Apartment Investment and Management Company Announces Second Quarter 2010 Results

DENVER--(BUSINESS WIRE)--Apartment Investment and Management Company (NYSE: AIV) announced today its second quarter 2010 results.

Chairman and Chief Executive Officer Terry Considine comments: “Aimco’s business plan is simple: to own and operate B/B+ quality apartments in the 20 largest U.S. markets to generate solid returns for our shareholders. During the second quarter, we had high occupancy and good demand leading to improved pricing. While rental rates on new leases in the aggregate were down from the prior year, new lease rates turned positive in several of our markets for the first time in five quarters. Rental rates on renewals were up in every market but one. We sold eleven properties and on July 26^th, repaid the $25 million balance on our Term Debt, leaving no recourse debt on our balance sheet. Our focus remains on providing excellent service to our customers, maintaining our properties, controlling our costs, and strengthening our balance sheet.”

Chief Financial Officer Ernie Freedman adds: “Second quarter Pro forma FFO of $0.41 per share exceeded the midpoint of our guidance range by $0.10 per share, with a $0.06 contribution from better than expected operating results and $0.03 of one-time items that were not contemplated in our guidance. We are increasing our guidance for full year 2010 Pro forma FFO from a range of $1.25 to $1.35 per share to a range of $1.37 to $1.45 per share and we are establishing third quarter Pro forma FFO guidance of $0.32 to $0.36 per share.”

Financial Results

  Diluted Per Share Results

	SECOND QUARTER				YEAR-TO-DATE
	2010		2009		2010		2009
Earnings (loss) per share	($0.15	)	($0.26	)	($0.50	)	($0.60	)
Funds from Operations (FFO)	$0.40		$0.34		$0.65		$0.78
Add back Aimco’s share of operating real estate impairment losses	$0.03		$0.13		$0.10		$0.12
Deduct Aimco’s share of preferred stock redemption related gains	($0.02	)	($0.02	)	($0.02	)	($0.02	)
Pro forma Funds from Operations (Pro forma FFO)	$0.41		$0.45		$0.73		$0.88
Deduct Aimco’s share of capital replacements	($0.14	)	($0.14	)	($0.24	)	($0.27	)
Adjusted Funds From Operations (AFFO)	$0.27		$0.31		$0.49		$0.61

Net income (loss) – Net loss attributable to Aimco common stockholders for the quarter was $18.0 million, compared to net loss of $29.9 million for second quarter 2009. Second quarter 2010 net loss was less than second quarter 2009 primarily due to other income associated with the settlement of certain litigation matters during second quarter 2010. The increase in other income was partially offset by dilution from 2009 asset sales and lower transaction revenues.

Funds from Operations – FFO is a non-GAAP financial measure defined in the glossary in Aimco’s Supplemental Information (the Glossary). FFO calculated in accordance with the definition prescribed by the National Association of Real Estate Investment Trusts (NAREIT) was $46.9 million, or $0.40 per share, compared with $38.7 million, or $0.34 per share, in second quarter 2009. Pro forma FFO, which represents FFO as prescribed by NAREIT but excludes operating real estate impairment losses (recoveries) and preferred stock redemption related gains, was $47.8 million, or $0.41 per share, compared with $52.3 million, or $0.45 per share, in second quarter 2009. Second quarter 2010 Pro forma FFO of $0.41 per share was $0.10 per share above the midpoint of Aimco’s guidance range primarily as a result of better than expected operating results of $0.06 per share and one-time items of $0.03 per share, which were not anticipated in guidance.

Property Operations

Property operating results discussed below represent Aimco’s Proportionate Share of reported amounts, which reflects property operating results adjusted for Aimco’s ownership in each property. This non-GAAP measure is defined in the Glossary.

Diversified Operating Portfolio – Aimco’s property operations consist primarily of Conventional with some Affordable real estate operations. Conventional real estate operations relate to Aimco’s diversified portfolio of market rate apartment communities and include Same Store Properties, Redevelopment Properties, Acquisition Properties, and Other Properties. See Supplemental Schedules 7a and 7b for detailed information on Aimco’s Conventional real estate portfolio, including selected operating results.

Affordable real estate operations relate to Aimco’s portfolio of properties with rents that are generally paid, in whole or part, by a government agency. Affordable properties tend to have more stable rents and higher occupancy than Conventional properties due to government rent payments and thus are much less affected by market fluctuations.

