10-Q

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 SEPTEMBER 30, 2001
	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
(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)	84-1259577 (I.R.S. Employer Identification No.)
2000 South Colorado Boulevard, Tower 2, Suite 2-1000 Denver, Colorado (Address of principal executive offices)	80222 (Zip Code)

(303) 757-8101
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)

         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. Yes       No

         The number of shares of Class A Common Stock outstanding as of October 31, 2001: 74,280,257

TABLE OF CONTENTS

		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
	ITEM 1. Legal Proceedings
	ITEM 2. Changes in Securities and Use of Proceeds
	ITEM 3. Defaults Upon Senior Securities
	ITEM 4. Submission of Matters to a Vote of Security Holders
	ITEM 5. Other Information
	ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX(1)
EX-10.1 - Payment Guaranty
EX-99.1 - Agreement Re: Disclosure

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

FORM 10-Q

INDEX

			Page
	PART I. FINANCIAL INFORMATION
ITEM 1		Financial Statements
		Consolidated Balance Sheets as of September 30, 2001 (unaudited) and December 31, 2000		3
		Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2001 and 2000 (unaudited)		4
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000 (unaudited)		5
		Notes to Consolidated Financial Statements (unaudited)		6
ITEM 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
ITEM 3		Quantitative and Qualitative Disclosures about Market Risk		33
	PART II. OTHER INFORMATION
ITEM 1		Legal Proceedings		34
ITEM 2		Changes in Securities and Use of Proceeds		34
ITEM 3		Defaults Upon Senior Securities		34
ITEM 4		Submission of Matters to a Vote of Security Holders		34
ITEM 5		Other Information		34
ITEM 6		Exhibits and Reports on Form 8-K		35
Signatures				36

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)

				September 30, 2001			December 31, 2000
				(Unaudited)
ASSETS
Real estate:
	Improved land			$	1,013,007		$	976,421
	Buildings and improvements				6,818,372			6,036,031
Total real estate					7,831,379			7,012,452
	Less accumulated depreciation				(1,384,636	)		(913,263	)
		Net real estate			6,446,743			6,099,189
Investments in unconsolidated real estate partnerships					725,797			676,188
Investments in unconsolidated subsidiaries					—			107,781
Notes receivable from unconsolidated real estate partnerships					257,403			140,860
Notes receivable from and advances to unconsolidated subsidiaries, net					—			190,453
Cash and cash equivalents					69,186			157,115
Restricted cash					147,604			126,914
Accounts receivable					98,836			2,873
Deferred financing costs, net					84,428			44,403
Goodwill, net					106,973			100,532
Other assets					117,815			53,566
			Total assets	$	8,054,785		$	7,699,874
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Secured notes payable				$	3,372,550		$	3,258,342
Secured tax-exempt bond financing					963,611			773,033
Term loan					—			74,040
Credit facility					109,000			254,700
			Total indebtedness		4,445,161			4,360,115
Accounts payable					18,240			88,818
Accrued and other liabilities					252,060			211,324
Deferred rental income					8,621			5,611
Deferred income taxes					33,453			—
Security deposits					31,182			28,332
			Total liabilities		4,788,717			4,694,200
Mandatorily redeemable convertible preferred securities					21,347			32,330
Minority interest in other entities					91,336			139,731
Minority interest in Operating Partnership					401,250			331,956
Stockholders’ equity:
	Preferred Stock, perpetual				502,520			315,770
	Preferred Stock, convertible				621,947			521,947
	Class A Common Stock, $.01 par value, 456,962,738 shares and 468,432,738 shares authorized, 74,224,713 and 71,337,217 shares issued and outstanding, at September 30, 2001 and December 31, 2000, respectively				742			713
	Additional paid-in capital				2,200,249			2,072,208
	Notes receivable on common stock purchases				(46,334	)		(44,302	)
	Distributions in excess of earnings				(526,989	)		(364,679	)
			Total stockholders’ equity		2,752,135			2,501,657
			Total liabilities and stockholders’ equity	$	8,054,785		$	7,699,874

See notes to consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2001			2000			2001			2000
RENTAL PROPERTY OPERATIONS:
Rental and other property revenues	$	323,801		$	271,079		$	969,805		$	753,463
Property operating expense		(131,522	)		(107,031	)		(384,366	)		(302,435	)
Owned property management expense		(2,240	)		(3,473	)		(8,458	)		(9,713	)
Income from property operations		190,039			160,575			576,981			441,315
SERVICE BUSINESS:
Management fees and other income from affiliates		60,717			14,430			158,715			36,865
Management and other expenses		(35,147	)		(10,220	)		(97,637	)		(19,599	)
Amortization of intangibles		(4,230	)		(1,898	)		(13,463	)		(4,968	)
Income from service business		21,340			2,312			47,615			12,298
General and administrative expenses		(4,319	)		(4,936	)		(12,868	)		(13,613	)
Depreciation on rental property		(100,127	)		(76,548	)		(300,731	)		(223,128	)
Interest expense		(81,639	)		(67,855	)		(250,022	)		(190,459	)
Interest and other income		15,000			18,841			47,038			47,352
Equity in losses of unconsolidated real estate partnerships		(4,861	)		(8,375	)		(14,068	)		(4,489	)
Equity in earnings (losses) of unconsolidated subsidiaries		—			(1,934	)		—			2,538
Minority interest in other entities		(9,126	)		2,475			(20,007	)		(10,977	)
Income before gain on disposition of properties and minority interest in Operating Partnership		26,307			24,555			73,938			60,837
Gain on disposition of properties, net		2,847			8,902			4,403			14,234
Income before minority interest in Operating Partnership		29,154			33,457			78,341			75,071
Minority interest in Operating Partnership, common		(285	)		(1,568	)		(728	)		(2,276	)
Minority interest in Operating Partnership, preferred		(2,758	)		(1,653	)		(7,049	)		(4,855	)
Net income		26,111			30,236			70,564			67,940
Net income attributable to preferred stockholders		24,341			15,728			65,444			44,843
Net income attributable to common stockholders	$	1,770		$	14,508		$	5,120		$	23,097
Basic earnings per common share	$	0.02		$	0.21		$	0.07		$	0.35
Diluted earnings per common share	$	0.02		$	0.20		$	0.07		$	0.34
Dividends declared per common share	$	0.78		$	0.70		$	2.34		$	2.10

See notes to consolidated financial statements.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

				Nine Months Ended September 30,
				2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income			$	70,564		$	67,940
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization of intangibles			314,194			228,096
		Gain on disposition of properties			(4,403	)		(14,234	)
		Minority interest in Operating Partnership			7,777			7,131
		Minority interest in other entities			20,007			10,977
		Equity in losses of unconsolidated real estate partnerships			14,068			4,489
		Equity in earnings of unconsolidated subsidiaries			—			(2,538	)
		Changes in operating assets and operating liabilities			(37,268	)		(20,676	)
			Total adjustments		314,375			213,245
			Net cash provided by operating activities		384,939			281,185
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of and additions to real estate				(268,301	)		(520,990	)
	Proceeds from sales of property				151,858			84,324
	Proceeds from sales of investments				237,824			—
	Cash from newly consolidated properties				22,505			206,115
	Purchase of notes receivable, general and limited partnership interests and other assets				(73,744	)		(225,840	)
	Purchase/originations of notes receivable				(82,971	)		(202,314	)
	Proceeds from repayment of notes receivable				38,561			20,885
	Cash paid in connection with mergers/acquisitions and related costs				(45,930	)		(4,484	)
	Distributions received from investments in unconsolidated real estate partnerships				33,408			79,278
			Net cash provided by (used in) investing activities		13,210			(563,026	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from secured notes payable borrowings				448,836			151,452
	Principal repayments on secured notes payable				(420,151	)		(81,450	)
	Proceeds from secured tax-exempt bond financing				112,676			—
	Principal repayments on secured tax-exempt bond financing				(145,759	)		(24,848	)
	Principal repayments on secured short-term financing				(25,105	)		—
	Net borrowings (paydowns) on term loan and revolving credit facilities				(282,740	)		244,800
	Payment of loan costs				(18,031	)		(3,603	)
	Proceeds from issuance of common and preferred stock, exercise of options/warrants				205,175			250,285
	Repurchase of Class A Common Stock and Operating Partnership units				(31,732	)		(2,580	)
	Principal repayments received on notes due from officers on Class A Common Stock purchases				7,929			13,283
	Proceeds from issuance of other units				3,198			—
	Payment of common stock dividends				(169,083	)		(138,622	)
	Payment of distributions to minority interest				(107,502	)		(77,095	)
	Payment of preferred stock dividends				(63,789	)		(44,841	)
			Net cash provided by (used in) financing activities		(486,078	)		286,781
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					(87,929	)		4,940
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					157,115			101,604
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	69,186		$	106,544

See notes to consolidated financial statements.

5

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)

NOTE 1 — Organization

         Apartment Investment and Management Company, a Maryland corporation incorporated on January 10, 1994 (“AIMCO” and, together with its consolidated subsidiaries and other controlled entities, the “Company”), owns a majority of the ownership interests in AIMCO Properties, L.P., (the “Operating Partnership”) through its wholly owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP, Inc. The Company held an approximate 86% interest in the Operating Partnership as of September 30, 2001. AIMCO-GP, Inc. is the sole general partner of the Operating Partnership.

         As of September 30, 2001, AIMCO:

• owned or controlled (consolidated) and managed 154,081 units in 564 apartment properties;

• held an equity interest in (unconsolidated) and managed 97,120 units in 593 apartment properties; and

• managed 52,604 units in 409 apartment properties for third party owners, primarily pursuant to long term, non-cancelable agreements.

         At September 30, 2001, AIMCO had 74,224,713 shares of Class A Common Stock (the “Common Stock”) outstanding and the Operating Partnership had 12,376,417 Partnership Common OP Units (“Common OP Units”) and other units (excluding units held by the Company), for a combined total of 86,601,130 shares of Common Stock, Common OP Units and other units outstanding.

NOTE 2 — Basis of Presentation

         The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001.

         The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

         For further information, refer to the statements and notes thereto included in the AIMCO annual report on Form 10-K for the year ended December 31, 2000. Certain 2000 financial statement amounts have been reclassified to conform to the 2001 presentation.

         The accompanying consolidated financial statements include the accounts of AIMCO, the Operating Partnership, majority owned subsidiaries and controlled real estate limited partnerships. Interests held by limited partners in real estate partnerships controlled by the Company are reflected as minority interest in other entities. All significant intercompany balances and transactions have been eliminated in consolidation. Minority interest in limited partnerships represents the non-controlling partners’ share of the underlying net assets of the Company’s controlled limited partnerships. With regard to such partnerships, losses in excess of the minority partners’ basis of $19.2 million for the three months ended, and $30.1 for the nine months ended, September 30, 2001 have been charged to operations. The assets of property owning limited partnerships and limited liability companies owned or

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controlled by AIMCO or the Operating Partnership generally are not available to pay creditors of AIMCO or the Operating Partnership.

NOTE 3 — Acquisitions

During the nine months ended September 30, 2001 the Company purchased:

• for $148.5 million, limited partnership interests in 238 partnerships (which own 274 properties) where AIMCO serves as general partner;

• interests in five apartment communities with details below:

Date Acquired	Location	Number of Units		Purchase Price	Ownership Interest
March 2001	Naperville, IL		240	$19 million		100.00	%
April 2001	Farmington Hills, MI		981	$23 million		49.99	%
April 2001	Iowa City, Iowa		401	$10 million		100.00	%
June 2001	Venice, California		795	$58 million		42.77	%
June 2001	Jacksonville, Florida		256	$10 million		100.00	%

         On March 26, 2001, the Company completed a merger pursuant to an agreement entered into on November 29, 2000 between AIMCO and Oxford Tax Exempt Fund II Limited Partnership (“OTEF”), for a total purchase price of $270 million, comprised of $100 million in Class P Convertible Cumulative Preferred Stock (the “Class P Preferred Stock”), $106 million in Common Stock issued at $48.46 per share, $17 million in cash, and $47 million in assumed liabilities. OTEF merged with a subsidiary of the Operating Partnership. In connection with the Company’s acquisition of interests in properties (the “Oxford properties”) from affiliates of Oxford Realty Financial Group, Inc., on September 20, 2000, the Company had acquired interests in OTEF’s managing general partner and OTEF’s associate general partner. After the merger, the Company’s interests in OTEF include a 1% general partner interest held by OTEF’s managing general partner and a 99% limited partner interest held by the Operating Partnership. OTEF was a publicly traded master limited partnership that invested primarily in tax-exempt bonds issued to finance high quality apartment and senior living/health care communities, the majority of which were owned by affiliates of OTEF, including the Oxford properties. In the merger, each BAC was converted into the right to receive 0.299 shares of Common Stock and 0.547 shares of AIMCO’s Class P Preferred Stock. In addition, the BAC holders received a special distribution of $50 million, or $6.21 per BAC.

NOTE 4 — Notes Receivable

         The following table summarizes the Company’s notes receivable from unconsolidated real estate partnerships and subsidiaries at September 30, 2001 and 2000 (in thousands):

	Notes Receivable from				Notes Receivable from
	Unconsolidated Real				Unconsolidated
	Estate Partnerships				Subsidiaries
	2001		2000		2001		2000
Par value notes	$	128,540	$	60,636	$	—	$	92,743
Discounted notes		128,863		84,951		—		—
Total	$	257,403	$	145,587	$	—	$	92,743

         The Company recognizes interest income earned from its investments in notes receivable based upon whether the collectibility of such amounts is both probable and estimable. The notes receivable were either extended by the Company and are carried at the face amount plus accrued interest (“par value notes”) or were made by predecessors whose positions have been acquired by the Company at a discount and are carried at the acquisition amount using the cost recovery method (“discounted notes”).

         As of September 30, 2001 and September 30, 2000, the Company held $128.5 million and $60.6 million, respectively, of par value notes receivable from unconsolidated real estate partnerships, including accrued interest, for which management believes the collectibility of such amounts is both probable and estimable. As such, interest

7

income from the par value notes is generally recognized as it is earned. Interest income from the par value notes for the three and nine months ended September 30, 2001 totaled $8.1 million and $22.8 million, respectively, and for the three and nine months ended September 30, 2000, totaled $7.0 million and $17.0 million, respectively.

