AIR Reports Fourth Quarter 2020 Results

DENVER--(BUSINESS WIRE)--Apartment Income REIT Corp (“AIR”) (NYSE: AIRC) announced today fourth quarter results for 2020.

Chief Executive Officer Terry Considine comments: “2020 was transformative due to the separation of AIR from Aimco. By doing so, we were able to unlock $1 billion of shareholder value. I am grateful to my colleagues on the board for their leadership, to my teammates for their hard work, and to the many shareholders who offered their advice and encouragement. Thank you all!

“AIR provides investors with a simple and transparent way to invest in the multi-family sector with public market liquidity, the safety of a diversified portfolio of apartment communities with low financial leverage, best-in-class operations, and sector low management costs.

“We begin 2021 with great optimism that the worst of COVID is behind us and with the expectation that our schools and businesses will soon reopen.”

Chief Financial Officer Paul Beldin adds: “Same Store revenue was down in the fourth quarter by 7.4%. In our stable, mostly suburban submarkets, which include approximately 60% of our Same Store apartment homes, revenue declined by 2.5%. Our dense urban submarkets, including the City of Los Angeles together with our communities on the San Francisco Peninsula and in Philadelphia, fared worse with Same Store revenue down by 12.6%.

“Fourth Quarter financial results are a lagging indicator; our leading indicators point to a building recovery. Net rental income increased each month from September through January, and average daily occupancy increased from a low of 93.3% in August to 95.4% in January.

“In 2021, we expect Same Store revenue growth between (3.00%) and (0.20%), and Same Store expense growth between 3.75% and 2.75%, resulting in Same Store NOI growth between (5.60%) and (1.40%). We also expect 2021 AIR FFO per share to be between $1.91 and $2.05. Our guidance should be viewed as our current best estimates for the ranges for expected outcomes. We ask that you consider these ranges carefully and avoid over reliance on the mid-point of these ranges.”

Financial Results: Fourth Quarter Pro Forma FFO Per Share

For financial reporting purposes, GAAP requires that Aimco be treated as the predecessor to AIR. As a result, unless otherwise stated, financial results prior to the December 15, 2020, separation include the combined results of AIR and Aimco. The financial results of Aimco before the separation are presented as discontinued operations.

AIR Pro Forma Funds From Operations presented in the following table exclude the financial results of Aimco before the separation.

	FOURTH QUARTER			FULL YEAR
(all items per common share - diluted)	2020			2020
Net loss	$	(0.96	)	$	(0.85	)
Nareit Funds From Operations (FFO)	$	(0.45	)	$	1.58
Adjustment to weight reverse stock split*	$	0.07		$	(0.28	)
Nareit FFO attributable to Aimco and sold properties**	$	(0.16	)	$	(0.69	)
Pro forma adjustments, net***	$	0.92		$	1.12
AIR Pro forma Funds From Operations (Pro forma FFO)	$	0.38		$	1.73
* Reflects an adjustment to eliminate the per share impact of the GAAP treatment to restate our weighted-average shares outstanding as if the reverse stock split occurred at the beginning of the period presented. See Supplemental Schedule 2 for the reconciliation of weighted-average shares outstanding used for Nareit FFO and Proforma FFO.
** Reflects an adjustment to exclude the financial results of Aimco, prior to the separation, which are included in Nareit FFO.
*** Primarily separation costs, the non-cash tax effect of making a REIT election at a taxable subsidiary, debt prepayment penalties, and restructuring costs. See Supplemental Schedule 1 for a detailed list of pro forma adjustments to FFO.

COVID-19 Response Update

Our top priority is the health and safety of our residents and teammates. Accordingly, we maintain enhanced cleaning procedures as well as physical distancing and remote working guidelines at our communities and corporate offices. Additionally, seeing residents as individuals, each impacted differently by the pandemic and lockdown, our teammates have undertaken to speak to every resident in need, to listen, and to help each to solve his or her problems. We also seek to assist the broader communities where our residents and employees live and work.

