accordance with the Loan Agreement; and
(c)within thirty (30) days after a Foreclosure Event, at Lender’s request, and upon payment to Landlord of $10.00, Landlord shall, at Landlord’s sole cost and expense (other than payment of Lender’s attorneys’ fees), convey to Tenant or its designee, by general warranty deed and other customary transfer
Exhibit 10.2
documents for such an interest in real property, Landlord’s fee interest in the Property, subject to the Lease; provided that if the Foreclosure Event resulted in the payment by a successful third party bidder of a sum that exceeds the outstanding “Debt” (as defined in the Loan Agreement), then concurrently with (or prior to) such conveyance of Landlord’s fee interest in the Property and as a condition precedent thereto, such excess proceeds shall be paid to Landlord.
3.Lender, upon serving Tenant with any notice of default under any of the Loan Documents shall also serve a copy of such notice upon Landlord in the same manner as required by the Loan Documents for notices to Tenant at the following address:
MCZ/Centrum Flamingo II, L.L.C. c/o AIR Communities
4582 S. Ulster Street, Suite 1700
Denver, Co. 80237 Attention: Lisa Cohn
Email: lisacohn@aircommunities.com With copies to:
MCZ/Centrum Flamingo II, L.L.C. c/o AIR Communities
4582 S. Ulster Street, Suite 1700
Denver, Co. 80237 Attention: Paul Beldin
Email: paul beldin@aircommunities.com
MCZ/Centrum Flamingo II, L.L.C. c/o AIR Communities
4582 S. Ulster Street, Suite 1700
Denver, Co. 80237
Attention: Ken Diamond, Esq.
Email: ken.diamond @aircommunities.com
In the event that Tenant shall be in default under the Loan, Landlord shall have the right, but not the obligation, to remedy such default, or cause the same to be remedied, provided that (a) such remedy occurs prior to the expiration of all applicable grace or cure periods provided to Tenant under the Loan Documents and (b) Landlord shall not have the right to cure a default under the Loan more than six (6) times in the aggregate over the entire term of the Loan. Lender shall accept such performance by or at the instance of Landlord (including the tender by Landlord of any sums necessary to cure a monetary default) as if the same had been made by Tenant under the Loan Documents.
4.Following the delivery of a notice of an event of default under the Loan by Lender to Tenant and Landlord, Landlord shall have the right, but not the obligation, exercisable at any
Exhibit 10.2
time prior to the date on which a Foreclosure Event is completed (the “Expiration Date”), to purchase the Loan and other obligations (with no representations or warranties from Lender) secured by the Leasehold Mortgage and the Pledge Agreement (the “Landlord Loan Acquisition Option”). In order to exercise the Landlord Loan Acquisition Option, Landlord shall give Lender written notice of its election to exercise such option on or before the Expiration Date. Upon delivery of such exercise notice by Landlord to Lender, Landlord and Lender will execute and deliver customary documents (in form and substance reasonably acceptable to Lender and Landlord) for the transfer and assignment of the Loan and other obligations secured by the Leasehold Mortgage, the Pledge Agreement and the documents and instruments evidencing, securing and governing the same and Landlord shall pay to Lender as the purchase price for the Landlord Loan Acquisition Option the sum of (a) the outstanding principal balance of the Loan, and (b) any accrued interest (including interest accrued at the “Default Rate” (as defined in the Loan Agreement)), fees, costs and all other sums due under the Leasehold Mortgage and the Pledge Agreement or the obligations secured thereby, which shall include any prepayment fees or yield maintenance fees or premiums.
|
|
5. |
[Intentionally Omitted] . |
|
|
6. |
Landlord hereby represents and warrants to Lender as follows: |
A.The Lease is in full force and effect, and all rental and/or other payments due pursuant to the Lease are current.
B.Landlord has no claims, defenses, or offsets of any kind or character with respect to the Lease and all provisions of the Lease are in full force and effect.
C.Landlord has not executed any contract or agreement for the sale of the Property or granted to any person or entity an option to purchase all or any portion of the Property.
D.There is no action, proceeding, or investigation at law or in equity before or by any court, public board, or body, nor does Landlord have actual knowledge of any basis for such action, proceeding, or investigation which calls into question the ability of the Landlord to perform its obligations under the Lease or this Amendment.
E.Lender assumes no liability or obligations under the Lease, or any extension or renewal thereof, unless or until it succeeds to the interest of Tenant thereunder and then subject to and in accordance with the terms of the Lease and this Amendment.
G.The term of the Lease commenced on December 15, 2020 and, subject to the terms of this Amendment, if not sooner terminated in accordance with Section 2(b) of the Lease, terminates on December 31, 2045. At the end of the term of the Lease, the Landlord shall become the owner of the improvements located on the Property free and clear of any encumbrances pursuant to the terms of the Lease.