         As of September 30, 2001 and 2000, the Company held discounted notes, including accrued interest, with a carrying value of $128.9 million and $85.0 million, respectively. The total face value plus accrued interest of these notes were $289 million and $221 million in 2001 and 2000, respectively. Effective January 1, 2001, the Company now consolidates its previously unconsolidated subsidiaries (see Note 10). As a result, the notes receivable from unconsolidated subsidiaries have been eliminated and notes receivable from unconsolidated real estate partnerships have increased, and includes discounted notes which were held at the previously unconsolidated subsidiaries. In general, interest income from the discounted notes is not recognized as it is earned until such time as the timing and amounts of cash flows are probable and estimable.

         Under the cost recovery method, the discounted notes are carried at the acquisition amount, less subsequent cash collections, until such time as collectibility is probable and the timing and amounts are estimable. Based upon closed or pending transactions (including sales activity), market conditions, and improved operations of the obligor, among other things, certain notes and the related discounts have been determined to be collectible. Accordingly, interest income that had previously been deferred and portions of the related discounts were recognized as interest income during the period. For the three and nine months ended September 30, 2001, the Company recognized deferred interest income and discounts of approximately $3.1 million ($0.04 per basic and diluted share) and $5.7 million ($0.08 per basic and diluted share), respectively, and in the three and nine months ended September 30, 2000, the Company recognized deferred interest income and discounts of approximately $7.2 million ($0.11 per basic and $0.10 per diluted share) and $20.6 million ($0.31 per basic and $0.30 per diluted share), respectively. Approximately 90% of the recognized interest income is collected in cash or recapitalized within 12 months from the date that such amounts were determined to be collectible, and the remainder is collected in the following nine months.

NOTE 5 — Commitments and Contingencies

Legal

         The Company is a party to various legal actions resulting from its operating activities. These actions are routine litigation and administrative proceedings arising in the ordinary course of business, some of which are covered by liability insurance, and none of which are expected to have a material adverse effect on the consolidated financial condition or results of operations of the Company and its subsidiaries taken as a whole.

Limited Partnerships

         In connection with the Company’s acquisitions of interests in limited partnerships that own properties (including mergers with such limited partnerships) the Company and its affiliates are sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the limited partners of such partnerships or violations of the relevant partnership agreements. The Company believes it complies with its fiduciary obligations and relevant partnership agreements, and does not expect any such legal actions to have a material adverse effect on the consolidated financial condition or results of operations of the Company and its subsidiaries taken as a whole.

Environmental

         Various Federal, state and local laws subject property owners or operators to liability for the costs of removal or remediation of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of the hazardous substances. The presence of, or the failure to properly remediate, hazardous substances may adversely affect occupancy at contaminated apartment communities and our ability to sell or finance contaminated properties. In addition to the costs associated with investigation and remediation actions brought by governmental agencies, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal or remediation of hazardous substances

8

at the disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous or toxic substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of our properties, the Company could potentially be liable for environmental liabilities or costs associated with properties or properties it acquires or manages in the future.

NOTE 6 — Stockholders’ Equity

Preferred Stock

         On July 20, 2001, AIMCO completed the sale of 3,600,000 shares of newly created Class R Cumulative Preferred Stock, par value $0.01 per share (the “Class R Preferred Stock”) in an underwritten public offering. AIMCO also gave the underwriters an option to purchase up to 540,000 additional shares of the Class R Preferred Stock to cover over-allotments, which was exercised on July 26, 2001. On August 1, 2001 an additional 800,000 shares were issued pursuant to an underwriting agreement dated July 27, 2001. The total net proceeds of approximately $119 million were used to repay short-term indebtedness. Holders of Class R Preferred Stock are entitled to receive dividends that are cumulative from the date of original issue and are payable quarterly each year, when and as declared by the AIMCO board of directors beginning on September 15, 2001, in an amount per share equal to $2.50 per year (equivalent to 10% of the $25 liquidation preference). Preferred stock for cash at a price per share equal to the liquidation preference plus accumulated, accrued and unpaid dividends. The Class R Preferred Stock is senior to Common Stock as to dividends and liquidation. Upon any liquidation, dissolution or winding up of AIMCO, before payments of distributions by AIMCO are made to any holders of Common Stock, the holders of the Class R Preferred Stock are entitled to receive a liquidation preference of $25 per share, plus accumulated, accrued and unpaid dividends. Each share of Class R Preferred Stock is redeemable beginning July 20, 2006, at the option of the Company, at a price equal to a liquidation preference of $25 per share, plus all accumulated, accrued, and unpaid dividends, if any, to the date fixed for redemption.

         On March 26, 2001, AIMCO issued 4,000,000 shares of newly created Class P Preferred Stock, par value $.01 per share, in connection with the OTEF merger. The Class P Preferred Stock is valued at $100 million based on a $25 per share liquidation preference. Holders of Class P Preferred Stock are entitled to receive, when and as declared by the AIMCO board of directors, cash dividends in an amount per share equal to the greater of (i) $2.25 per year (equivalent to 9% of the liquidation preference) or (ii) the cash dividends payable on the number of shares of Common Stock into which a share of Class P Preferred Stock is convertible. Each share of Class P Preferred Stock is convertible at the option of the holder into 0.4464 shares of Common Stock, subject to certain anti-dilutive adjustments. The initial conversion ratio was in excess of the fair market value of the Common Stock on the commitment date. The Class P Preferred Stock is senior to Common Stock as to dividends and liquidation. Upon any liquidation, dissolution or winding up of the Company, before payments or distributions by the Company are made to any holders of Common Stock, the holders of the Class P Preferred Stock are entitled to receive a liquidation preference of $25 per share, plus accumulated, accrued and unpaid dividends. Each share of Class P Preferred Stock is redeemable beginning March 26, 2004, at the option of the Company, at a price equal to a liquidation preference of $25 per share, plus all accumulated, accrued and unpaid dividends, if any, to the date fixed for redemption.

         On March 19, 2001, AIMCO completed the sale of 2,200,000 shares of its Class Q Cumulative Preferred Stock, $.01 par value per share (the “Class Q Preferred Stock”), in an underwritten public offering. AIMCO also gave the underwriters an option to purchase up to 330,000 additional shares of the Class Q Preferred Stock to cover over-allotments, which was exercised on March 29, 2001. The net proceeds of approximately $61 million were used to repay short-term indebtedness. Holders of Class Q Preferred Stock are entitled to receive, when and as declared by the AIMCO board of directors cash dividends in an amount per share equal to $2.525 per year (equivalent to 10.10% of the liquidation preference). On and after March 19, 2006, the Company may redeem the Class Q Preferred Stock for cash at a price per share equal to the $25 liquidation preference plus accumulated, accrued and unpaid dividends, if any, to the redemption date. The Class Q Preferred Stock is senior to Common Stock as to dividends and liquidation. Upon any liquidation, dissolution or winding up of AIMCO, before payments or distributions by AIMCO are made to any holders of Common Stock, the holders of the Class Q Preferred Stock are entitled to receive a liquidation preference of $25 per share, plus accumulated, accrued and unpaid dividends. Each share of Class Q Preferred Stock is redeemable beginning March 19, 2006, at the option of the Company, at a price equal to a liquidation preference of $25 per share, plus all accumulated, accrued and unpaid dividends, if any, to the date fixed for redemption.

Common Stock

         On March 26, 2001, AIMCO issued approximately 2.2 million shares of Common Stock in connection with the OTEF merger. Pursuant to the agreement of merger, each OTEF BAC was converted into the right to receive 0.299 shares of Common Stock.

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         During the three and nine months ended September 30, 2001, the Company repurchased and retired approximately 45,000 shares and 713,000 shares, respectively, of Common Stock at average prices of $45.62 per share and $43.03 per share, respectively.

         During the three and nine months ended September 30, 2001, the holders of trust convertible preferred securities (“TOPRS”) converted a total of $4.0 million and $11.0 million of TOPRS into 84,109 and 224,881 shares of Common Stock, respectively. The convertible preferred securities were assumed by AIMCO in October 1998 in connection with its merger with Insignia Financial Group, Inc. The preferred securities have a conversion price of $49.61 per share which, based on a liquidation amount of $50 per security, results in the issuance of 1.0079 shares of Common Stock for each preferred security converted.

         During the nine months ended September 30, 2001, approximately 312,000 shares of Common Stock were issued in exchange for Common OP Units.

10

NOTE 7 — Earnings Per Share

         Earnings per share is calculated based on the weighted average number of shares of common stock, common stock equivalents and dilutive convertible securities outstanding during the period. The following tables illustrate the calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2001 and 2000 (in thousands, except per share data):

			Three Months Ended
			September 30,
			2001			2000
NUMERATOR:
Net income			$	26,111		$	30,236
Preferred stock dividends				(24,341	)		(15,728	)
Numerator for basic and diluted earnings per share — income attributable to common stockholders			$	1,770		$	14,508
DENOMINATOR:
Denominator for basic earnings per share — weighted average number of shares of common stock outstanding				73,114			67,715
Effect of dilutive securities:
Dilutive potential common shares, options and warrants				1,406			4,018
Denominator for dilutive earnings per share				74,520			71,733
Basic earnings (loss) per common share:
	Operations		$	(0.02	)	$	0.08
	Gain on disposition of properties			0.04			0.13
		Total	$	0.02		$	0.21
Diluted earnings (loss) per common share:
	Operations		$	(0.02	)	$	0.08
	Gain on disposition of properties			0.04			0.12
		Total	$	0.02		$	0.20

			Nine Months Ended
			September 30,
			2001			2000
NUMERATOR:
Net income			$	70,564		$	67,940
Preferred stock dividends				(65,444	)		(44,843	)
Numerator for basic and diluted earnings per share — income attributable to common stockholders			$	5,120		$	23,097
DENOMINATOR:
Denominator for basic earnings per share — weighted average number of shares of common stock outstanding				72,150			66,641
Effect of dilutive securities:
Dilutive potential common shares, options and warrants				1,014			1,837
Denominator for dilutive earnings per share				73,164			68,478
Basic earnings per common share:
	Operations		$	0.01		$	0.14
	Gain on disposition of properties			0.06			0.21
		Total	$	0.07		$	0.35
Diluted earnings per common share:
	Operations		$	0.01		$	0.13
	Gain on disposition of properties			0.06			0.21
		Total	$	0.07		$	0.34

11

NOTE 8 — Industry Segments

         AIMCO has two reportable segments: real estate and service business. The Company owns and operates multi-family apartment communities throughout the United States and Puerto Rico which generate rental and other property related income through the leasing of apartment units to a diverse base of residents. The Company separately evaluates the performance of each of its apartment communities. However, because each of the apartment communities has similar economic characteristics, facilities, services and residents, the apartment communities have been aggregated into a single apartment communities segment, or real estate segment. There are different components of the multi-family business for which management considers disclosure to be useful. All real estate revenues are from external customers and no revenues are generated from transactions with other segments. There were no residents that contributed 10% or more of the Company’s total revenues during the three and nine months ended September 30, 2001 and 2000. The Company also manages apartment properties for third parties and affiliates through its service business segment. As disclosed, a significant portion of the revenues of the service business are from affiliates of the Company.

         The performance measure used by management of the Company for each segment is its contribution to free cash flow (“Free Cash Flow” (“FCF”)). Free Cash Flow is defined by the Company as net operating income minus the capital spending required to maintain the related assets. Free Cash Flow measures profitability prior to the cost of capital. Other performance measures also used by management of the Company include Funds From Operations (“FFO”), Adjusted Funds From Operations (“AFFO”) and Earnings Before Structural Depreciation (“EBSD”).

         The following tables present the contribution (separated between consolidated and unconsolidated activity) to the Company’s Free Cash Flow for the three and nine months ended September 30, 2001 and 2000 from these segments, and a reconciliation of Free Cash Flow to Funds From Operations, Adjusted Funds From Operations, and net income (in thousands, except equivalent units (ownership effected and period weighted) and monthly rents):

12

FREE CASH FLOW FROM BUSINESS COMPONENTS
For the Three Months Ended September 30, 2001 and 2000
(in thousands, except share and unit data)

				2001											2000
				Consolidated			Unconsolidated		Total			%			Consolidated			Unconsolidated		Total			%
Real Estate
	Conventional
			Average monthly rent greater than $1,000 per unit (equivalent units of 9,374 and 2,487 for 2001 and 2000)	$	19,700		$	3,319		23,019			10.7	%	$	10,465		$	2,449		12,914			7.5	%
			Average monthly rent $900 to $1,000 per unit (equivalent units of 8,684 and 2,304 for 2001 and 2000)		18,670			782		19,452			9.0	%		9,622			543		10,165			5.9	%
			Average monthly rent $800 to $900 per unit (equivalent units of 13,050 and 3,462 for 2001 and 2000)		23,511			993		24,504			11.4	%		12,539			1,300		13,839			8.0	%
			Average monthly rent $700 to $800 per unit (equivalent units of 20,353 and 8,698 for 2001 and 2000)		24,125			2,814		26,939			12.5	%		15,805			1,141		16,946			9.8	%
			Average monthly rent $600 to $700 per unit (equivalent units of 34,280 and 27,225 for 2001 and 2000)		37,844			3,589		41,433			19.2	%		40,015			1,861		41,876			24.5	%
			Average monthly rent $500 to $600 per unit (equivalent units of 41,919 and 40,558 for 2001 and 2000)		32,406			3,105		35,511			16.4	%		38,532			4,213		42,745			24.8	%
			Average monthly rent less than $500 per unit (equivalent units of 20,634 and 23,363 for 2001 and 2000)		10,174			523		10,697			5.0	%		14,316			837		15,153			8.8	%
			Subtotal conventional real estate contribution to Free Cash Flow		166,430			15,125		181,555			84.2	%		141,294			12,344		153,638			89.3	%
Affordable (equivalent units of 12,515 and 12,445 for 2001 and 2000)					3,184			6,452		9,636			4.5	%		6,731			7,362		14,093			8.2	%
College housing (average rent of $545 and $663 per month for 2001 and 2000) (equivalent units of 2,947 and 2,490 for 2001 and 2000)					2,600			35		2,635			1.2	%		3,206			129		3,335			1.9	%
Other real estate					4,838			142		4,980			2.3	%		1,215			159		1,374			0.8	%
Minority interest					(19,170	)		—		(19,170	)		(9.0	%)		(24,217	)		—		(24,217	)		(14.1	%)
			Total real estate contribution to Free Cash Flow		157,882	(1)		21,754		179,636			83.2	%		128,229	(1)		19,994		148,223			86.1	%
Service Business
		Management contracts (property and asset management)
			Controlled properties		10,694			—		10,694			4.9	%		3,195			1,200		4,395			2.5	%
			Third party with terms in excess of one year		400			—		400			0.2	%		—			2,701		2,701			1.6	%
			Third party cancelable in 30 days		869			—		869			0.4	%		—			1,142		1,142			0.7	%
			Service business contribution to Free Cash Flow before fees		11,963			—		11,963			5.5	%		3,195			5,043		8,238			4.8	%
		Activity based fees			13,607			—		13,607			6.3	%		1,015			678		1,693			1.0	%
			Total service business contribution to Free Cash Flow		25,570	(2)		—		25,570			11.8	%		4,210	(2)		5,721		9,931			5.8	%
Interest income
		General partner loan interest			8,051			—		8,051			3.7	%		7,043			—		7,043			4.1	%
		Transactional income			5,831			—		5,831			2.7	%		7,160			—		7,160			4.2	%
		Money market and interest bearing accounts			1,118			—		1,118			0.5	%		4,638			—		4,638			2.7	%
			Total interest income contribution to Free Cash Flow		15,000			—		15,000			6.9	%		18,841			—		18,841			11.0	%
General and Administrative Expense					(4,319	)		—		(4,319	)		(1.9	%)		(4,936	)		—		(4,936	)		(2.9	%)
Free Cash Flow (FCF) (4)					194,133			21,754		215,887			100	%		146,344			25,715		172,059			100	%