We estimate that, in addition to decreased occupancy and lower rental rates, we incurred incremental costs of $7.2 million in the fourth quarter, and $24.6 million year-to-date. The table below provides additional detail for AIR, excluding impacts attributable to our discontinued operations.

	FOURTH QUARTER				FULL YEAR
	2020				2020
FFO Impacts ($ in millions, except per share data)	$		$/sh		$		$/sh
Incremental Bad Debt Expense	$	5.3	$	0.05	$	10.6	$	0.08
Lower Commercial Revenue		1.4		0.01		3.8		0.03
Lower Other Income, due to local restriction on charging late fees		0.1		—		0.9		0.01
Other COVID-related amounts		0.4		—		1.0		0.01
Property Level Impact	$	7.2	$	0.06	$	16.3	$	0.13
Net Incremental Interest Expense		—		—		5.4		0.05
Write-off of Commercial Straight-line Rent Receivables		—		—		2.9		0.02
FFO Impact	$	7.2	$	0.06	$	24.6	$	0.20

Rent Collection Update

Residential Rent Collection – We measure residential rent collection as the amount of payments received as a percentage of all residential amounts owed. Through December 31st, we have collected 98.3% of all amounts owed relating to the first nine months of 2020.

In the fourth quarter, we recognized 98.0% of all residential revenue billed during the quarter, treating the balance of 2.0% as bad debt. Of the 98.0% of residential revenue recognized, as of year-end, we had collected in cash all but 100 basis points. During the fourth quarter, we wrote off both the 2% mentioned above and an additional $2.3 million of receivables associated with our residents who have not paid rent since June. More than half of these residents reside in the City of Los Angeles, where financially capable residents can live rent free by abusing emergency measures intended to help those in need because of the pandemic.

For the year, we recognized 98.2% of all residential revenue, treating the balance of 1.8% as bad debt. At December 31st, the amount of uncollected and unreserved residential accounts receivable, not offset by tenant security deposits totaled $1.3 million. Most of the balance is expected to be collected during the first quarter of 2021.

Looking forward, we expect monthly bad debt expense to decline, but the timing and pace will depend on unwinding the emergency ordinances that currently allow residents to live rent free, so that we are again able to collect rent or to re-rent these apartments to new residents who pay the rent that is owed.

AIR Operating Results: Fourth Quarter Same Store NOI Down 12.5%; Full Year NOI Down 4.0%

The table below includes the operating results of the 91 properties of AIR that meet our Same Store definition. Properties retained in the separation by Aimco are excluded.

The Same Store portfolio together with our properties leased to Aimco for their development or redevelopment represents essentially all of our owned properties.

	FOURTH QUARTER					FULL YEAR
	Year-over-Year			Sequential		Year-over-Year
($ in millions)	2020	2019	Variance	3rd Qtr.	Variance	2020	2019	Variance
Revenue, before utility reimbursements	$149.1	$161.0	(7.4%)	$152.0	(1.9%)	$619.2	$634.7	(2.4%)
Expenses, net of utility reimbursements	44.1	41.0	7.6%	44.6	(1.0%)	173.6	170.8	1.6%
Net operating income (NOI)	$105.0	$120.0	(12.5%)	$107.4	(2.2%)	$445.6	$463.9	(4.0%)

Components of Same Store Revenue Growth – Same Store revenue growth was impacted by lower residential rental rates, lower average daily occupancy, increased bad debt expense, waived late fees, and reduced commercial rents. The table below summarizes the change in the components of our Same Store revenue growth.