Portfolio Operating Measures^*

	YEAR-TO-DATE
	% Aimco NOI	Revenue	Year-over-Year Variance Expenses	NOI
Conventional Same Store	69%	-1.1%	2.2%	-3.2%
Affordable Same Store	11%	2.4%	5.4%	-0.2%
Total Same Store	80%	-0.6%	2.8%	-2.8%
Conventional Redevelopment	12%	8.5%	-4.6%	17.9%
Other Conventional	6%	0.8%	5.5%	-3.7%
Affordable Redevelopment	2%	4.0%	-7.9%	14.3%
Total	100%	0.6%	2.0%	-0.4%

* The information in this table relates to properties that Aimco owns and manages, and are classified within continuing operations. Results exclude properties that Aimco owns but does not manage and properties classified within discontinued operations. To ensure comparability between periods, the year-over-year change in Revenue, Expenses and NOI in this table is based on Aimco’s current period ownership. See the Glossary for additional information about the property categories included in the table above and Schedules 1 and 2 in the Supplemental Information for financial and statistical information for these portfolios.

Conventional Same Store Results – In second quarter 2010, the Conventional Same Store portfolio included 168 communities with 56,272 units, in which Aimco had a weighted average ownership of 92%.

Conventional Same Store Operating Measures

	SECOND QUARTER Year-over-Year						SECOND QUARTER Sequential				YEAR-TO-DATE Year-over-Year
	2010		2009		Variance		1st Qtr		Variance		2010		2009		Variance
$ in Millions except rent per unit
Average Daily Occupancy	95.6	%	92.8	%	2.8	%	96.0	%	-0.4	%	95.8	%	93.0	%	2.8	%
Average Rent Per Unit	$1,010		$1,056		-4.4	%	$1,008		0.2	%	$1,009		$1,062		-5.0	%
Revenue	$164.2		$165.0		-0.5	%	$164.5		-0.1	%	$326.5		$330.2		-1.1	%
Expenses	(63.4	)	(63.1	)	0.5	%	(67.6	)	-6.2	%	(130.2	)	(127.3	)	2.2	%
NOI	$100.8		$101.9		-1.1	%	$96.9		4.1	%	$196.3		$202.9		-3.2	%

Comparing Conventional Same Store results in second quarter 2010 with second quarter 2009, total revenue decreased $0.8 million, or 0.5%. The decrease in revenue was primarily the result of lower average rent, down 4.4% or $46 per unit, from $1,056 per unit to $1,010 per unit, largely offset by higher average daily occupancy of 95.6% for second quarter 2010 compared to 92.8% for second quarter 2009. Rental rates on new leases transacted during the quarter were 2.3% lower than the expiring lease rates, while renewal rates were 1.9% higher than the expiring lease rates. New and renewal lease rates improved throughout the quarter, with June 2010 new lease rates 1.4% lower than the expiring lease rates and renewal rates 2.4% higher than the expiring lease rates. June 2010 new and renewal lease rates also compared favorably to beginning of year new lease rates that were 8.9% lower than the expiring lease rates and renewal rates that were 0.7% lower than the expiring lease rates. Conventional Same Store expenses increased $0.3 million or 0.5%, with higher marketing and turnover costs substantially offset by lower property taxes and insurance. Refer to Supplemental Schedules 6a through 6c for additional details on Conventional Same Store operating results.

Affordable Same Store Results – In second quarter 2010, the Affordable Same Store portfolio included 166 communities with 20,122 units, in which Aimco had a weighted average ownership of 62%. For the second quarter 2010, average month-end occupancy for the affordable portfolio was 97.2%, a decrease of 10 basis points from second quarter 2009, while average rent per unit increased 1.6% from $768 to $780 per unit.

Portfolio

Aimco’s portfolio strategy focuses on B/B+ quality Conventional apartment communities located in the 20 largest U.S. markets, with a target capital allocation of 10% to Affordable apartment communities.

Aimco measures Conventional property asset quality based on average rents compared to local market average rents as reported by REIS, a third-party provider of commercial real estate performance information and analysis. Aimco defines A-quality assets as those with rents greater than 125% of local market average, B-quality assets as those with rents 90% to 125% of local market average and C-quality assets as those with rents less than 90% of local market average. For the first quarter 2010, the most current period for which REIS information is available, Aimco’s Conventional property rents averaged 101% of local market average rents.

For the second quarter 2010, average rents for the Conventional portfolio were $1,042 per unit, a 0.8% increase compared to second quarter 2009, primarily as a result of the sale of Conventional properties during 2009 with rents averaging 33% less than the retained portfolio.