13

FREE CASH FLOW FROM BUSINESS COMPONENTS
For the Three Months Ended September 30, 2001 and 2000
(in thousands, except share and unit data)

			2001									2000
			Consolidated			Unconsolidated			Total			Consolidated			Unconsolidated			Total
Free Cash Flow (FCF) (4)				194,133			21,754			215,887			146,344			25,715			172,059
Interest expense:
	Secured debt
		Long-term, fixed rate		(69,000	)		(12,339	)		(81,339	)		(56,771	)		(15,297	)		(72,068	)
		Long-term, variable rate		(7,958	)		(1,576	)		(9,534	)		(281	)		(433	)		(714	)
		Short-term		(2,251	)		(2	)		(2,253	)		(1,658	)		—			(1,658	)
	Lines of credit and other unsecured debt			(4,204	)		—			(4,204	)		(8,433	)		(335	)		(8,768	)
	Interest expense on convertible preferred securities			(294	)		—			(294	)		(3,426	)		—			(3,426	)
	Interest capitalized			2,068			—			2,068			2,714			—			2,714
		Total interest expense before minority interest		(81,639	)		(13,917	)		(95,556	)		(67,855	)		(16,065	)		(83,920	)
	Minority interest share of interest expense			9,844			—			9,844			18,440			—			18,440
		Total interest expense after minority interest		(71,795	)		(13,917	)		(85,712	)		(49,415	)		(16,065	)		(65,480	)
Distributions on preferred OP units				(2,758	)		—			(2,758	)		(1,653	)		—			(1,653	)
Dividends on preferred securities owned by minority interest				(678	)		—			(678	)		(678	)		—			(678	)
Dividends on preferred stock				(24,341	)		—			(24,341	)		(15,728	)		—			(15,728	)
		Total dividends/distributions on preferred securities		(27,777	)		—			(27,777	)		(18,059	)		—			(18,059	)
Non-structural depreciation, net of capital replacements				(1,105	)		(278	)		(1,383	)		(3,608	)		(1,665	)		(5,273	)
Amortization of intangibles				(4,230	)		—			(4,230	)		(1,898	)		(186	)		(2,084	)
Gain on disposition of properties				2,847			—			2,847			8,902			—			8,902
Deferred income tax benefit				—			—			—			—			286			286
		Earnings Before Structural Depreciation (EBSD)(4)		92,073			7,559			99,632			82,266			8,085			90,351
Structural depreciation, net of minority interest in other entities				(85,157	)		(12,420	)		(97,577	)		(55,881	)		(18,394	)		(74,275	)
		Net income (loss) attributable to common OP unitholders and stockholders		6,916			(4,861	)(3)		2,055			26,385			(10,309	)(3)		16,076
Gain on disposition of properties				(2,847	)		—			(2,847	)		(8,902	)		—			(8,902	)
Income tax arising from disposition of properties				1,207			—			1,207			—			—			—
Structural depreciation, net of minority interest in other entities				85,157			12,420			97,577			55,881			18,394			74,275
Non-structural depreciation, net of minority interest in other entities				14,094			2,478			16,572			11,736			3,226			14,962
Amortization of intangibles				4,230			—			4,230			1,898			186			2,084
Deferred income tax benefit				—			—			—			—			(286	)		(286	)
		Funds From Operations (FFO)(4)		108,757			10,037			118,794			86,998			11,211			98,209
Capital replacement reserve				(12,987	)		(2,200	)		(15,187	)		(8,129	)		(1,562	)		(9,691	)
		Adjusted Funds From Operations (AFFO)(4)	$	95,770		$	7,837		$	103,607		$	78,869		$	9,649		$	88,518

						Earnings						Earnings
		Earnings		Shares		Per Share		Earnings		Shares		Per Share
EBSD
	Basic	$	99,632		85,420			$	90,351		74,022
	Diluted		116,855		104,302				104,546		91,615
Net Income
	Basic		2,055		85,420	$	0.02		16,076		74,022	$	0.21
	Diluted		2,055		86,826	$	0.02		16,076		78,040	$	0.20
FFO
	Basic		118,794		85,420				98,209		74,022
	Diluted		136,017		104,302				112,485		91,615
AFFO
	Basic		103,607		85,420				88,518		74,022
	Diluted		120,830		104,302				102,794		91,615

14

FREE CASH FLOW FROM BUSINESS COMPONENTS
For the Nine Months Ended September 30, 2001 and 2000
(in thousands, except share and unit data)

					2001											2000
					Consolidated			Unconsolidated		Total			%			Consolidated			Unconsolidated		Total			%
Real Estate
	Conventional
		Average monthly rent greater than $1,000 per unit (equivalent units of 8,730 and 4,686 for 2001 and 2000)			$	58,887		$	7,417	$	66,304			10.5	%	$	29,640		$	5,081		34,721			7.1	%
		Average monthly rent $900 to $1,000 per unit (equivalent units of 8,330 and 2,875 for 2001 and 2000)				54,447			1,645		56,092			8.9	%		16,433			1,308		17,741			3.6	%
		Average monthly rent $800 to $900 per unit (equivalent units of 12,706 and 6,831 for 2001 and 2000)				70,958			3,938		74,896			11.8	%		42,091			3,921		46,012			9.4	%
		Average monthly rent $700 to $800 per unit (equivalent units of 18,331 and 8,978 for 2001 and 2000)				70,818			6,906		77,724			12.3	%		40,322			5,362		45,684			9.3	%
		Average monthly rent $600 to $700 per unit (equivalent units of 36,023 and 27,629 for 2001 and 2000)				128,381			11,325		139,706			22.0	%		104,637			10,059		114,696			23.4	%
		Average monthly rent $500 to $600 per unit (equivalent units of 39,555 and 39,972 for 2001 and 2000)				97,786			9,964		107,750			17.0	%		111,741			14,098		125,839			25.7	%
		Average monthly rent less than $500 per unit (equivalent units of 18,403 and 23,046 for 2001 and 2000)				29,708			1,660		31,368			5.0	%		45,135			4,608		49,743			10.1	%
			Subtotal conventional real estate contribution to Free Cash Flow			510,985			42,855		553,840			87.5	%		389,999			44,437		434,436			88.6	%
	Affordable (equivalent units of 13,480 and 13,003 for 2001 and 2000)					12,220			19,094		31,314			4.9	%		13,772			26,390		40,162			8.2	%
	College housing (average rent of $538 and $663 per month for 2001 and 2000) (equivalent units of 3,140 and 2,691 for 2001 and 2000)					7,811			294		8,105			1.3	%		9,755			619		10,374			2.1	%
	Other real estate					10,816			384		11,200			1.8	%		4,391			1,630		6,021			1.2	%
	Minority interest					(66,022	)		—		(66,022	)		(10.4	%)		(67,232	)		—		(67,232	)		(13.5	%)
				Total real estate contribution to Free Cash Flow		475,810	(1)		62,627		538,437			85.1	%		350,685	(1)		73,076		423,761			86.4	%
Service Business
	Management contracts (property and asset management)
		Controlled properties				29,972			—		29,972			4.7	%		14,520			5,058		19,578			4.0	%
		Third party with terms in excess of one year				1,006			—		1,006			0.2	%		—			7,226		7,226			1.5	%
		Third party cancelable in 30 days				1,779			—		1,779			0.3	%		—			2,570		2,570			0.5	%
				Service business contribution to Free Cash Flow before fees		32,757			—		32,757			5.2	%		14,520			14,854		29,374			6.0	%
	Activity based fees					28,321			—		28,321			4.5	%		2,746			743		3,489			0.7	%
		Total service business contribution to Free Cash Flow				61,078	(2)		—		61,078			9.6	%		17,266	(2)		15,597		32,863			6.7	%
Interest income
	General partner loan interest					22,806			—		22,806			3.6	%		16,952			—		16,952			3.4	%
	Transactional income					16,989			—		16,989			2.7	%		20,557			—		20,557			4.2	%
	Money market and interest bearing accounts					7,243			—		7,243			1.1	%		9,843			—		9,843			2.0	%
		Total interest income contribution to Free Cash Flow				47,038			—		47,038			7.4	%		47,352			—		47,352			9.6	%
General and Administrative Expense						(12,868	)		—		(12,868	)		(2.2	%)		(13,613	)		—		(13,613	)		(3.0	%)
Free Cash Flow (FCF)(4)						571,058			62,627		633,685			100	%		401,690			88,673		490,363			100	%

15

FREE CASH FLOW FROM BUSINESS COMPONENTS
For the Nine Months Ended September 30, 2001 and 2000
(in thousands, except share and unit data)

				2001									2000
				Consolidated			Unconsolidated			Total			Consolidated			Unconsolidated			Total
Free Cash Flow (FCF)(4)					571,058			62,627			633,685			401,690			88,673			490,363
Interest expense:
		Secured debt
			Long-term, fixed rate		(208,835	)		(34,947	)		(243,782	)		(162,066	)		(35,228	)		(197,294	)
			Long-term, variable rate		(22,778	)		(4,232	)		(27,010	)		(742	)		(1,178	)		(1,920	)
			Short-term		(6,177	)		(49	)		(6,226	)		(4,974	)		—			(4,974	)
		Lines of credit and other unsecured debt			(18,953	)		(2	)		(18,955	)		(21,545	)		(1,168	)		(22,713	)
		Interest expense on convertible preferred securities			(1,308	)		—			(1,308	)		(8,285	)		—			(8,285	)
		Interest capitalized			8,029			—			8,029			7,153			1,165			8,318
			Total interest expense before minority interest		(250,022	)		(39,230	)		(289,252	)		(190,459	)		(36,409	)		(226,868	)
		Minority interest share of interest expense			37,326			—			37,326			36,511			—			36,511
			Total interest expense after minority interest		(212,696	)		(39,230	)		(251,926	)		(153,948	)		(36,409	)		(190,357	)
Distributions on preferred OP units					(7,049	)		—			(7,049	)		(4,855	)		—			(4,855	)
Dividends on preferred securities owned by minority interest					(2,035	)		—			(2,035	)		(2,030	)		—			(2,030	)
Dividends on preferred stock					(65,444	)		—			(65,444	)		(44,843	)		—			(44,843	)
	Total dividends/distributions on preferred securities				(74,528	)		—			(74,528	)		(51,728	)		—			(51,728	)
Non-structural depreciation, net of capital replacements					(6,200	)		(656	)		(6,856	)		(8,372	)		(2,927	)		(11,299	)
Amortization of intangibles					(13,463	)		—			(13,463	)		(4,968	)		(1,205	)		(6,173	)
Gain on disposition of properties					4,403			—			4,403			14,234			—			14,234
Deferred income tax provision					—			—			—			—			(2,675	)		(2,675	)
		Earnings Before Structural Depreciation (EBSD)(4)			268,574			22,741			291,315			196,908			45,457			242,365
Structural depreciation, net of minority interest in other entities					(248,658	)		(36,809	)		(285,467	)		(169,584	)		(47,408	)		(216,992	)
		Net income (loss) attributable to common OP unitholders and stockholders			19,916			(14,068	)(3)		5,848			27,324			(1,951	)(3)		25,373
Gain on disposition of properties					(4,403	)		—			(4,403	)		(14,234	)		—			(14,234	)
Income tax arising from disposition of properties					1,207			—			1,207
Structural depreciation, net of minority interest in other entities					248,658			36,809			285,467			169,584			47,408			216,992
Non-structural depreciation, net of minority interest in other entities					41,348			6,956			48,304			31,769			8,771			40,540
Amortization of intangibles					13,463			—			13,463			4,968			1,205			6,173
Deferred income tax provision					—			—			—			—			2,675			2,675
		Funds From Operations (FFO)(4)			320,189			29,697			349,886			219,411			58,108			277,519
Capital replacement reserve					(35,149	)		(6,300	)		(41,449	)		(23,397	)		(5,851	)		(29,248	)
		Adjusted Funds From Operations (AFFO)(4)		$	285,040		$	23,397		$	308,437		$	196,014		$	52,257		$	248,271

						Earnings						Earnings
		Earnings		Shares		Per Share		Earnings		Shares		Per Share
EBSD
	Basic	$	291,315		84,014			$	242,365		72,969
	Diluted		340,086		102,055				275,405		89,396
Net Income
	Basic		5,848		84,014	$	0.07		25,373		72,969	$	0.35
	Diluted		5,848		85,028	$	0.07		25,373		74,806	$	0.34
FFO
	Basic		349,886		84,014				277,519		72,969
	Diluted		398,657		102,055				315,910		89,396
AFFO
	Basic		308,437		84,014				248,271		72,969
	Diluted		357,208		102,055				286,662		89,396