	FOURTH QUARTER						FULL YEAR
Same Store Revenue Components	Year-over-Year			Sequential			Year-over-Year
Residential Rents		(1.4	%)		(1.3	%)		1.0	%
Average Daily Occupancy		(2.8	%)		0.9	%		(1.5	%)
Residential Net Rental Income		(4.2	%)		(0.4	%)		(0.5	%)
Bad Debt		(2.6	%)		(1.3	%)		(1.3	%)
Late Fees and Other		0.2	%		(0.4	%)		0.1	%
Residential Revenue		(6.6	%)		(2.1	%)		(1.7	%)
Commercial Revenue		(0.8	%)		0.2	%		(0.7	%)
Same Store Revenue Growth		(7.4	%)		(1.9	%)		(2.4	%)

Same Store Rental Rates – We measure changes in rental rates by comparing, on a lease-by-lease basis, the effective rate on a newly executed lease to the effective rate on the expiring lease for that same apartment. A newly executed lease is classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal. The table below details changes in new and renewal lease rates, as well as the weighted-average (blended) lease rates for leases executed in the respective period.

	FOURTH QUARTER									FULL YEAR									2020									2021
	2020			2019			Variance			2020			2019			Variance			October			November			December			January
Renewal rent changes		1.4	%		5.1	%		(3.7	%)		3.8	%		5.1	%		(1.3	%)		1.5	%		1.2	%		1.3	%		1.5	%
New lease rent changes		(10.9	%)		0.6	%		(11.5	%)		(6.2	%)		1.9	%		(8.1	%)		(10.8	%)		(11.2	%)		(11.0	%)		(8.4	%)
Weighted-average rent changes		(8.5	%)		2.4	%		(10.9	%)		(1.8	%)		3.4	%		(5.2	%)		(7.6	%)		(9.2	%)		(9.5	%)		(6.6	%)
Average Daily Occupancy		94.4	%		97.2	%		(2.8	%)		95.2	%		96.7	%		(1.5	%)		93.7	%		94.3	%		95.1	%		95.4	%

During the fourth quarter of 2020, approximately 80% of our lease activity were New Leases.

Same Store Markets – Our portfolio is diversified by price point and geography, and with a mix of urban and suburban submarkets. While fourth quarter results varied based on population density, overall results showed a consistent strengthening of the business throughout the fourth quarter that continued into January.

Suburban properties include 15,226 units, or 60% of our Same Store portfolio. These communities finished December with an ADO of 97.2%, with increases in occupancy for each month since June.

Urban properties total 9,975 units, the 40% balance of our Same Store portfolio. These communities finished December with an ADO of 91.7%, with increases in occupancy for each month since August, including 120 basis points of occupancy growth from November to December, and an additional 80 basis points in January. This reflects a leasing pace that was 37% ahead of fourth quarter 2019.

In the fourth quarter, New Lease rates were roughly stable, in line with September’s results. This is encouraging, as rates generally erode seasonally in the fourth quarter. In January, we are seeing continued recovery. As compared to December, January leasing velocity improved 30%; occupancy increased 30 basis points; and new lease rent growth improved by 260 basis points.

The following table details changes in average daily occupancy and signed new lease rents:

Average Daily Occupancy & Signed New Lease Rent Changes
	2020				2021
	September	October	November	December	January
Average Daily Occupancy	93.3%	93.7%	94.3%	95.1%	95.4%
Signed New Lease Rent Changes	(12.3%)	(12.0%)	(10.7%)	(10.1%)	(7.5%)

Portfolio Management

Our portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points, averaging “B/B+” in quality, and is also diversified across several of the largest markets in the United States. The table below relates to the AIR portfolio and includes the properties leased to Aimco after year-end for their development or redevelopment and excludes the properties retained by Aimco in the separation from AIR.

	FOURTH QUARTER
	2020	2019	Variance
Apartment Communities	99	99	—
Apartment Homes	26,592	26,592	—
Average Revenue per Apartment Home	$2,231	$2,364	(6%)
Percentage A (4Q 2020 Average Revenue per Apartment Home $2,819)	57%	55%	2%
Percentage B (4Q 2020 Average Revenue per Apartment Home $1,971)	26%	29%	(3%)
Percentage C+ (4Q 2020 Average Revenue per Apartment Home $1,761)	17%	16%	1%
NOI Margin	70%	74%	(4%)
Free Cash Flow Margin	70%	74%	(4%)

Fourth Quarter Portfolio – For our entire portfolio, average monthly revenue per apartment home was $2,231 for fourth quarter 2020, a 6% decrease compared to fourth quarter 2019.