Exhibit 10.2
|
|
H. |
The Lease is unmodified except as indicated herein. |
I.No act event, omission or condition has occurred or exists which, together with notice and/or the passage of time, would constitute a default by any party under the Lease.
7.This Amendment may be executed in any number of separate counterparts, each of which, when so executed and delivered, shall be deemed an original, but all of which, collectively and separately, shall constitute one and the same agreement. All signatures need not be on the same counterpart. Concurrently with the execution of this Amendment, Landlord and Tenant will execute a memorandum of this Amendment and record such memorandum in the official records of the Miami-Dade County Clerk of the Courts. Upon the request of Landlord or Tenant, and provided that the Loan has been paid in full, Landlord and Tenant shall execute such documents as may be necessary to terminate such memorandum of record.
8.In the event of inconsistency between Lease and this Amendment as to the rights, benefits and obligations of Lender, the terms of this Amendment shall govern.
9.Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Lease.
10.Landlord agrees that this Amendment may be relied upon by Lender, any Subsequent Owner and their respective successors and assigns. This Amendment shall inure to the benefit of Tenant, Landlord, Lender any Subsequent Owner, and their respective successors and assigns (including, without limitation, with respect to Lender, each and every owner and holder of the Loan and each person who may succeed to Tenant’s interest under the Lease) and shall be binding on each such party and its respective successors and assigns; provided, that this Amendment shall automatically terminate and be without further force or effect upon payment in full of all amounts payable to Lender under the Leasehold Mortgage and the other Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above written.
[signature pages follow]
Exhibit 10.2
LANDLORD:
MCZ/CENTRUM FLAMINGO II, L.L.C., a Delaware limited liability company
By: Morton Towers Apartments, L.P., a Delaware limited partnership, its member
By: AIMCO Holdings, L.P., a Delaware limited partnership, its general partner
By: AIMCO Holdings QRS, Inc., a Delaware
corporation, i½tenl partner
By:/;J.J!)_
Paul Beldin, Executive Vice President and Chief Financial Officer
TENANT:
FLAMINGO NORTH LESSEE, LLC, a Delaware limited liability company
By: Flamingo North Lessee Holdco, LLC, a Delaware limited liability company, its sole member
By: Aimco Development Company, LLC, a Delaware limited liability company, its sole member
By: Aimco OP L.P., a Delaware limited pai1nership, its sole member
By: Aimco OP GP, LLC, a Delaware limited liability company, its general partner
By: Apartment Investment and Management Company, a Maryland corporation, its sole member
By://(c:::::==
John icholson,Vice President and Treasurer
Exhibit 10.2
Joining solely for the purpose of binding itself to the terms and conditions of Sections 3 and 4 hereof.
ATHENE ANNUITY & LIFE ASSURANCE COMPANY
By: Apollo Insurance Solutions Group LP, its investment adviser
|
|
By: |
Apollo Global Real Estate Management, L.P., its sub-adviser |
|
By: Apollo Global Real Estate Management GP, LLC, its General Partner
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Wesley W. Powell, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Apartment Investment and Management Company; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 13, 2021
|
|
/s/ Wesley W. Powell |
|
|
Wesley W. Powell |
|
|
Director, Chief Executive Officer |
CHIEF FINANCIAL OFFICER CERTIFICATION
I, H. Lynn C. Stanfield, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Apartment Investment and Management Company; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 13, 2021
|
|
/s/ H. Lynn C. Stanfield |
|
|
H. Lynn C. Stanfield |
|
|
Chief Financial Officer |
|
|
|
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Wesley W. Powell, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Aimco OP L.P.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 13, 2021
|
|
/s/ Wesley W. Powell |
|
|
Wesley W. Powell |
|
|
Director, Chief Executive Officer |
CHIEF FINANCIAL OFFICER CERTIFICATION
I, H. Lynn C. Stanfield, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Aimco OP L.P.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 13, 2021
|
|
/s/ H. Lynn C. Stanfield |
|
|
H. Lynn C. Stanfield |
|
|
Executive Vice President Chief Financial Officer |
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Apartment Investment and Management Company (the “Company”) on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
|
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
/s/ Wesley W. Powell |
|
|
Wesley W. Powell |
|
|
Director and Chief Executive Officer |
|
|
August 13, 2021 |
|
|
/s/ H. Lynn C. Stanfield |
|
|
H. Lynn C. Stanfield |
|
|
Executive Vice President and Chief Financial Officer |
|
|
August 13, 2021 |
|
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Aimco OP L.P. (the “Partnership”) on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
|
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. |
|
/s/ Wesley W. Powell |
|
|
Wesley W. Powell |
|
|
Director, Chief Executive Officer |
|
|
August 13, 2021 |
|
|
/s/ H. Lynn C. Stanfield |
|
|
H. Lynn C. Stanfield |
|
|
Executive Vice President and Chief Financial Officer |
|
|
August 13, 2021 |
|