16

(1) Reconciliation of total consolidated real estate contribution to Free Cash Flow to consolidated rental and other property revenues:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2001		2000		2001		2000
Consolidated real estate contribution to Free Cash Flow		$	157,882	$	128,229	$	475,810	$	350,685
Plus: minority interest			19,170		24,217		66,022		67,232
Plus: capital replacement reserve			12,987		8,129		35,149		23,398
Plus: property operating expense			131,522		107,031		384,366		302,435
Plus: owned property management expense			2,240		3,473		8,458		9,713
	Rental and other property revenues	$	323,801	$	271,079	$	969,805	$	753,463

(2) Reconciliation of total service business contribution to Free Cash Flow to consolidated management fees and other income from affiliates:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2001		2000		2001		2000
Consolidated service business contribution to Free Cash Flow		$	25,570	$	4,210	$	61,078	$	17,266
Plus: management and other expenses			35,147		10,220		97,637		19,599
	Management fees and other income from affiliates	$	60,717	$	14,430	$	158,715	$	36,865

(3) Reconciliation of unconsolidated net income attributable to common OP unitholders and stockholders to equity in losses of unconsolidated real estate partnerships and equity in earnings (losses) of unconsolidated subsidiaries:

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2001			2000			2001			2000
Equity in earnings (losses) of unconsolidated subsidiaries		$	—		$	(1,934	)	$	—		$	2,538
Equity in losses of unconsolidated real estate partnerships			(4,861	)		(8,375	)		(14,068	)		(4,489	)
	Unconsolidated net income (loss) attributable to common OP unitholders and stockholders	$	(4,861	)	$	(10,309	)	$	(14,068	)	$	(1,951	)

(4) Free Cash Flow (FCF), Earnings Before Structural Depreciation (EBSD), Funds From Operations (FFO), and Adjusted Funds From Operations (AFFO) are measurement standards used by the Company’s management. These should not be considered alternatives to net income or net cash flow from operating activities, as determined in accordance with GAAP, as an indication of the Company’s performance or as a measure of liquidity.

• “Free Cash Flow” or “FCF” is defined by the Company as net operating income minus the capital spending required to maintain the related assets. It measures profitability prior to the cost of capital.

• “Earnings Before Structural Depreciation” or “EBSD” is defined by the Company as Net Income, determined in accordance with GAAP, plus “structural depreciation”, i.e., depreciation of buildings and land improvements whose useful lives exceed 20 years.

• “Funds From Operations” or “FFO” is defined by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) as net income (loss), computed in accordance with generally accepted accounting principles (“GAAP”), excluding gains and losses from debt restructuring and sales of property, plus real estate related depreciation and amortization (excluding amortization of financing costs),

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and after adjustments for unconsolidated partnerships and joint ventures. The Company calculates FFO (diluted) based on the NAREIT definition, as further adjusted for minority interest in the Operating Partnership, amortization of intangibles for which no economic loss is anticipated or occurring, interest expense on mandatorily convertible preferred securities, the non-cash deferred portion of the income tax provision and less the payment of dividends on perpetual and non-dilutive convertible preferred stock. There can be no assurance that the Company’s basis for computing FFO is comparable with that of other real estate investment trusts.

•

“Adjusted Funds From Operations” or “AFFO” is defined by the Company as FFO less a charge for capital replacements equal to at least $380 per apartment unit.

Reconciliation of FCF, EBSD, FFO and AFFO to Net Income:

	For the Three Months Ended September 30, 2001												For the Three Months Ended September 30, 2000
	FCF			EBSD			FFO			AFFO			FCF			EBSD			FFO			AFFO
Amount per Free Cash Flow schedule above	$	215,887		$	99,632		$	118,794		$	103,607		$	172,059		$	90,351		$	98,209		$	88,518
Total interest expense after minority interest		(85,712	)		—			—			—			(65,480	)		—			—			—
Dividends on preferred securities owned by minority interest		(676	)		—			—			—			(680	)		—			—			—
Distributions on preferred OP units		—			2,758			2,758			2,758			—			1,653			1,653			1,653
Dividends on preferred stock		—			24,341			24,341			24,341			—			15,728			15,728			15,728
Structural depreciation, net of minority interest		(97,577	)		(97,577	)		(97,577	)		(97,577	)		(74,275	)		(74,275	)		(74,275	)		(74,275	)
Non-structural depreciation, net of minority interest		(16,572	)		—			(16,572	)		(16,572	)		(14,962	)		—			(14,962	)		(14,962	)
Capital replacement reserve		15,187			—			—			15,187			9,691			—			—			9,691
Amortization of intangibles		(4,230	)		—			(4,230	)		(4,230	)		(2,084	)		—			(2,084	)		(2,084	)
Gain on disposition of properties		2,847			—			2,847			2,847			8,902			—			8,902			8,902
Income tax arising from disposition of properties		—			—			(1,207	)		(1,207	)		—			—			—			—
Deferred income tax benefit (provision)		—			—			—			—			286			—			286			286
Minority interest in Operating Partnership		(3,043	)		(3,043	)		(3,043	)		(3,043	)		(3,221	)		(3,221	)		(3,221	)		(3,221	)
Net income	$	26,111		$	26,111		$	26,111		$	26,111		$	30,236		$	30,236		$	30,236		$	30,236

	For the Nine Months Ended September 30, 2001												For the Nine Months Ended September 30, 2000
	FCF			EBSD			FFO			AFFO			FCF			EBSD			FFO			AFFO
Amount per Free Cash Flow schedule above	$	633,685		$	291,315		$	349,886		$	308,437		$	490,363		$	242,365		$	277,519		$	248,271
Total interest expense after minority interest		(251,926	)		—						—			(190,357	)		—			—			—
Dividends on preferred securities owned by minority interest		(2,036	)		—			—			—			(2,037	)		—			—			—
Distributions on preferred OP units		—			7,049			7,049			7,049			—			4,855			4,855			4,855
Dividends on preferred stock		—			65,444			65,444			65,444			—			44,843			44,843			44,843
Structural depreciation, net of minority interest		(285,467	)		(285,467	)		(285,467	)		(285,467	)		(216,992	)		(216,992	)		(216,992	)		(216,992	)
Non-structural depreciation, net of minority interest		(48,304	)		—			(48,304	)		(48,304	)		(40,540	)		—			(40,540	)		(40,540	)
Capital replacement reserve		41,449			—			—			41,449			29,248			—			—			29,248
Amortization of intangibles		(13,463	)		—			(13,463	)		(13,463	)		(6,173	)		—			(6,173	)		(6,173	)
Income tax arising from disposition of properties		—			—			(1,207	)		(1,207	)		—			—			—			—
Gain on disposition of properties		4,403			—			4,403			4,403			14,234			—			14,234			14,234
Deferred income tax benefit (provision)		—			—			—			—			(2,675	)		—			(2,675	)		(2,675	)
Minority interest in Operating Partnership		(7,777	)		(7,777	)		(7,777	)		(7,777	)		(7,131	)		(7,131	)		(7,131	)		(7,131	)
Net income	$	70,564		$	70,564		$	70,564		$	70,564		$	67,940		$	67,940		$	67,940		$	67,940

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ASSETS:
		September 30, 2001		December 31, 2000
Total assets for reportable segments(1)		$	6,939,579	$	6,522,114
Corporate and other assets			1,115,206		1,177,760
	Total consolidated assets	$	8,054,785	$	7,699,874

(1) Assets associated with the service business are immaterial, and therefore included in total assets for reportable segments, and not separately disclosed.

NOTE 9 — Derivative Financial Instruments

         In June 1998, Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“Statement 133”) was issued. In June 2000, Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Hedging Activities (“Statement 138”), an amendment of Statement 133 was issued. Statements 133 and 138 require that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction.

         The Company predominately uses long-term, fixed-rate and self-amortizing non-recourse debt in order to avoid, among other things, risk related to fluctuating interest rates. Where the Company does use variable-rate debt, occasionally the Company enters into short-term economic hedges, such as interest rate swap agreements and interest rate cap agreements, to reduce its exposure to interest rate fluctuations. The interest rate swap agreements are generally utilized by the Company to modify the Company’s exposure to interest rate risk by converting the variable-rate debt to a fixed rate. The interest rate cap agreements utilized by the Company effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying variable rate debt. Normally, the interest rate caps are embedded within the original debt contract and are considered clearly and closely related to the debt contract and, therefore, are not measured as separate derivative instruments. Free standing interest rate exchange agreements were not material and were recorded on the balance sheet at their fair value and in current earnings in each period. The Company adopted Statements 133 and 138 on January 1, 2001. Due to the Company’s limited use of derivative instruments, the adoption of Statements 133 and 138 did not have a material effect on the Company’s financial statements.

NOTE 10 — Consolidation of Subsidiaries

         In prior years, in order to satisfy certain requirements of the Internal Revenue Code applicable to the Company’s status as a REIT, certain assets of the Company were held through unconsolidated subsidiaries in which the Operating Partnership held non-voting preferred stock representing a 99% economic interest and certain officers and directors of the Company held all of the voting common stock, representing a 1% economic interest. As a result of the controlling ownership interest in the unconsolidated subsidiaries being held by others, the Company accounted for its interest in the unconsolidated subsidiaries using the equity method.

         The REIT Modernization Act, which became effective January 1, 2001, among other things, permits REITS to own taxable REIT subsidiaries. Therefore, effective January 1, 2001, the Company acquired the 1% controlling ownership interest in the unconsolidated subsidiaries. As a result, the Company now consolidates these subsidiaries.

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         The following table provides selected financial information assuming these subsidiaries were consolidated in the prior year (in thousands):

	Three Months Ended			Nine Months Ended
Operating Data:	September 30, 2000			September 30, 2000
Income from property operations	$	160,575		$	441,315
Income from service business		11,986			32,490
Interest and other income		19,158			48,982
Interest expense		(68,579	)		(193,610	)
Net income		30,236			67,940

Balance Sheet Data:	As of December 31, 2000
Real estate	$	6,370,288
Total assets		8,043,846
Total indebtedness		4,625,314
Total liabilities		5,015,416
Stockholders’ equity		2,501,657

NOTE 11 — Transactional Income

         For the three and nine months ended September 30, 2001, the Company’s interest and other income included transactional income (gains on sale of bonds or accretion of discounted notes) of $5.8 and $17.0 million, respectively.

         During the nine months ended September 30, 2001, the Company received net proceeds of approximately $237.8 million from the sale of certain of the tax-exempt mortgage bonds. The remaining tax-exempt mortgage bonds of $9.0 million have been classified with other assets and are recorded at their fair value. All gains and losses have been realized and were determined on the specific identification method and are reflected in net income.

NOTE 12 — Dilutive Securities

         In June 2001, AIMCO shareholders approved the sale by AIMCO’s Operating Partnership of an aggregate of 15,000 of its Class II, III, and IV High Performance Partnership Units (the “Class II Units”, “Class III Units” and “Class IV Units,” respectively, and, collectively the “High Performance Units”) to three limited liability companies comprised of a limited number of AIMCO employees for an aggregate offering price of $4.9 million. For further information on this transaction, see Proposal 3 in AIMCO’s proxy statement for its 2001 annual meeting of stockholders.

         There is substantial uncertainty that the High Performance Units will have more than nominal value due to the required total return over the respective measurement periods. The Company has not met the required measurement benchmarks at September 30, 2001, and therefore, the Company has not recorded any value to the High Performance Units in the consolidated financial statements as of September 30, 2001, and such High Performance Units have had no dilutive effect.

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         AIMCO has additional dilutive securities, which include options, warrants, convertible preferred securities and convertible debt securities. The following table represents the total amount of common shares that would be outstanding if all dilutive securities were converted or exercised (not all of which are included in the fully diluted share count) as of September 30, 2001:

Type of Security		As of September 30, 2001
Common Stock			74,224,713
Common OP Units and other units			12,376,417
Vested options and warrants			2,316,361
Convertible preferred stock			13,320,026
Convertible preferred OP units			3,520,543
Convertible debt securities			430,287
	Total		106,188,347

NOTE 13 — Recent Accounting Developments

         In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statement. Other intangible assets will continue to be amortized over their useful lives.

         The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. Application of the non-amortization provisions of the Statement is expected to result in an increase in annual net income of $6.7 million ($.09 per share) per year. During 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002, and believes that there will be no material effect on the earnings and financial position of the Company.

         In July of 2001, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 102, “Selected Loan Loss Allowance Methodology and Documentation Issue” (“SAB 102”). SAB 102 summarizes certain of the SEC’s views on the development, documentation, and application of a systematic methodology as required by Financial Reporting Release No. 28 for determining allowances for loan and lease losses in accordance with generally accepted accounting principles. The Company believes that it is in compliance with the guidelines set forth in SAB 102.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

         The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the effect of acquisitions, the Company’s future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation, national and local economic conditions: the general level of interest rates; the terms of governmental regulations that affect the Company and interpretations of those regulations; the competitive environment in which the Company operates; financing risks, including the risk that the Company’s cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for residents in such markets; acquisition and development risks, including failure of such acquisitions to perform in accordance with projections; and possible environmental liabilities, including costs which may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Company. In addition, the Company’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 its ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distributions levels and diversity of stock ownership. Readers should carefully review the Company’s financial statements and the notes thereto, as well as the risk factors described in documents the Company files from time to time with the Securities and Exchange Commission.

         AIMCO is a real estate investment trust with headquarters in Denver, Colorado and 18 regional operating centers, which holds a geographically diversified portfolio of apartment communities. As of September 30, 2001, the Company owned or managed 303,805 apartment units, comprised of 154,081 units in 564 apartment properties owned or controlled by the Company (the “Owned Properties”), 97,120 units in 593 apartment properties in which the Company has an equity interest (the “Equity Properties”) and 52,604 units in 409 apartment properties which the Company manages for third parties (the “Managed Properties” and together with the Owned Properties and the Equity Properties, the “AIMCO Properties”). The apartment communities are located in 46 states, the District of Columbia and Puerto Rico.