Acquisitions – We had no acquisitions in the fourth quarter.

Dispositions – We had no dispositions in the fourth quarter.

Joint Venture Transaction – As previously announced, in September, we formed a joint venture with a passive institutional investor to own a portfolio of 12 multi-family communities with 4,051 apartment homes located in California.

The properties were valued at $2.40 billion, or approximately $592,000 per unit, equivalent to an implied NOI cap rate of approximately 4.2%. The valuation is equal to 97% of our pre-COVID-19 valuation of the properties and confirms our previously published NAV. The joint venture has existing property debt of $1.22 billion and an implied equity value of $1.18 billion. In exchange for a 39% interest subject to $475 million of property debt, we received $461 million. We retain ownership of 61% of the joint venture and control and will operate the properties in exchange for property and asset management fees.

Balance Sheet

Leverage

We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage, primarily non-recourse and long-dated property debt; and we build financial flexibility by maintaining ample unused and available credit; holding properties with substantial value unencumbered by property debt; maintaining an investment grade rating; and using partners’ capital when it enhances financial returns or reduces investment risk.

Our leverage includes our share of the long-term non-recourse, property debt encumbering our apartment communities, together with outstanding borrowings under our revolving credit facility, our term loan, and our preferred equity.

	AS OF DECEMBER 31, 2020
$ in Millions	Amount			% of Total			Weighted-Avg. Maturity (Yrs.)
AIR share of long-term, non-recourse property debt	$	3,160			82	%		8.4
Term loan		350			9	%		0.3
Outstanding borrowings on revolving credit facility		266			7	%		1.1
Preferred equity*		81			2	%		9.9
Total Leverage	$	3,857			100	%		7.2
Cash, restricted cash, and investments in securitization trust assets		(158	)
Notes receivable from Aimco		(534	)
Net Leverage	$	3,165
*AIR’s Preferred equity is perpetual in nature; however, for illustrative purposes, we have computed the weighted-average maturity of our Preferred OP Units assuming a 10-year maturity and Preferred Stock assuming it is called at the expiration of the no-call period.

We have notes receivable from Aimco with an aggregate principal amount of $534 million. The notes will mature on January 31, 2024 and are secured by a pool of properties owned by Aimco. We consider the notes a reduction of leverage as their proceeds will be used to repay current amounts outstanding.

Leverage Ratios

Our current target leverage ratios are Net Leverage to Adjusted EBITDAre < 6.0x and Adjusted EBITDAre to Adjusted Interest Expense and Preferred Dividends > 2.5x. Our calculation of Adjusted EBITDAre reflects EBITDA earned from AIR’s operations.

	Annualized Current Quarter	Trailing Twelve Months
Proportionate Debt to Adjusted EBITDAre	7.3x	7.1x
Net Leverage to Adjusted EBITDAre	7.5x	7.3x
Adjusted EBITDAre to Adjusted Interest Expense	3.9x	3.3x
Adjusted EBITDAre to Adjusted Interest Expense and Preferred Dividends	3.7x	3.1x

Our leverage to Adjusted EBITDAre ratio is higher than our September target due to the approximately $45 million reduction in pro forma property NOI, due primarily to the impacts of COVID-19 and the related governmental response, and due also to the increased leverage of approximately $440 million. Of this total, approximately $240 million is due to an increase in Aimco’s initial capitalization; $135 million is due to additional investment in properties owned by AIR; and $65 million due to our fourth quarter 2020 special cash dividend.

Under our revolving credit facility and term loan, we have agreed to maintain a fixed charge coverage ratio of 1.40x, as well as other covenants customary for similar revolving credit arrangements. For the period ended December 31, 2020, our fixed charge coverage ratio was 1.92x. We expect to remain in compliance with our covenants.