Aimco’s geographic allocation strategy focuses on the 20 largest U.S. markets as measured by total apartment value. Aimco believes these markets to be deep, relatively liquid and possessing desirable long-term growth characteristics. These target markets are primarily coastal markets, and also include a number of Sun Belt cities and Chicago, Illinois. As Aimco executes this strategy, the Company expects to reduce its investment in markets outside the 20 largest markets and to increase its investment in the 20 largest markets through redevelopment and acquisitions. During second quarter 2010, net operating income generated by Conventional properties located in the 20 largest markets accounted for 82.6% of total Conventional property net operating income, an increase of 0.8% compared to second quarter 2009.

In second quarter 2010, Aimco sold seven Conventional properties and four Affordable properties with 1,327 and 597 units, respectively for $102.2 million in gross proceeds. Aimco’s share of net proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $25.0 million. Proceeds were used primarily to repay recourse term debt.

See Supplemental Schedules 7a and 7b for additional details regarding Aimco’s portfolio quality and capital allocation, and Supplemental Schedule 8 for additional details on disposition activity.

Balance Sheet and Liquidity

	AS OF JUNE 30, 2010
	Amount	% of Total Leverage	Weighted Avg Maturity (Yrs)	Weighted Avg Rate
Aimco leverage ($ in millions)
Aimco’s share of long-term, non-recourse property debt	$ 4,902.8	85%	8.0	5.50%
Recourse term debt	25.0	1%	0.5	1.85%
Other borrowings	41.4	1%	n/a	6.16%
Total/weighted average debt	4,969.2	87%	8.0	5.48%
Preferred securities	765.9	13%	n/a	7.60%
Total/weighted average leverage	$ 5,735.1	100%	n/a	5.77%

See Supplemental Schedules 4a and 4b for additional details about Aimco’s non-recourse property debt and Supplemental Schedule 5 for information related to Aimco’s preferred securities.

Aimco’s recourse debt at June 30, 2010, was limited to its revolving credit facility and corporate term debt. At that time, the balance on Aimco’s revolving credit facility was zero and available capacity was $137.1 million, net of $42.9 million of letters of credit issued against the facility. Aimco’s revolving credit facility is used for working capital purposes and to secure letters of credit. At the end of second quarter 2010, the balance on Aimco’s corporate term debt was $25.0 million, which balance was repaid in full in July 2010.

In connection with its revolving credit facility, Aimco is subject to Debt Service and Fixed Charge Coverage covenants, as defined in the Glossary. For second quarter 2010, Aimco’s Debt Service and Fixed Charge Coverage ratios were 1.57:1 and 1.34:1, compared to covenants in place during the quarter of 1.40:1 and 1.20:1, respectively, and first quarter 2010 ratios of 1.59:1 and 1.35:1. Aimco expects to remain in compliance with these covenants.

2010 Outlook

	THIRD QUARTER	FULL YEAR
Net loss per share	-$0.47 to -$0.43	-$1.80 to -$1.72
Pro forma FFO per share	$0.32 to $0.36	$1.37 to $1.45
Conventional Same Store Operating Measures
Average daily occupancy	95.0% to 95.5%	95.0% to 95.5%
NOI change compared to same period 2009	-0.5% to 0.5%	-2.0% to -1.0%
NOI change compared to second quarter 2010	-2.0% to -1.0%
Additional full year guidance updates:
Conventional Same Store Operating Measures
Revenue change compared to 2009		-1.0% to -0.5%
Expense change compared to 2009		0.0% to 1.0%
Total portfolio NOI change compared to 2009		-0.5% to 0.5%
Non-Recurring Investment Management Revenue		$4 to $6 million
Non-Recurring Investment Management Expenses		$4 million
Non-Recurring Investment Management Income, net of tax		$1 million

About Aimco

Aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the 20 largest markets in the United States. Aimco is one of the country’s largest owners and operators of both conventional and affordable apartments, with 817 communities serving approximately 500,000 residents in 43 states, the District of Columbia and Puerto Rico. Aimco common shares are traded on the New York Stock Exchange under the ticker symbol AIV and are included in the S&P 500. For more information about Aimco, please visit our website at www.aimco.com.

Supplemental Information

The full text of this release and the Supplemental Information referenced in this release is available on Aimco’s Website at the link http://www.aimco.com/CorporateInformation/About/Financial/QEarnRelease.aspx.

Earnings Conference Call

Aimco’s second quarter 2010 earnings conference call will be held Friday, July 30, 2010, at 1:00 p.m. Eastern time.