         In the three months ended September 30, 2001, the Company completed the following:

• purchased $28 million of limited partnership interests in 51 partnerships;

• sold 27 apartment communities for a total of $156 million, of which AIMCO’s share was $70 million; and

• refinanced 25 mortgage loans generating a total of $255 million of proceeds, of which AIMCO’s share was $207, at a weighted average interest rate of 7.07%

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Results of Operations

         Comparison of the Three Months Ended September 30, 2001 to the Three Months Ended September 30, 2000

         In order for a meaningful analysis of the financial statements to be made, the revenues and expenses for the unconsolidated subsidiaries for the three months ended September 30, 2000, have been included as though they had been consolidated in the following analysis. All significant intercompany revenues and expenses have been eliminated.

	Three Months Ended
	September 30,
	2001			2000
RENTAL PROPERTY OPERATIONS:
Rental and other property revenues	$	323,801		$	271,079
Property operating expense		(131,522	)		(107,031	)
Owned property management expense		(2,240	)		(3,473	)
Income from property operations		190,039			160,575
SERVICE BUSINESS:
Management fees and other income from affiliates		60,717			44,038
Management and other expenses		(35,147	)		(29,968	)
Amortization of intangibles		(4,230	)		(2,084	)
Income from service business		21,340			11,986
General and administrative expenses		(4,319	)		(4,936	)
Depreciation on rental property		(100,127	)		(76,548	)
Interest expense		(81,639	)		(68,579	)
Interest and other income		15,000			19,158
Equity in losses of unconsolidated real estate partnerships		(4,861	)		(8,375	)
Deferred income tax benefit (provision)		—			286
Minority interest in other entities		(9,126	)		(9,012	)
Income before gain on disposition of properties and minority interest in Operating Partnership		26,307			24,555
Gain on disposition of properties, net		2,847			8,902
Income before minority interest in Operating Partnership		29,154			33,457
Minority interest in Operating Partnership, common		(285	)		(1,568	)
Minority interest in Operating Partnership, preferred		(2,758	)		(1,653	)
Net income	$	26,111		$	30,236

Net Income

         The Company recognized net income of $26.1 million for the three months ended September 30, 2001, compared with $30.2 million for the three months ended September 30, 2000. The following paragraphs discuss the results of operations in detail.

23

Consolidated Rental Property Operations

         Consolidated rental and other property revenues from the consolidated Owned Properties totaled $323.8 million for the three months ended September 30, 2001, compared with $271.1 million for the three months ended September 30, 2000, an increase of $52.7 million, or 19.4%. This increase in consolidated rental and other property revenues is a result of the purchase of interests in the Oxford properties, as well as 11 other properties in 2000, and 3 properties in 2001, which contributed 94.0% of the increase; the purchase of controlling interests and the subsequent consolidation of partnerships owning 7 properties in 2000 and 3 properties in 2001, which contributed 7.2% of the increase, and a 3.1% increase in “same store” sales revenues, which contributed 15.9% of the total increase. The effect of the foregoing was offset by the sale of 18 apartment properties in 2000 and 20 apartment properties in 2001.

         Consolidated property operating expenses for the consolidated Owned Properties, consisting of on-site payroll costs, utilities, contract services, turnover costs, repairs and maintenance, advertising and marketing, property taxes and insurance, totaled $131.5 million for the three months ended September 30, 2001, compared with $107.0 million for the three months ended September 30, 2000, an increase of $24.5 million or 22.9%. The increase in property operating expenses was due to the purchase of interests in the Oxford properties, as well as 11 other properties in 2000, and 3 properties in 2001, which contributed 67.8% of the increase; the purchase of controlling interests and the subsequent consolidation of partnerships owning 7 properties in 2000 and 3 properties in 2001, which contributed 24.0% of the increase, and an increase in “same store” expenses of 3.5%, which contributed 15.3% of the total increase, offset by the sale of 18 apartment properties in 2000 and 20 apartment properties in 2001.

         Depreciation expense increased $23.6 million to $100.1 million for the three months ended September 30, 2001, compared to $76.5 million for the three months ended September 30, 2000. This is primarily a result of the purchase of interests in the Oxford properties, as well as 11 other properties in 2000, and 3 in 2001, and the purchase of controlling interests and the subsequent consolidation of partnerships owning 7 properties in 2000 and 3 properties in 2001.

Consolidated Service Business

         The Company’s share of income from the consolidated service business totaled $21.3 million for the three months ended September 30, 2001, compared with income of $12.0 million for the three months ended September 30, 2000, an increase of $9.3 million. The increase resulted from higher construction revenue of $13.8 million, due to the seasonality of increased capital expenditures from construction and redevelopment activities. In addition, the Company took advantage of the lower interest rate environment and increased its refinancing activities generating additional fee revenue of approximately $2.9 million. This was offset by higher operating and corporate expenses of $5.3 million, primarily employee severance, and health insurance costs, and additional property and asset management contract intangible amortization of $2.1 million as a result of the acquisition of interests in the Oxford properties.

Consolidated General and Administrative Expenses

         Consolidated general and administrative expenses decreased by $.6 million or 12.2% from $4.9 million for the three months ended September 30, 2000 compared to $4.3 million for the three months ended September 30, 2001, due to a reduction in temporary office assistance, recruiting, outside consultant, and travel expenses.

Consolidated Interest Expense

         Consolidated interest expense, which includes the amortization of deferred financing costs, totaled $81.6 million for the three months ended September 30, 2001, compared with $68.6 million for the three months ended September 30, 2000, an increase of $13.0 million, or 19.0%. The increase was due to the acquisition of interests in the Oxford properties, as well as 11 other properties in 2000, and 3 properties in 2001, which contributed 138.7% of the increase; and the purchase of controlling interests and the subsequent consolidation of partnerships owning 7 properties in 2000 and 3 properties in 2001, which contributed 5.4% of the increase. These increases were offset by the sale of 18 apartment properties in 2000 and 20 apartment properties in 2001. In addition, there was a 32.4%

24

decrease in the interest expense on the Company’s line of credit, as the Company had $109 million outstanding on its credit facility as of September 30, 2001, compared with $175 million at September 30, 2000, and the cost of such borrowing was at a weighted average interest rate of 6.12% compared to 9.17% at September 30, 2001 and September 30, 2000, respectively.

Consolidated Interest and Other Income

         Consolidated interest and other income decreased $4.2 million or 21.9% from $19.2 million for the three months ended September 30, 2000, to $15.0 million for the three months ended September 30, 2001. The majority of this decrease is due to a $3.5 million decrease in interest income from money market and interest bearing accounts. The Company had $69.2 million in cash as of September 30, 2001, compared to $106.5 million at September 30, 2000, as well as interest rates on deposit accounts have decreased. In addition, transactional income, which was comprised of gain on sale of bonds or accretion of discounted notes, net of allocated expenses, decreased nearly $1.3 million from $7.2 million for the three months ended September 30, 2000 to $5.8 million for the three months ended September 30, 2001.

Equity in Losses of Unconsolidated Real Estate Partnerships

         Equity in losses of unconsolidated real estate partnerships totaled $4.9 million for the three months ended September 30, 2001, compared with $8.4 million for the three months ended September 30, 2000, an increase of $3.5 million. The acquisition of interests in the Oxford properties in 2000 was a contributing factor to this increase.

Minority Interest in Other Entities

         Minority interest in other entities was relatively unchanged, with $9.1 million for the three months ended September 30, 2001, compared to $9.0 million for the three months ended September 30, 2000.

Gain on Disposition of Properties

         Gain on disposition of properties totaled $2.8 million for the three months ended September 30, 2001, compared to $8.9 million for the three months ended September 30, 2000, a decrease of $6.1 million. In both periods the properties sold were considered by management to be inconsistent with the Company’s long-term investment strategy.

Minority Interest in Operating Partnership

         Minority interest in Operating Partnership remained relatively unchanged with $3.0 million for the three months ended September 30, 2001 compared to $3.2 million for the three months ended September 30, 2001.

25

         Comparison of the Nine Months Ended September 30, 2001 to the Nine Months Ended September 30, 2000

         In order for a meaningful analysis of the financial statements to be made, the revenues and expenses for the unconsolidated subsidiaries for the nine months ended September 30, 2000, have been included as though they had been consolidated in the following analysis. All significant intercompany revenues and expenses have been eliminated.

	Nine Months Ended
	September 30,
	2001			2000
RENTAL PROPERTY OPERATIONS:
Rental and other property revenues	$	969,805		$	753,463
Property operating expense		(384,366	)		(302,435	)
Owned property management expense		(8,458	)		(9,713	)
Income from property operations		576,981			441,315
SERVICE BUSINESS:
Management fees and other income from affiliates		158,715			129,137
Management and other expenses		(97,637	)		(90,476	)
Amortization of intangibles		(13,463	)		(6,171	)
Income from service business		47,615			32,490
General and administrative expenses		(12,868	)		(13,613	)
Depreciation on rental property		(300,731	)		(222,822	)
Interest expense		(250,022	)		(193,610	)
Interest and other income		47,038			48,982
Equity in losses of unconsolidated real estate partnerships		(14,068	)		(6,766	)
Income tax benefit (provision)		—			(2,675	)
Minority interest in other entities		(20,007	)		(22,464	)
Income before gain on disposition of properties and minority interest in Operating Partnership		73,938			60,837
Gain on disposition of properties, net		4,403			14,234
Income before minority interest in Operating Partnership		78,341			75,071
Minority interest in Operating Partnership, common		(728	)		(2,276	)
Minority interest in Operating Partnership, preferred		(7,049	)		(4,855	)
Net income	$	70,564		$	67,940

Net Income

         The Company recognized net income of $70.6 million for the nine months ended September 30, 2001, compared with $67.9 million for the nine months ended September 30, 2000. The following paragraphs discuss the results of operations in detail.

Consolidated Rental Property Operations

         Consolidated rental and other property revenues from the consolidated Owned Properties totaled $969.8 million for the nine months ended September 30, 2001, compared with $753.5 million for the nine months ended September 30, 2000, an increase of $216.3 million, or 28.7%. This increase in consolidated rental and other property revenues is a result of the purchase of interests in the Oxford properties, as well as 12 other properties in 2000, and 3 in 2001, which contributed 67.1% of the increase; the purchase of controlling interests and the subsequent consolidation of

26

partnerships owning 66 properties in 2000 and 3 properties in 2001, which contributed 23.4% of the increase, and a 4.2% increase in “same store” sales revenues, which contributed 14.6% of the total increase. The effect of the foregoing was offset by the sale of 28 apartment properties in 2000 and 20 apartment properties in 2001.

         Consolidated property operating expenses for the consolidated Owned Properties, consisting of on-site payroll costs, utilities, contract services, turnover costs, repairs and maintenance, advertising and marketing, property taxes and insurance, totaled $384.4 million for the nine months ended September 30, 2001, compared with $302.4 million for the nine months ended September 30, 2000, an increase of $82.0 million or 27.1%. The increase in property operating expenses was due to the purchase of interests in the Oxford properties, as well as 12 other properties in 2000, and 3 in 2001, which contributed 61.4% of the increase; the purchase of controlling interests and the subsequent consolidation of partnerships owning 66 properties in 2000 and 3 properties in 2001, which contributed 23.4% of the increase, and an increase in “same store” expenses of 4.6%, which contributed 17.0% of the total increase, offset by the sale of 28 apartment properties in 2000 and 20 apartment properties in 2001.

         Depreciation expense increased $77.9 million to $300.7 million for the nine months ended September 30, 2001, compared to $222.8 million for the nine months ended September 30, 2000 as a primary result of the purchase of interests in the Oxford properties, as well as 12 other properties in 2000, and 3 in 2001, and the purchase of controlling interests and the subsequent consolidation of partnerships owning 66 properties in 2000 and 3 properties in 2001.

Consolidated Service Business

         The Company’s share of income from the consolidated service business totaled $47.6 million for the nine months ended September 30, 2001, compared with income of $32.5 million for the nine months ended September 30, 2000, an increase of $15.1 million. The increase resulted from higher construction revenue of $24.4 million, due to the seasonality of increased capital expenditures from construction and redevelopment activities. In addition, the Company took advantage of the lower interest rate environment and increased its refinancing activities generating additional fee revenue of approximately $5.2 million. This was offset by higher operating and corporate expenses of $7.2 million, primarily employee severance, and health insurance costs, and additional property and asset management contract intangible amortization of $7.3 million as a result of the acquisition of interests in the Oxford properties.

Consolidated General and Administrative Expenses

         Consolidated general and administrative expenses decreased by $.7 million or 5.1% from $13.6 million for the nine months ended September 30, 2000 compared to $12.9 million for the nine months ended September 30, 2001, due to a reduction in temporary office assistance, recruiting, outside consultant, and travel expenses.

Consolidated Interest Expense

         Consolidated interest expense, which includes the amortization of deferred financing costs, totaled $250.0 million for the nine months ended September 30, 2001, compared with $193.6 million for the nine months ended September 30, 2000, an increase of $56.4 million, or 29.1%. The increase was due to the acquisition of interests in the Oxford properties, as well as 12 other properties in 2000, and 3 in 2001, which contributed 93.7% of the increase; and the purchase of controlling interests and the subsequent consolidation of partnerships owning 66 properties in 2000 and 3 properties in 2001, which contributed 19.3% of the increase. These increases were offset by the sale of 28 apartment properties in 2000 and 20 apartment properties in 2001. In addition, there was a 6.6% decrease in the interest expense on the Company’s line of credit, as the Company had $109 million outstanding on its credit facility as of September 30, 2001, compared with $175 million at September 30, 2000, and the cost of such borrowing was at a weighted average interest rate of 6.12% compared to 9.17% at September 30, 2001 and September 30, 2000, respectively.

Consolidated Interest and Other Income

         Consolidated interest and other income remained relatively unchanged with $47.0 million for the nine months ended September 30, 2001, compared to $49.0 million for the nine months ended September 30, 2000. While

27

transactional income, which was comprised of gain on sale of bonds or accretion of discounted notes, net of allocated expenses, decreased nearly $3.6 million from $20.6 million for the three months ended September 30, 2000 to $17.0 million for the three months ended September 30, 2001, and interest from money market and interest bearing accounts decreased $2.6 million, interest from general partner notes receivable increased $5.9 million, as a result of increased funding of general partner loans.