Consistent with our paired trade philosophy, we expect to repay the incremental borrowings through the sale of whole or partial interests in low-cap rate properties.

Liquidity

We use our credit facility primarily for working capital and other short-term purposes and to secure letters of credit. In connection with the separation from Aimco, we entered into the third amended and restated senior credit agreement, which lowered the maximum borrowing capacity of our revolving credit facility from $800 million to $600 million, reflecting reduced borrowing needs with the elimination of redevelopment and development opportunities. At December 31, 2020, our share of cash and restricted cash was $58 million and we had the capacity to borrow up to $311 million under our revolving credit facility, bringing total liquidity to approximately $370 million.

We also manage our financial flexibility by maintaining an investment grade rating and holding communities that are unencumbered by property debt. AIR has been rated BBB by Standard & Poor’s, one level above Aimco’s rating prior to the separation. As of December 31, 2020, we held unencumbered communities with an estimated fair market value of approximately $2.8 billion.

Equity Capital Activities

On January 25, 2021, the AIR Board of Directors declared quarterly cash dividends of $0.43 per share of AIR Common Stock. This amount is payable on February 26, 2021, to stockholders of record on February 12, 2021. The safety and simplicity of our business model, combined with the predictability of our cash flows, allows us to distribute a greater percentage of income, leading to an improved dividend payout ratio after the separation from Aimco.

2021 Outlook

The AIR strategy is simple: provide a transparent, efficient, and low risk way to invest in multi-family properties:

• Combine a narrow focus on allocating capital only to stabilized apartment communities with best-in-class operations, and do so with costs for corporate overhead < 15 basis points of the gross asset value of our investment assets;
• Reduce risk by low leverage, the quality of the real estate, and the diversification of the portfolio; and
• Measure success in Pro forma FFO per share with a high quality of earnings confirmed by cash dividends.

While results in all urban markets showed a consistent strengthening of business results throughout the fourth quarter of 2020 and into January, there is still uncertainty regarding the duration of the pandemic, continued government intervention, and the timing of economic re-opening. While we are seeing signs of improvement and we expect steady quarter to quarter improvements, we also expect year-over-year NOI and FFO growth to be negative in the first quarter, with improvements throughout 2021 so that year-over-year comparisons become positive as business strengthens in the second half of the year.

In 2021, our simple strategy will focus on (1) property net income, including income from properties leased for their development or redevelopment; (2) a declining cost of leverage; and (3) a low level of offsite costs.

The following table details the change in AIR’s Pro Forma FFO per share for 2020 to 2021 guidance:

Components of 2020 to 2021 FFO Growth
	Low			High
2020 AIR Pro forma FFO	$	1.73		$	1.73
Operations		(0.17	)		(0.04	)
Lease Income		0.19			0.19
Cost of Capital		0.09			0.09
Offsite Costs		0.06			0.06
Other		0.01			0.02
2021 Pro forma FFO	$	1.91		$	2.05

Our guidance should be viewed as our current best estimates for the ranges for expected outcomes. We ask that you consider these ranges carefully and avoid over reliance on their mid-points. Our guidance ranges are based on the following components:

($ Amounts represent AIR Share)	FULL YEAR 2021	FULL YEAR 2020
Net Income per share	$(0.18) to $(0.05)	$(0.85)
Pro forma FFO per share [1]	$1.91 to $2.05	$1.73
Same Store Operating Components of Nareit FFO
Revenue change compared to prior year	(3.00%) to (0.20%)	(2.4%)
Expense change compared to prior year	3.75% to 2.75%	1.6%
NOI change compared to prior year	(5.60%) to (1.40%)	(4.0%)
Offsite Costs [2]
Property management expenses	~$24M	$31M
General and administrative expenses	~$16M	$22M
Other Earnings
Lease income [3]	~$30M	N/A
Tax (expense)/benefit [4]	~($1M)	$6M
AIR Share of Capital Investments
Capital Enhancements	$45M to $55M	$27M