Live Conference Call
Domestic Dial-In Number: 1-866-843-0890
International Dial-In Number: 1-412-317-9250
Passcode: 7517190

Conference Call Replay
Domestic Dial-In Number: 1-877-344-7529
International Dial-In Number: 1-412-317-0088
Passcode: 442294

The conference call replay will be available until 9:00 a.m. Eastern time on August 9, 2010.

Live and Replay Webcast: http://www.aimco.com/CorporateInformation/About/Financial/news.aspx

Glossary and Reconciliations of Non-GAAP Financial and Operating Measures

Financial and operating measures found in this Earnings Release and the Supplemental Information include certain financial measures used by Aimco management that are not calculated in accordance with accounting principles generally accepted in the United States of America, or GAAP. These measures are defined in the glossary in the Supplemental Information and, where appropriate, reconciled to the most comparable GAAP measures.

Forward-looking Statements

This earnings release and Supplemental Information contain forward-looking statements within the meaning of the federal securities laws, including statements regarding projected results and specifically forecasts of third quarter and full year 2010 results. These forward-looking statements are based on management’s judgment as of this date and include certain risks and uncertainties.

Risks and uncertainties include, but are not limited to, Aimco’s ability to maintain current or meet projected occupancy, rental rates and property operating results. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the control of Aimco, including, without limitation: financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; earnings may not be sufficient to maintain compliance with debt covenants; real estate 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; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; the timing of acquisitions and dispositions; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by Aimco.

In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership.

Readers should carefully review Aimco’s financial statements and notes thereto, as well as the risk factors described in Aimco’s Annual Report on Form 10-K for the year ended December 31, 2009, and the other documents Aimco files from time to time with the Securities and Exchange Commission. These forward-looking statements reflect management’s judgment as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances. This press release does not constitute an offer of securities for sale.

Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
REVENUES:
Rental and other property revenues	$ 285,395		$ 279,041		$ 570,622		$ 559,303
Asset management and tax credit revenues	9,596		12,606		13,853		22,144
Total revenues	294,991		291,647		584,475		581,447
OPERATING EXPENSES:
Property operating expenses	132,946		125,665		271,354		259,149
Investment management expenses	5,141		4,716		8,370		8,506
Depreciation and amortization	108,667		108,437		217,006		212,606
Provision for operating real estate impairment losses	-		1,569		-		2,079
General and administrative expenses	15,184		14,577		26,919		30,837
Other (income) expenses, net	(6,693	)	3,748		(3,592	)	5,229
Total operating expenses	255,245		258,712		520,057		518,406
Operating income	39,746		32,935		64,418		63,041
Interest income	1,928		2,225		5,150		5,532
Recovery of (provision for) losses on notes receivable	148		(1,534	)	(278	)	(1,685	)
Interest expense	(79,499	)	(81,771	)	(159,294	)	(162,068	)
Equity in (losses) earnings of unconsolidated real estate partnerships	(7,224	)	(1,696	)	727		(3,736	)
Gain on dispositions of unconsolidated real estate and other, net	4,970		3,463		7,612		14,327
Loss before income taxes and discontinued operations	(39,931	)	(46,378	)	(81,665	)	(84,589	)
Income tax benefit	3,598		2,473		7,369		4,949
Loss from continuing operations	(36,333	)	(43,905	)	(74,296	)	(79,640	)
Income from discontinued operations, net [1]	26,163		36,279		47,366		39,440
Net loss	(10,170	)	(7,626	)	(26,930	)	(40,200	)
Noncontrolling interests:
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships	2,716		(11,695	)	(9,418	)	(5,422	)
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership	(1,683	)	(1,746	)	(3,376	)	(2,815	)
Net loss attributable to common noncontrolling interests in Aimco Operating Partnership	1,312		2,623		4,381		5,458
Total noncontrolling interests	2,345		(10,818	)	(8,413	)	(2,779	)
Net loss attributable to Aimco	(7,825	)	(18,444	)	(35,343	)	(42,979	)
Net income attributable to Aimco preferred stockholders	(10,128	)	(11,477	)	(23,050	)	(24,643	)
Net income attributable to participating securities	(42	)	-		-		-
Net loss attributable to Aimco common stockholders	$ (17,995	)	$ (29,921	)	$ (58,393	)	$ (67,622	)
Weighted average common shares outstanding - basic and diluted	116,323		115,510		116,179		112,886
Earnings (loss) per common share - basic and diluted:
Loss from continuing operations attributable to Aimco common stockholders	$ (0.30	)	$ (0.38	)	$ (0.74	)	$ (0.72	)
Income from discontinued operations attributable to Aimco stockholders	0.15		0.12		0.24		0.12
Net loss attributable to Aimco common stockholders	$ (0.15	)	$ (0.26	)	$ (0.50	)	$ (0.60	)
Notes to Consolidated Statements of Operations
[1] Income from discontinued operations consists of the following (in thousands):
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Rental and other property revenues [2]	$ 3,218		$ 56,872		$ 10,977		$ 118,186
Property operating expenses [2]	(1,773	)	(29,015	)	(5,199	)	(61,262	)
Depreciation and amortization	(453	)	(17,538	)	(1,925	)	(36,962	)
Provision for operating real estate impairment losses	(895	)	(17,268	)	(8,121	)	(13,904	)
Other expenses, net	(194	)	(3,180	)	(1,046	)	(5,180	)
Operating (loss) income	(97	)	(10,129	)	(5,314	)	878
Interest income	81		46		107		188
Interest expense	(585	)	(10,898	)	(1,593	)	(23,343	)
Loss before gain on dispositions of real estate and income taxes	(601	)	(20,981	)	(6,800	)	(22,277	)
Gain on dispositions of real estate	26,982		57,991		53,321		62,538
Income tax (expense) benefit	(218	)	(731	)	845		(821	)
Income from discontinued operations, net	$ 26,163		$ 36,279		$ 47,366		$ 39,440
Income from discontinued operations attributable to:
Noncontrolling interests in consolidated real estate partnerships [2]	$ (7,107	)	$ (20,662	)	$ (17,800	)	$ (25,182	)
Noncontrolling interests in Aimco Operating Partnership	(1,323	)	(1,185	)	(2,058	)	(1,082	)
Total noncontrolling interests	(8,430	)	(21,847	)	(19,858	)	(26,264	)
Aimco	$ 17,733		$ 14,432		$ 27,508		$ 13,176
[2] Income from discontinued operations for the three months ended June 30, 2010 attributed to the property classified as held for sale at June 30, 2010, includes $0.6 million of rental and other property revenues, $0.2 million of property operating expenses and less than $0.1 million of noncontrolling interests.