Equity in Losses of Unconsolidated Real Estate Partnerships

         Equity in losses of unconsolidated real estate partnerships totaled $14.1 million for the nine months ended September 30, 2001, compared with $6.8 million for the nine months ended September 30, 2000, a decrease of $7.3 million. The acquisition of interests in the Oxford properties in 2000 has contributed over $1.0 million to the earnings of unconsolidated real estate partnerships. However, this was offset by the purchase of equity interests in better performing apartment properties which resulted in these properties being consolidated and contributing to consolidated rental revenues and expenses (66 properties in 2000 and 3 properties in 2001).

Deferred Income Tax Benefit (Provision)

         In the nine months ended September 30, 2001, there was no provision for income taxes, compared to an expense of $2.7 million in the nine months ended September 30, 2000. This decrease is a result of a reduction in income from the Company’s taxable REIT subsidiaries.

Minority Interest in Other Entities

         Minority interest in other entities totaled $20.0 million for the nine months ended September 30, 2001, compared to $22.5 million for the nine months ended September 30, 2000, a decrease of $2.5 million. This decrease is a result of the Company’s purchase of additional interests in consolidated properties, thereby reducing the minority interest allocation.

Gain on Disposition of Properties

         Gain on disposition of properties totaled $4.4 million for the nine months ended September 30, 2001, compared to $14.2 million for the nine months ended September 30, 2000, a decrease of $9.8 million. In both periods the properties sold were considered by management to be inconsistent with the Company’s long-term investment strategy.

Minority Interest in Operating Partnership

         Minority interest in Operating Partnership increased $.7 million, from $7.1 million for the nine months ended September 30, 2000 to $7.8 million for the nine months ended September 30, 2001. This increase is due to additional partnership units issued in tender, merger and acquisition related activities, resulting in dilution and an increase to minority interest shareholders. As a result, AIMCO’s interest in the Operating Partnership has decreased to 86% from 91% as of September 30, 2000.

28

Same Store Property Operating Results

         The Company defines “same store” properties as conventional apartment communities in which AIMCO’s ownership interest exceeded 10% in the comparable periods of 2001 and 2000. Total portfolio includes same store properties plus acquisition and redevelopment properties. The following table summarizes the unaudited conventional rental property operations on a “same store” and a total portfolio basis (dollars in thousands):

	Same Store
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2001			2000			2001			2000
Properties		645			645			645			645
Apartment units		176,701			176,701			176,701			176,701
Average physical occupancy		93.6	%		94.7	%		93.6	%		94.3	%
Average rent collected/unit/month	$	687		$	687		$	687		$	662
Revenues	$	278,183		$	269,864		$	824,850		$	791,433
Expenses		107,934			104,248			313,471			299,732
Net operating income	$	170,249		$	165,616		$	511,379		$	491,701

	Total Portfolio
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2001			2000			2001			2000
Properties		679			672			679			672
Apartment units		188,768			185,260			188,768			185,260
Average physical occupancy		92.7	%		92.3	%		92.2	%		91.6	%
Average rent collected/unit/month	$	691		$	669		$	689		$	662
Revenues	$	298,919		$	282,146		$	884,316		$	824,210
Expenses		118,054			110,184			341,198			316,678
Net operating income	$	180,865		$	171,962		$	543,118		$	507,532

29

Funds From Operations

         For the three and nine months ended September 30, 2001 and 2000, the Company’s Funds From Operations (“FFO”) on a fully diluted basis were as follows (dollars in thousands):

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2001			2000			2001			2000
Net Income			$	26,111		$	30,236		$	70,564		$	67,940
	Adjustments:
		Real estate depreciation, net of minority interest		99,251			72,564			290,007			206,298
		Real estate depreciation related to unconsolidated entities		14,898			16,672			43,765			51,235
		Amortization of intangibles		4,230			2,084			13,463			6,171
		Gain on disposition of properties		(2,847	)		(8,902	)		(4,403	)		(14,234	)
	Other items:
		Deferred income tax provision (benefit)		—			(286	)		—			2,675
		Income tax arising from the disposition of properties		1,207			—			1,207			—
		Preferred stock dividends and distributions		(10,170	)		(6,530	)		(25,031	)		(19,590	)
		Interest expense on mandatorily redeemable convertible preferred securities		294			3,426			1,308			8,284
		Minority interest in Operating Partnership		3,043			3,221			7,777			7,131
Funds From Operations (FFO)			$	136,017		$	112,485		$	398,657		$	315,910
Weighted average number of common shares, common share equivalents, Common OP Units and other units outstanding:
	Common share and common share equivalents			91,996			83,441			90,191			81,201
	Common OP Units and other units			12,306			8,174			11,864			8,195
				104,302			91,615			102,055			89,396

Liquidity and Capital Resources

         For the nine months ended September 30, 2001 and 2000, net cash flows were as follows (dollars in thousands):

	2001			2000
Cash flow provided by operating activities	$	384,939		$	281,185
Cash flow provided by (used in) investing activities		13,210			(563,026	)
Cash flow provided by (used in) financing activities		(486,078	)		286,781

         During the nine months ended September 30, 2001, the Company closed $791 million in secured notes payable with a weighted average interest rate of 6.19%. Each of the notes is individually secured by one of 75 properties with no cross-collateralization, and the majority are long-term, fixed-rate and fully amortizing. The Company used its share of the proceeds, approximately $633 million, to repay the existing mortgage debt and to fund operating activities.

         On November 6, 2001, the Company amended and restated its revolving credit facility. The commitment remains $400 million, and the number of lender participants in the facility’s syndicate is ten. The obligations under the amended and restated credit facility are secured by a first priority pledge of certain non-real estate assets of the Company and the stock of certain subsidiaries of the Company owned by the Operating Partnership, NHP Management Company, AIMCO/Bethesda Holdings, Inc., and AIMCO Holdings, L.P. Borrowings under the amended and restated credit facility are available for general corporate purposes. The amended and restated credit facility matures in July 2004 and can be extended once at AIMCO’s option, for a term of one year. The annual interest rate under the credit facility is based either on LIBOR or a base rate which is the higher of Bank of America’s reference rate or 0.50% over the federal funds rate, plus, in either case, an applicable margin. From November 6, 2001 through July 31,

30

2002, the margin ranges between 2.05% and 2.55%, in the case of LIBOR-based loans, and between 0.55% and 1.05%, in the case of base rate loans, based upon a fixed charge coverage ratio. Commencing August 1, 2002 through maturity, the margin will range between 1.60% and 2.35%, in the case of LIBOR-based loans, and between 0.20% and 0.95% in the case of base rate loans, based upon a fixed charge coverage ratio. The weighted average interest rate at November 6, 2001 was 5.01%. The amount available under the credit facility at September 30, 2001 was $291 million. At November 6, 2001, $128.5 million was outstanding on the line, providing availability of $271.5 million.

         On September 20, 2000, AIMCO completed the acquisition of interests in the Oxford properties. In order to pay the cash portion of the purchase price and transactions costs, the Company borrowed $302 million from Bank of America, N.A., Lehman Commercial Paper Inc. and several other lenders, pursuant to a term loan. In March 2001, the Company paid off the remaining balance of the term loan and charged to operations approximately $2.2 million for the complete amortization of deferred financing and loan origination costs principally related to the term loan.

         At September 30, 2001, the Company had $69.2 million in cash and cash equivalents. In addition, the Company had $147.6 million of restricted cash, primarily consisting of reserves and impounds held by lenders for capital replacements, property taxes and insurance. The Company’s principal liquidity requirements include normal operating expenses, payments of principal and interest on outstanding debt, capital improvements, acquisitions of or investments in properties, dividends paid to its stockholders and distributions paid to limited partners. The Company considers its cash provided by operating activities, and funds available under its credit facilities, to be adequate to meet short-term liquidity demands. The Company utilizes its revolving credit facility for general corporate purposes and to fund investments on an interim basis.

         The Company expects to fund its requirements for property acquisitions, tender offers and refinancing of short-term debt with: cash generated from operations; long-term, fixed rate, fully amortizing non-recourse property debt; secured or unsecured short-term debt; and the issuance of debt or equity securities in public offerings or private placements.

         From time to time, the Company has offered to acquire and, in the future, may offer to acquire the interests held by third party investors in certain limited partnerships for which the Company acts as general partner. Any such acquisitions will require funds to pay the cash purchase price for such interests. During the nine months ended September 30, 2001, the Company made separate offers to the limited partners of 238 partnerships to acquire their limited partnership interests, and purchased approximately $148.5 million (including transaction costs) of limited partnership interests.

Return on Assets and Return on Equity

         The Company’s Return On Assets and Return On Equity for the nine months ended September 30, 2001 and 2000 are as follows:

		Based on AFFO						Based on FFO
		Nine Months Ended						Nine Months Ended
		September 30,						September 30,
		2001			2000			2001			2000
Return on Assets(a)			9.9	%		9.9	%		10.4	%		10.4	%
Return on Equity
	Basic(b)		14.3	%		14.7	%		15.5	%		15.9	%
	Diluted(c)		13.1	%		13.2	%		14.1	%		14.2	%

(a) The Company defines Return on Assets (AFFO) as (i) annualized Free Cash Flow, divided by (ii) Average Assets. Average Assets are computed by averaging the sum of Assets, as defined below, at the beginning and the end of the period. Assets are total assets, plus accumulated depreciation, less accumulated Capital Replacements of $145,055 and $77,863 for the nine months ended September 30, 2001 and 2000, respectively,

31

	and less all non-indebtedness liabilities. The Company defines Return on Assets (FFO) as (i) annualized Free Cash Flow plus Capital Replacements, divided by (ii) Average Assets plus accumulated Capital Replacements.
(b)	The Company defines Return on Equity-Basic (AFFO) as (i) annualized AFFO-Basic, divided by (ii) Average Equity. Average Equity is computed by averaging the sum of Equity, as defined below, at the beginning and the end of the period. Equity is total stockholders’ equity, plus accumulated depreciation, less accumulated Capital Replacements of $145,055 and $77,863 for the nine months ended September 30, 2001 and 2000, respectively, less preferred stock, plus minority interest in the Operating Partnership, net of preferred OP unit interests $159,835 and $105,440 for the nine months ended September 30, 2001 and 2000, respectively. The Company defines Return on Equity-Basic (FFO) as (i) annualized AFFO-Basic plus Capital Replacements; divided by (ii) Average Equity plus accumulated Capital Replacements.
(c)	The Company defines Return on Equity-Diluted (AFFO) and Return on Equity-Diluted (FFO) assuming conversion of debt and preferred securities whose conversion is dilutive.

32

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

         The Company’s primary market risk exposure relates to changes in interest rates. The Company is not subject to any foreign currency exchange rate risk or commodity price risk, or any other material market rate or price risks. The Company believes that an increase in energy costs will not have a material adverse effect on its results of operations. The Company uses predominantly long-term, fixed-rate and self-amortizing non-recourse debt in order to avoid the refunding or repricing risks of short-term borrowings. The Company uses short-term debt financing and working capital primarily to fund acquisitions and generally expects to refinance such borrowings with proceeds from equity offerings or long-term debt financings.

         The Company had $708.5 million of variable rate debt outstanding at September 30, 2001, which represented 15.9% of the Company’s total outstanding debt. Based on this level of debt, an increase in interest rates of 1% would result in the Company’s income and cash flows being reduced by $7.1 million on an annual basis.

         The estimated aggregate fair value of the Company’s cash and cash equivalents, receivables, payables and short-term secured and unsecured debt as of September 30, 2001 is assumed to approximate their carrying value due to their relatively short terms. Management further believes that, after consideration of interest rate agreements, the fair market value of the Company’s secured tax-exempt bond debt and secured long-term debt approximates their carrying value, based on market comparisons to similar types of debt instruments having similar maturities.

33

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

         None.

ITEM 2. Changes in Securities and Use of Proceeds

         From time to time during the quarter, AIMCO issued shares of Common Stock in exchange for Common OP Units tendered to the Operating Partnership for redemption in accordance with the terms and provisions of the agreement of limited partnership of the Operating Partnership. Such shares are issued based on an exchange ratio of one share for each Common OP Unit. The shares are issued in exchange for Common OP Units in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof. During the three months ended September 30, 2001, 61,737 shares of Common Stock were issued in exchange for Common OP Units in these transactions.

         During the three months ended September 30, 2001, the holders of trust convertible preferred securities (“TOPRS”) converted a total of $4.0 million of TOPRS into 84,109 shares of Common Stock. The convertible preferred securities were assumed by AIMCO in October 1998 in connection with its merger with Insignia Financial Group, Inc. The preferred securities have a conversion price of $49.61 per share which, based on a liquidation amount of $50 per security, results in the issuance of 1.0079 shares of Common Stock for each preferred security converted.

         All of the foregoing issuances were made in private placement transactions exempt from registration under the Securities Act pursuant to Section 4(2) thereof.

ITEM 3. Defaults Upon Senior Securities

         None.

ITEM 4. Submission of Matters to a Vote of Security Holders

         None.

ITEM 5. Other Information

         None.

34

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits. The following exhibits are filed with this report¹:

EXHIBIT NO.
3.1	Charter (Exhibit 3.1 to AIMCO’s Quarterly Report on Form 10-Q for the period ended June 30, 2001, is incorporated herein by this reference)
3.2	Bylaws (Exhibit 3.2 to AIMCO’s Annual Report on Form 10-K for the fiscal year 2000, is incorporated herein by this reference)
10.1	Payment Guaranty, dated as of November 6, 2001, by AIMCO, AIMCO/Bethesda Holdings, Inc., AIMCO/NHP Holdings, Inc., NHP A&R Services, Inc., AIMCO NHP Properties, Inc. and NHP Management Company, in favor of Bank of America, N.A.
99.1	Agreement re: disclosure of long term debt instruments

(b)

Reports on Form 8-K for the quarter ended September 30, 2001:

During the quarter for which this report if filed, Apartment Investment and Management Company filed its Current Report on Form 8-K, dated July 20, 2001, relating to the sale of 3,600,000 shares of Class R Cumulative Preferred Stock in an underwritten public offering; its Current Report on Form 8-K, dated July 26, 2001, relating to financial results for the quarter ended June 30, 2001; and its Current Report on Form 8-K, dated August 1, 2001, relating to the sale of an additional 800,000 shares of Class R Cumulative Preferred Stock in an underwritten public offering.