[1]	In the first quarter AIR anticipates Pro forma FFO between $0.45 and $0.49 per share.
[2]	Full year 2020 property management and general and administrative expenses in this table are recast to represent changes in the classification of certain expenses in order to be consistent with the 2021 presentation, however there is no impact on the total amount of offsite costs.
[3]	There were no revenues in 2020 associated with the development/redevelopment properties leased to Aimco. These leases commenced on January 1, 2021.
[4]	Full year 2020 tax (expense) benefit is presented net of approximately $89 million of Pro forma FFO adjustments related to the TRS REIT election and FFO adjustments related to income tax adjustments associated with sold properties.

Earnings Conference Call Information

Live Conference Call:	Conference Call Replay:
Thursday, February 11, 2021 at 1:00 p.m. ET	Replay available until May 11, 2021
Domestic Dial-In Number: 1-888-317-6003	Domestic Dial-In Number: 1-877-344-7529
International Dial-In Number: 1-412-317-6061	International Dial-In Number: 1-412-317-0088
Passcode: 0143909	Passcode: 10151372
Live webcast and replay:
investors.aircommunities.com

Supplemental Information

The full text of this Earnings Release and the Supplemental Information referenced in this release is available on AIR’s website at investors.aircommunities.com.

Glossary & 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 AIR management that are measures not defined under accounting principles generally accepted in the United States (“GAAP”). Certain AIR terms and Non-GAAP measures are defined in the Glossary in the Supplemental Information and Non-GAAP measures reconciled to the most comparable GAAP measures.

About AIR

AIR is a real estate investment trust focused on the ownership and management of quality apartment communities located in the largest markets in the United States. AIR is one of the country’s largest owners and operators of apartments, with 99 communities in 12 states and the District of Columbia. AIR common shares are traded on the New York Stock Exchange under the ticker symbol AIRC, and are included in the S&P 400. For more information about AIR, please visit our website at www.aircommunities.com.

Forward-looking Statements

This Earnings Release and Supplemental Information contain forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of 2021 results, including but not limited to: Nareit FFO, Pro forma FFO and selected components thereof; expectations regarding sales of AIR apartment communities and the use of proceeds thereof; and AIR liquidity and leverage metrics. We caution investors not to place undue reliance on any such forward-looking statements.

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 AIR’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 AIR holds a partial interest, and the impact of the lockdown on AIR’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 and dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIR’s ability to maintain current or meet projected occupancy, rental rate and property operating results; 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 apartment communities presently or previously owned by AIR; Aimco’s and AIR’s relationship with each other after the business separation; the ability and willingness of Aimco and AIR and their subsidiaries to meet and/or perform their obligations under any contractual arrangements that were entered into among the parties in connection with the business 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 business separation; and such other risks and uncertainties described from time to time in filings by AIR with the Securities and Exchange Commission.

In addition, AIR’s 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 AIR’s 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 AIRs financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of Aimco’s Annual Report on Form 10-K for the year ended December 31, 2019 and the section entitled “Risk Factors” in Item 1A of Aimco’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, and the other documents AIR files from time to time with the Securities and Exchange Commission. Readers should also carefully review the “Risk Factors” section of the registration statements relating to the business separation, that have been filed with the Securities and Exchange Commission. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.