Consolidated Balance Sheets
(in thousands) (unaudited)
	June 30, 2010		December 31, 2009
ASSETS
Buildings and improvements	$ 7,461,121		$ 7,326,284
Land	2,179,744		2,161,010
Accumulated depreciation	(2,830,752	)	(2,626,047	)
Net real estate	6,810,113		6,861,247
Cash and cash equivalents	78,318		81,260
Restricted cash	211,795		219,255
Accounts receivable	47,192		59,822
Accounts receivable from affiliates	13,191		23,744
Deferred financing costs	50,272		51,611
Notes receivable from unconsolidated real estate partnerships	12,280		14,295
Notes receivable from non-affiliates	129,427		125,269
Investment in unconsolidated real estate partnerships	114,549		105,324
Other assets	184,671		185,890
Deferred income tax asset, net	49,943		42,015
Assets held for sale	6,050		136,736
Total assets	$ 7,707,801		$ 7,906,468
LIABILITIES AND EQUITY
Property tax-exempt bond financing	$ 548,973		$ 574,926
Property loans payable	5,010,995		4,884,233
Term loans	25,000		90,000
Other borrowings	58,943		53,057
Total indebtedness	5,643,911		5,602,216
Accounts payable	27,647		29,819
Accrued liabilities and other	279,063		286,326
Deferred income	158,402		180,656
Security deposits	35,794		34,855
Liabilities related to assets held for sale	3,276		121,237
Total liabilities	6,148,093		6,255,109
Preferred noncontrolling interests in Aimco Operating Partnership	86,389		86,656
Preferred stock subject to repurchase agreement	20,000		30,000
Equity:
Perpetual preferred stock	660,500		660,500
Class A Common Stock	1,170		1,165
Additional paid-in capital	3,079,230		3,072,665
Accumulated other comprehensive loss	(2,872	)	(1,138	)
Notes due on common stock purchases	(911	)	(1,392	)
Distributions in excess of earnings	(2,597,379	)	(2,492,082	)
Total Aimco equity	1,139,738		1,239,718
Noncontrolling interests in consolidated real estate partnerships	341,707		316,177
Common noncontrolling interests in Aimco Operating Partnership	(28,126	)	(21,192	)
Total equity	1,453,319		1,534,703
Total liabilities and equity	$ 7,707,801		$ 7,906,468