¹ Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request.

35

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

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/ PAUL J. McAULIFFE Paul J. McAuliffe Executive Vice President, Chief Financial Officer (duly authorized officer and principal financial officer)
By:	/s/ THOMAS C. NOVOSEL Thomas C. Novosel Senior Vice President, Chief Accounting Officer

Date: November 14, 2001

36

EXHIBIT INDEX(1)

Exhibit
Number	Description
3.1	Charter (Exhibit 3.1 to AIMCO’s Quarterly Report on Form 10-Q for the period ended June 30, 2001, is incorporated herein by this reference)
3.2	Bylaws (Exhibit 3.2 to AIMCO’s Annual Report on Form 10-K for the fiscal year 2000, is incorporated herein by this reference)
10.1	Payment Guaranty, dated as of November 6, 2001, by AIMCO, AIMCO/Bethesda Holdings, Inc., AIMCO/NHP Holdings, Inc., NHP A&R Services, Inc., AIMCO/NHP Properties, Inc. and NHP Management Company, in favor of Bank of America, N.A.
99.1	Agreement re: disclosure of long-term debt instruments

(1) Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request.

EX-10.1

                                                                    EXHIBIT 10.1

                                PAYMENT GUARANTY

                   OF REIT AND OF PREFERRED STOCK SUBSIDIARIES

         This PAYMENT GUARANTY ("GUARANTY") is made as of November 6, 2001, by
the undersigned entities (each a "GUARANTOR") in favor of BANK OF AMERICA, N.A.
("BANK OF AMERICA"), as Administrative Agent for itself and the lenders
("LENDERS") from time to time party to the Credit Agreement (as hereinafter
defined) (in such capacities, "ADMINISTRATIVE AGENT").

                               Factual Background

         The Lenders have made or intend to make a $400,000,000 credit facility
available to AIMCO Properties L.P., a Delaware limited partnership ("AIMCO"),
AIMCO/Bethesda Holdings, Inc., a Delaware corporation ("AIMCO/BETHESDA"), and
NHP Management Company, a District of Columbia corporation ("NHP MANAGEMENT")
(AIMCO, AIMCO/Bethesda and NHP Management are collectively referred to as
"BORROWERS"), in accordance with the Third Amended and Restated Credit Agreement
(the "CREDIT AGREEMENT"), dated as of the date hereof, by and among Borrowers,
Bank of America (as Administrative Agent), Fleet National Bank (as Syndication
Agent), First Union National Bank (as Documentation Agent), Banc of America
Securities LLC and Fleet Securities Inc., as Co-Lead Arrangers and Banc of
America Securities LLC, as Sole Book Manager, and the other Lenders from time to
time party thereto. In connection with the Credit Agreement, the Borrowers have
obtained this Guaranty from the Guarantors and the Guarantors (other than the
REIT) have provided this Guaranty in return for Borrowers' payment of a
guarantee fee. In addition, certain Subsidiaries of Guarantors (other than the
REIT) will be providing a guaranty for which Guarantors (other than the REIT)
have been paid a guarantee fee. Capitalized terms used but not defined herein
will have the meanings set forth in the Credit Agreement. As used herein, the
term "FACILITY" shall refer individually to each of the credit facilities
available to the Borrowers under the Credit Agreement.

                                    Guaranty

         1. Guaranty of Loan.

         (a) Absolute Guaranty. Each Guarantor absolutely, unconditionally and
irrevocably guaranties to Administrative Agent and the Lenders the full payment
of the Indebtedness (as hereinafter defined), and unconditionally agrees to pay
to Administrative Agent and the Lenders the full amount of the Indebtedness.
This is a guaranty of payment, not of collection. If Borrowers default in the
payment when due of the Indebtedness or any part of it, each Guarantor will in
lawful money of the United States pay to Administrative Agent and the Lenders,
on demand, all sums due and owing on the Indebtedness, including all interest,
charges, fees and other sums, costs and expenses.

                                       1


         (b) AIMCO/Bethesda Holdings Inc. Notwithstanding that AIMCO/Bethesda is
a "Borrower" pursuant to the Credit Agreement, if Administrative Agent for any
reason determines that AIMCO/Bethesda is or may be construed as a guarantor or a
surety in respect of the Indebtedness instead of a Borrower with respect
thereto, then AIMCO/Bethesda shall be for all purposes hereunder a Guarantor,
and, without limiting the generality of the foregoing, shall have all of the
obligations and liabilities of a Guarantor hereunder.

         2. Loan. In this Guaranty, the term "Indebtedness" is broadly defined
to mean and include all primary, secondary, direct, indirect, fixed and
contingent obligations of Borrowers to pay principal, interest, prepayment
charges, breakage costs, late charges, loan fees and any other fees, charges,
sums, costs and expenses that may be owing at any time under the Loan Documents,
as any or all of such obligations may from time to time be modified, amended,
extended or renewed. If the amount outstanding under the Indebtedness is
determined by a court of competent jurisdiction, that determination shall be
conclusive and binding on each Guarantor, regardless of whether such Guarantor
was a party to the proceeding in which the determination was made or not.

         3. Rights of Administrative Agent and the Lenders. Each Guarantor
authorizes Administrative Agent or any Lender to perform any or all of the
following acts at any time in its sole discretion, all without notice to such
Guarantor and without affecting such Guarantor's obligations under this
Guaranty:

         (a) Administrative Agent or the Requisite Lenders may alter any terms
     of the Indebtedness or any part of it, including renewing, compromising,
     extending or accelerating, or otherwise changing the time for payment of,
     or increasing or decreasing the rate of interest on, the Indebtedness or
     any part of it.

         (b) Administrative Agent or any Lender may take and hold security for
     the Indebtedness or this Guaranty, accept additional or substituted
     security for either, and subordinate, exchange, enforce, waive, release,
     compromise, fail to perfect and sell or otherwise dispose of any such
     security in accordance with the terms of the Indebtedness.

         (c) Administrative Agent or any Lender may direct the order and manner
     of any sale of all or any part of any security now or later to be held for
     the Indebtedness or this Guaranty, and Administrative Agent or any Lender
     may also bid at any such sale.

         (d) Administrative Agent or any Lender may apply any payments or
     recoveries from Borrowers, Guarantors or any other source, and any proceeds
     of any security, to Borrowers' obligations under the Loan Documents in such
     manner, order and priority as Administrative Agent or such Lender may
     elect, whether or not those obligations are guarantied by this Guaranty or
     secured at the time of the application.

         (e) Administrative Agent or any Lender may release Borrowers of their
     liability for the Indebtedness or any part of it.

         (f) Administrative Agent or any Lender may substitute, add or release
     any one or more Guarantors, other guarantors or endorsers.

                                       2


         (g) In addition to the Indebtedness, Administrative Agent or any Lender
     may extend other credit to Borrowers, and may take and hold security for
     the credit so extended, all without affecting any Guarantor's liability
     under this Guaranty.

         4. Guaranty to be Absolute. Each Guarantor expressly agrees that until
the Indebtedness is paid and performed in full and each and every term, covenant
and condition of this Guaranty is fully performed, such Guarantor shall not be
released by or because of:

         (a) Any act or event (other than payment and performance in full of the
     Indebtedness) which might otherwise discharge, reduce, limit or modify such
     Guarantor's obligations under this Guaranty;

         (b) Any waiver, extension, modification, forbearance, delay or other
     act or omission of Administrative Agent or any Lender, or its failure to
     proceed promptly or otherwise as against Borrowers, any Guarantor or any
     security;

         (c) Any action, omission or circumstance that might increase the
     likelihood that such Guarantor may be called upon to perform under this
     Guaranty or that might affect the rights or remedies of such Guarantor as
     against Borrowers;

         (d) Any dealings occurring at any time between Borrowers and
     Administrative Agent or any Lender, whether relating to the Indebtedness or
     otherwise; or

         (e) Any action of Administrative Agent or any Lender described in
     Section 3 above.

         Each Guarantor hereby acknowledges that absent this Section 4, such
Guarantor might have a defense to the enforcement of this Guaranty as a result
of one or more of the foregoing acts, omissions, agreement, waivers or matters.
Each Guarantor hereby expressly waives and surrenders any defense to its
liability under this Guaranty based upon any of the foregoing acts, omissions,
agreements, waivers or matters. It is the purpose and intent of this Guaranty
that the obligations of each Guarantor under it shall be absolute and
unconditional under any and all circumstances.

         5. Guarantors' Waivers. Each Guarantor waives:

         (a) All statutes of limitations as a defense to any action or
     proceeding brought against such Guarantor by Administrative Agent or any
     Lender, to the fullest extent permitted by law;

         (b) Any right it may have to require Administrative Agent or any Lender
     to proceed against Borrowers, proceed against or exhaust any security held
     from Borrowers, or pursue any other remedy in Administrative Agent's or any
     Lender's power to pursue;

         (c) Any defense based on any claim that such Guarantor's obligations
     exceed or are more burdensome than those of Borrowers;

                                        3


         (d) Any defense based on: (i) any legal disability of Borrowers, (ii)
     any release, discharge, modification, impairment or limitation of the
     liability of Borrowers to Administrative Agent or any Lender from any
     cause, whether consented to by Administrative Agent or any Lender or
     arising by operation of law or from any bankruptcy or other voluntary or
     involuntary proceeding, in or out of court, for the adjustment of
     debtor-creditor relationships ("Insolvency Proceeding"), and (iii) any
     rejection or disaffirmance of the Indebtedness, or any part of it, or any
     security held for it, in any such Insolvency Proceeding;

         (e) Any defense based on any action taken or omitted by Administrative
     Agent or any Lender in any Insolvency Proceeding involving Borrowers,
     including any election to have Administrative Agent's or that Lender's
     claim allowed as being secured, partially secured or unsecured, any
     extension of credit by Lender to Borrowers in any Insolvency Proceeding,
     and the taking and holding by Administrative Agent or any Lender of any
     security for any such extension of credit;

         (f) All presentments, demands for performance, notices of
     nonperformance, protests, notices of protest, notices of dishonor, notices
     of acceptance of this Guaranty and of the existence, creation, or incurring
     of new or additional indebtedness, and demands and notices of every kind
     except for any demand or notice by Administrative Agent or any Lender to
     such Guarantor expressly provided for in Section 1;

         (g) Any defense based on or arising out of any defense that Borrowers
     may have to the payment or performance of the Indebtedness or any part of
     it; and

         (h) Any defense based on or arising out of any action of Administrative
     Agent or any Lender described in Sections 3 or 4 above.

         6. Waivers of Subrogation and Other Rights.

         (a) During the existence of an Event of Default by Borrowers,
     Administrative Agent or any Lender, without prior notice to or consent of
     any Guarantor, may elect to: (i) foreclose either judicially or
     nonjudicially against any real or personal property security it may hold
     for the Indebtedness, (ii) accept a transfer of any such security in lieu
     of foreclosure, (iii) compromise or adjust the Indebtedness or any part of
     it or make any other accommodation with Borrowers or Guarantors, or (iv)
     exercise any other remedy against Borrowers or any security. No such action
     by Administrative Agent or any Lender shall release or limit the liability
     of Guarantors, who shall remain liable under this Guaranty after the
     action, even if the effect of the action is to deprive Guarantors of any
     subrogation rights, rights of indemnity, or other rights to collect
     reimbursement from Borrowers for any sums paid to Administrative Agent or
     any Lender, whether contractual or arising by operation of law or
     otherwise. Each Guarantor expressly agrees that under no circumstances
     shall it be deemed to have any right, title, interest or claim in or to any
     real or personal property to be held by Administrative Agent or any Lender
     or any third party after any foreclosure or transfer in lieu of foreclosure
     of any security for the Indebtedness.

                                       4


         (b) Regardless of whether any Guarantor may have made any payments to
     Lender, each Guarantor hereby waives: (i) all rights of subrogation, all
     rights of indemnity, and any other rights to collect reimbursement from
     Borrowers for any sums paid to Administrative Agent or any Lender, whether
     contractual or arising by operation of law (including the United States
     Bankruptcy Code or any successor or similar statute) or otherwise, (ii) all
     rights to enforce any remedy that Lender may have against Borrowers, and
     (iii) all rights to participate in any security now or later to be held by
     Administrative Agent or any Lender for the Indebtedness, in each case until
     the full and indefeasible payment and performance of all Indebtedness, and
     all obligations of the Guarantors hereunder.

         (c) Each Guarantor waives all rights and defenses arising out of an
     election of remedies by the Administrative Agent or any Lender, even though
     that election of remedies may affect such Guarantor's rights of subrogation
     and reimbursement against the Borrowers by the operation of law or
     otherwise. In addition, such Guarantor waives all rights and defenses that
     such Guarantor may have because the Borrowers' indebtedness is secured by
     real property. This means, among other things, that Administrative Agent
     and the Lenders may collect from such Guarantor without first foreclosing
     on any real or personal property collateral pledged by the Borrowers.

         7. Revival and Reinstatement. If Administrative Agent or any Lender is
required to pay, return or restore to Borrowers or any other person any amounts
previously paid on the Indebtedness because of any Insolvency Proceeding of
Borrowers, any stop notice or any other reason, the obligations of Guarantors
shall be reinstated and revived and the rights of Administrative Agent and such
Lender shall continue with regard to such amounts, all as though they had never
been paid.

         8. Information Regarding Borrowers. Before signing this Guaranty, each
Guarantor investigated the financial condition and business operations of
Borrowers and such other matters as such Guarantor deemed appropriate to assure
itself of Borrowers' ability to discharge its obligations under the Loan
Documents. Each Guarantor assumes full responsibility for that due diligence, as
well as for keeping informed of all matters that may affect Borrowers' ability
to pay and perform its obligations to the Administrative Agent and the Lenders.
Neither Administrative Agent nor any Lender has any duty to disclose to any
Guarantor any information which such party may have or receive about Borrowers'
financial condition, business operations, or any other circumstances bearing on
its ability to perform.