These forward-looking statements reflect management’s judgment as of this date, and AIR 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)
The separation resulted in Aimco being presented as the predecessor for AIR’s financial statements due to the relative significance of AIR’s business as compared to Aimco before the separation. The below statement was prepared in accordance with GAAP and presents the results of operations for AIR and Aimco prior to the December 15, 2020 separation.
	Three Months Ended						Year Ended
	December 31,						December 31,
	2020			2019			2020			2019
REVENUES
Rental and other property revenues [1]	$	173,746		$	191,831		$	719,556		$	770,602
OPERATING EXPENSES
Property operating expenses [1]		64,011			65,959			249,036			261,241
Depreciation and amortization		81,284			78,135			320,943			317,283
General and administrative expenses		12,502			11,696			40,424			43,619
Investment management expenses		829			1,677			5,953			5,996
Provision for real estate impairment loss		47,281			—			47,281			—
Other expenses, net [2]		50,691			4,197			73,860			16,737
Total operating expenses		256,598			161,664			737,497			644,876
Interest income		3,590			2,418			12,374			9,300
Interest expense [3]		(34,704	)		(40,965	)		(160,359	)		(150,888	)
Gain on dispositions of real estate		71,889			146,281			119,215			503,168
Mezzanine investment income, net		7,023			1,531			27,576			1,531
(Loss) income from continuing operations before income tax expense and discontinued operations		(35,054	)		139,432			(19,135	)		488,837
Income tax expense		(97,115	)		(754	)		(95,437	)		(305	)
(Loss) income from continuing operations		(132,169	)		138,678			(114,572	)		488,532
Income from discontinued operations, net of tax [4]		1,459			4,088			11,228			19,495
Net (loss) income		(130,710	)		142,766			(103,344	)		508,027
Noncontrolling interests:
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships		645			(84	)		798			(187	)
Net income attributable to preferred noncontrolling interests in AIR OP		(1,604	)		(1,908	)		(7,019	)		(7,708	)
Net loss (income) attributable to common noncontrolling interests in AIR OP		6,572			(7,262	)		5,438			(26,049	)
Net income (loss) attributable to noncontrolling interests		5,613			(9,254	)		(783	)		(33,944	)
Net (loss) income from operations attributable to AIR		(125,097	)		133,512			(104,127	)		474,083
Net income attributable to AIR preferred stockholders		—			—			—			(7,335	)
Net income attributable to participating securities		(77	)		(173	)		(202	)		(604	)
Net (loss) income attributable to AIR common stockholders	$	(125,174	)	$	133,339		$	(104,329	)	$	466,144
Earnings per common share – basic
(Loss) income from continuing operations attributable to AIR per common share	$	(0.97	)	$	1.08		$	(0.94	)	$	3.75
Income from discontinued operations attributable to AIR per common share		0.01			0.03			0.09			0.16
Net (loss) income attributable to AIR per common share – basic	$	(0.96	)	$	1.11		$	(0.85	)	$	3.91
Earnings per common share – diluted
(Loss) income from continuing operations attributable to AIR per common share	$	(0.97	)	$	1.08		$	(0.94	)	$	3.74
Income from discontinued operations attributable to AIR per common share		0.01			0.03			0.09			0.16
Net (loss) income attributable to AIR per common share – diluted	$	(0.96	)	$	1.11		$	(0.85	)	$	3.90
Weighted-average common shares outstanding – basic [5]		129,911			119,890			122,446			119,307
Weighted-average common shares outstanding – diluted [5]		129,911			120,141			122,446			119,533

[1]	Prior to the separation, Aimco sold two apartment communities in 2020 and twelve apartment communities in 2019. Rental and other property revenues for the three months and year ended December 31, 2020 is inclusive of $0.7 million and $8.8 million, respectively, of revenues related to Aimco’s sold properties. Rental and other property revenues for the three months and year ended December 31, 2019 is inclusive of $7.8 million and $40.4 million, respectively, of revenues related to Aimco’s sold properties. Property operating expenses for the three months and year ended December 31, 2020 is inclusive of $0.3 million and $2.7 million, respectively, of expenses related to Aimco’s sold properties. Property operating expenses for the three months and year ended December 31, 2019 is inclusive of $2.8 million and $14.2 million, respectively, of expenses related to Aimco’s sold properties.
[2]	Other expenses, net, for the three months and year ended December 31, 2020, is inclusive of $44.4 million and $57.0 million, respectively, of transaction costs related to the separation.
[3]	Interest expense for the three months and year ended December 31, 2020, is inclusive of $0.4 million and $13.3 million, respectively, of prepayment penalties related to debt prepaid during the year.
[4]	Income from discontinued operations includes the financial results of Aimco prior to the separation for all periods presented. Summarized results of discontinued operations for the three months and year ended December 31, 2020 and 2019 are shown below (in thousands):

	Three Months Ended						Year Ended
	December 31,						December 31,
	2020			2019			2020			2019
REVENUES
Rental and other property revenues	$	31,752		$	38,201		$	144,757		$	143,692
OPERATING EXPENSES
Property operating expenses		12,204			12,693			51,710			49,502
Depreciation and amortization		15,975			19,009			72,729			62,887
Other expenses, net		1,493			80			1,897			257
Total operating expenses		29,672			31,782			126,336			112,646
Interest income		454			389			2,076			2,125
Interest expense		(2,968	)		(4,879	)		(17,972	)		(17,918	)
Income from unconsolidated real estate partnerships		135			212			764			802
(Loss) income before income tax benefit		(299	)		2,141			3,289			16,055
Income tax benefit		1,758			1,947			7,939			3,440
Income from discontinued operations, net of tax	$	1,459		$	4,088		$	11,228		$	19,495

[5]

During the fourth quarter of 2020 and first quarter of 2019, Aimco completed a reverse stock split and a special dividend paid primarily in stock. For stock splits, GAAP requires the restatement of weighted-average shares as if the reverse stock split occurred at the beginning of the period presented, while shares issued in the special dividend are included in weighted-average shares outstanding from the date issued. Basic and diluted weighted-average common shares outstanding were 148,449 and 148,700, respectively, as previously reported for the three months ended December 31, 2019. Basic and diluted weighted-average common shares outstanding were 147,718 and 147,944, respectively, as previously reported for the year ended December 31, 2019.

Included in net income for the three months and year ended December 31, 2020 are $7.2 million and $24.6 million, respectively, of COVID-19 related impacts detailed in the COVID-19 Response Update included in this earnings release.

Consolidated Balance Sheets
(in thousands) (unaudited)
	December 31,			December 31,
	2020			2019
Assets
Real estate	$	7,468,864		$	7,351,979
Accumulated depreciation		(2,455,505	)		(2,268,839	)
Net real estate		5,013,359			5,083,140
Cash and cash equivalents		44,214			136,458
Restricted cash		29,266			30,083
Notes receivable from Aimco		534,127			—
Goodwill		32,286			32,286
Other assets [1]		576,026			604,593
Assets of discontinued operations [2]		—			1,022,696
Total Assets	$	6,229,278		$	6,909,256
Liabilities and Equity
Non-recourse property debt	$	3,646,093		$	3,755,153
Debt issue costs		(17,857	)		(17,348	)
Non-recourse property debt, net		3,628,236			3,737,805
Term loan, net		349,164			—
Revolving credit facility borrowings		265,600			275,000
Accrued liabilities and other [1]		598,736			270,487
Liabilities of discontinued operations [2]		—			663,389
Total Liabilities		4,841,736			4,946,681
Preferred noncontrolling interests in AIR OP		79,449			97,064
Redeemable noncontrolling interests in consolidated real estate partnership		—			4,716
Equity:
Perpetual preferred stock		2,000			—
Class A Common Stock		1,489			1,489
Additional paid-in capital		3,432,121			3,497,367
Accumulated other comprehensive income		3,039			4,195
Distributions in excess of earnings		(2,131,798	)		(1,722,402	)
Total AIR equity		1,306,851			1,780,649
Noncontrolling interests in consolidated real estate partnerships		(61,943	)		(3,296	)
Common noncontrolling interests in AIR OP		63,185			83,442
Total Equity		1,308,093			1,860,795
Total Liabilities and Equity	$	6,229,278		$	6,909,256

[1]	Other assets includes the Parkmerced mezzanine investment and accrued liabilities and other includes the offsetting liability. The benefits and risks of ownership have been transferred to Aimco, but legal transfer is not complete.
[2]	Represents the assets and liabilities associated with the properties retained by Aimco in the separation.