         9. Subordination. Any rights of Guarantors, whether now existing or
later arising, to receive payment on account of any indebtedness (including
interest) owed to any of them by Borrowers or any Subsidiary thereof or to
receive any payment from Borrowers or any such Subsidiary other than those
payments or distributions permitted under Sections 7.07 and 7.10 of the Credit
Agreement shall at all times be subordinate as to lien and time of payment and
in all other respects to the full and prior repayment of the Indebtedness. No
Guarantor shall be entitled to enforce or receive payment of any sums hereby
subordinated until the Indebtedness has been paid and performed in full and any
such sums received in violation of this Guaranty shall be received by such
Guarantor in trust for the Administrative Agent and the Lenders.

                                       5


         10. Financial Information. Each Guarantor shall keep true and correct
financial books and records, using generally accepted accounting principles
consistently applied, or such other accounting principles as the Requisite
Lenders in their reasonable judgment may find acceptable from time to time. Each
Guarantor represents, warrants and covenants to Administrative Agent and the
Lenders that all financial information with respect to such Guarantor delivered
or to be delivered to Administrative Agent and the Lenders by the Borrowers with
respect to such Guarantor under Section 6.01 of the Credit Agreement is or shall
be true and correct and fairly presents or will fairly present the financial
position of such Guarantor for the applicable period. Each Guarantor shall
promptly provide Administrative Agent and the Lenders with any additional
audited financial information that such Guarantor may obtain, and such other
information concerning its affairs and properties as Administrative Agent or any
Lender may reasonably request, including, without limitation, signed copies of
any tax returns if requested by Administrative Agent or the Lenders.

         11. Guarantors' Representations and Warranties. Each Guarantor
represents and warrants that:

         (a) All financial statements delivered to Administrative Agent or the
     Lenders were or will be prepared in accordance with generally accepted
     accounting principles which are applicable to the circumstances as of the
     date of determination or such other accounting principles as may be
     acceptable to the Requisite Lenders at the time of their preparation,;

         (b) There has been no material adverse change in such Guarantor's
     financial condition since the dates of the statements most recently
     furnished to Administrative Agent and the Lenders; and

         (c) All representations and warranties given on behalf of or with
     respect to such Guarantor contained in Section 5 of the Credit Agreement
     and in any other Loan Document or certification made in connection with the
     Credit Agreement are true and correct.

         12. Covenants of Guarantors. Each Guarantor covenants and agrees that
it shall comply with and perform all covenants given on behalf of or with
respect to such Guarantor (whether expressly or as a Subsidiary) contained in
Sections 6 and 7 of the Credit Agreement and in all other Loan Documents.

         13. Intentionally Omitted.

         14. Intentionally Omitted.

         15. Authorization; No Violation. Each Guarantor is authorized to
execute, deliver and perform under this Guaranty, which is a valid, binding, and
enforceable obligation of such Guarantor in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditor's rights generally. The
execution, delivery and performance of this Guaranty are not in violation of any
applicable law, regulation or ordinance, or any order or ruling of any court or
governmental

                                       6


agency applicable to such Guarantor. The Guaranty does not conflict with, or
constitute a breach or default under, any agreement to which such Guarantor is a
party.

         16. Additional and Independent Obligations. Each Guarantor's
obligations under this Guaranty are in addition to its obligations under any
future guaranties, each of which shall remain in full force and effect until it
is expressly modified or released in a writing signed by Administrative Agent
and consented to by the Lenders. Each Guarantor's obligations under this
Guaranty are independent of those of Borrowers on the Indebtedness.
Administrative Agent or the Lenders may bring a separate action, or commence a
separate arbitration proceeding against each Guarantor without first proceeding
against Borrowers, any other person or any security that Administrative Agent or
any Lender may hold, and without pursuing any other remedy. None of
Administrative Agent's or any Lender's rights under this Guaranty shall be
exhausted by any action by Administrative Agent or any Lender until the
Indebtedness has been paid and performed in full in cash.

         17. No Waiver; Consents; Cumulative Remedies. Each waiver by
Administrative Agent or the Lenders must be in writing, and no waiver shall be
construed as a continuing waiver. No waiver shall be implied from Administrative
Agent's or any Lender's delay in exercising or failure to exercise any right or
remedy against Borrowers, any Guarantor or any security. Consent by
Administrative Agent or the Lenders to any act or omission by Borrowers or any
Guarantor shall not be construed as a consent to any other or subsequent act or
omission, or as a waiver of the requirement for Administrative Agent's or the
Lenders' consent to be obtained in any future or other instance. All remedies of
Administrative Agent and each Lender against Borrowers and Guarantors are
cumulative.

         18. No Release. Except as otherwise provided in Section 1, no Guarantor
shall be released, in whole or in part, from its obligations under this Guaranty
except by a writing signed by Administrative Agent and all the Lenders.

         19. Heirs, Successors and Assigns; Participations. The terms of this
Guaranty shall bind and benefit the heirs, legal representatives, successors and
assigns of Administrative Agent, the Lenders and Guarantors; provided, however,
that no Guarantor may assign this Guaranty, or assign or delegate any of its
rights or obligations under this Guaranty, without the prior written consent of
Administrative Agent in each instance. Without notice to or the consent of
Guarantors, Administrative Agent and any Lender may disclose any and all
information in its possession concerning Guarantors, this Guaranty and any
security for this Guaranty to any actual or prospective purchaser of any
securities issued or to be issued by Administrative Agent or such Lender, and to
any actual or prospective purchaser or assignee of any participation or other
interest in the Indebtedness and this Guaranty.

         20. Notices.

         (a) Delivery. All notices, requests and other communications provided
     for hereunder shall be in writing (including, unless the context expressly
     otherwise provides, telegraphic, telex, facsimile transmission or cable
     communication) and mailed, telegraphed, telexed or delivered to the
     recipient's address specified on the signature

                                       7


     pages hereof, or to such other address as shall be designated by such party
     in a written notice to the other party.

         (b) Receipt. All such notices and communications shall, when
     transmitted by overnight delivery, telegraphed, telecopied by facsimile,
     telexed or cabled, be effective when delivered for overnight delivery or to
     the telegraph company, transmitted by telecopier, confirmed by telex
     answerback or delivered to the cable company, respectively, or if
     delivered, upon delivery.

         (c) Reliance. Administrative Agent and each Lender shall be entitled to
     rely on the authority of any person purporting to be a person authorized by
     Guarantors to give such notice, and neither Administrative Agent nor any
     Lender shall have any liability to any Guarantor or any other person on
     account of any action taken or not taken by Administrative Agent or such
     Lender in reliance upon such telephonic or facsimile notice. The obligation
     of each Guarantor hereunder shall not be affected in any way or to any
     extent by any failure by Lender to receive written confirmation of any
     telephonic or facsimile notice or the receipt by Administrative Agent or a
     Lender of a confirmation which is at variance with the terms understood by
     Administrative Agent or such Lender to be contained in the telephonic or
     facsimile notice.

         21. Rules of Construction. In this Guaranty, the word "Borrowers"
includes both the named Borrowers and any other person who at any time assumes
or otherwise becomes primarily liable for all or any part of the obligations of
the named Borrowers on the Indebtedness. The word "person" includes any
individual, company, trust or other legal entity of any kind. The word
"include(s)" means "include(s), without limitation," and the word "including"
means "including, but not limited to." When the context and construction so
require, all words used in the singular shall be deemed to have been used in the
plural and vice versa. No listing of specific instances, items or matters in any
way limits the scope or generality of any language of this Guaranty. All
headings appearing in this Guaranty are for convenience only and shall be
disregarded in construing this Guaranty.

         22. Governing Law. This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of California, without regard to its
choice of law rules.

         23. Costs and Expenses. If any lawsuit or arbitration is commenced
which arises out of, or which relates to this Guaranty, the Loan Documents or
the Indebtedness, the prevailing party shall be entitled to recover from each
other party such sums as the court or arbitrator may adjudge to be reasonable
attorneys' fees (including allocated costs for services of in-house counsel) in
the action or proceeding, in addition to costs and expenses otherwise allowed by
law. In all other situations, including any Insolvency Proceeding, the
Guarantors agree to pay all of the Administrative Agent's and each Lender's
costs and expenses, including attorneys' fees (including allocated costs for
services of the Administrative Agent's and each Lender's in-house counsel) which
may be incurred in any effort to collect or enforce the Indebtedness or any part
of it or any term of this Guaranty. Without limiting any rights of the
Administrative Agent or Lenders under the Credit Agreement, all amounts of any
kind due and payable under this Guaranty (whether for principal, interest, and
other costs under the Indebtedness, or for costs, fees, and expenses for which
the Guarantors are directly responsible

                                       8


hereunder, or otherwise) shall accrue interest from the time the Administrative
Agent or the Lenders make demand therefor hereunder until paid in full in cash
to such Administrative Agent or the Lenders at the Base Rate, as defined in the
Credit Agreement, plus three (3%) percentage points, except to the extent that
any such amounts are then accruing interest under the Indebtedness, in which
case such Base Rate plus 3% interest rate shall not be applied if the effect
would be to compound the interest to which such obligations are subject to under
the Indebtedness.

         24. Covenant. Each Guarantor hereby agrees that it will make dividend
payments on its outstanding preferred stock with its excess cash to the extent
such cash is not required by such Guarantor for its business, consistent with
prudent business practices and its cash requirements.

         25. Integration; Modifications. This Guaranty (a) integrates all the
terms and conditions mentioned in or incidental to this Guaranty, (b) supersedes
all oral negotiations and prior writings with respect to its subject matter, and
(c) is intended by each Guarantor, Administrative Agent and the Lenders as the
final expression of the agreement with respect to the terms and conditions set
forth in this Guaranty and as the complete and exclusive statement of the terms
agreed to by each Guarantor, Administrative Agent and the Lenders. No
representation, understanding, promise or condition shall be enforceable against
any party hereto unless it is contained in this Guaranty. This Guaranty may not
be modified except in a writing signed by both Administrative Agent (with the
consent of the Requisite Lenders) and each Guarantor. No course of prior
dealing, usage of trade, parol or extrinsic evidence of any nature shall be used
to supplement, modify or vary any of the terms hereof. As between Administrative
Agent and the Lenders only, nothing contained in this Guaranty shall alter the
rights and obligations among Administrative Agent and the Lenders set forth in
the Credit Agreement.

         26. Miscellaneous. The illegality or unenforceability of one or more
provisions of this Guaranty shall not affect any other provision. Time is of the
essence in the performance of this Guaranty by Guarantors.

         27. Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GUARANTORS ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE COURT OF
COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA OR IN THE UNITED STATES
DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA. BY EXECUTING AND
DELIVERING THIS GUARANTY, EACH GUARANTOR, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SECTION 20; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE

                                       9


AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT ADMINISTRATIVE AGENT
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH GUARANTOR IN THE COURTS OF ANY OTHER
JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 27 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT
PERMISSIBLE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 410.40 OR
OTHERWISE.

         28. Waiver of Jury Trial. EACH GUARANTOR AND ADMINISTRATIVE AGENT
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope of this
waiver is intended to be all-encompassing of any and all disputes that may be
filed in any court and that relate to the subject matter of this transaction,
including without limitation contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. Each Guarantor and
Administrative Agent acknowledge that this waiver is a material inducement for
Guarantors and Administrative Agent to enter into a business relationship, that
Guarantors and Administrative Agent have already relied on this waiver in
entering into this Guaranty and that each will continue to rely on this waiver
in their related future dealings. Each Guarantor and Administrative Agent
further warrant and represent that each has reviewed this waiver with its legal
counsel, and that each knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 28 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Guaranty may be filed as a written consent to a trial by the
court.

         29. Provisional Remedies, Self-Help and Foreclosure. No provision of
this Guaranty shall limit the right of any party to exercise self-help remedies
such as setoff, foreclosure against or sale of any real or personal property
collateral or security.

                  [Remainder of page intentionally left blank]

                                       10


         IN WITNESS WHEREOF, the undersigned has executed and delivered this
Guaranty as of the date on the first page.

GUARANTOR:

APARTMENT INVESTMENT AND
MANAGEMENT COMPANY

By: /s/ Peter K. Kompaniez
    -------------------------------
    Peter K. Kompaniez
    President


AIMCO/BETHESDA HOLDINGS, INC.

By: /s/ Peter K. Kompaniez
    -------------------------------
    Peter K. Kompaniez
    President


AIMCO/NHP HOLDINGS, INC.

By: /s/ Peter K. Kompaniez
    -------------------------------
    Peter K. Kompaniez
    President


NHP A&R SERVICES, INC.

By: /s/ Peter K. Kompaniez
    -------------------------------
    Peter K. Kompaniez
    President



AIMCO/NHP PROPERTIES, INC.

By: /s/ Peter K. Kompaniez
    -------------------------------
    Peter K. Kompaniez
    President


NHP MANAGEMENT COMPANY

By: /s/ Patrick Foye
    -------------------------------
    Patrick Foye
    Executive Vice President



Address Where Notices are to be Sent:

     To Guarantor:              2000 S. Colorado Boulevard
                                Suite 2-1000
                                Denver, Colorado 90071

     To Administrative Agent:   BANK OF AMERICA, N.A.
                                Real Estate Group-Structured Debt
                                CA9-706-06-02
                                555 South Flower Street, 6th Floor
                                Los Angeles, California 90071

     To Lenders:                Per the Credit Agreement

EX-99.1

                                                                    EXHIBIT 99.1

          Agreement Regarding Disclosure of Long-Term Debt Instruments

     In reliance upon Item 601(b)(4)(iii)(A), of Regulation S-K, Apartment
Investment and Management Company, a Maryland corporation (the "Company") has
not filed as an exhibit to its Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2001, any instrument with respect to long-term debt
not being registered where the total amount of securities authorized thereunder
does not exceed 10 percent of the total assets of the Company and its
subsidiaries on a consolidated basis. Pursuant to Item 601 (b)(4)(iii)(A), of
Regulation S-K, the Company hereby agrees to furnish a copy of any such
agreement to the Securities Exchange Commission upon request.

                                       AIMCO INVESTMENT AND
                                       MANAGEMENT COMPANY

                                       By: /s/ Peter Kompaniez
                                           --------------------------------
                                           Peter Kompaniez
                                           President