Disposals and Discontinued Operations

3 Months Ended

Mar. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Assets Held for Sale and Discontinued Operations

Disposals and Discontinued Operations

In April 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, or ASU 2014-08. ASU 2014-08 revised the definition of, and the requirements for reporting, a "discontinued operation." Specifically, ASU 2014-08 revised the reporting requirements to only allow a component of an entity, or group of components of an entity, to be reported in discontinued operations if their disposal represents a “strategic shift that has (or will have) a major effect on an entity’s operations and financial results.”

For public companies, ASU 2014-08 is generally required to be applied prospectively to disposals of components of an entity or classifications as held for sale of components of an entity that occur in annual periods commencing after December 15, 2014; however, we elected to adopt ASU 2014-08 effective January 1, 2014, as permitted by the transition provisions, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued.

Under ASU 2014-08, we believe routine sales of apartment communities and certain groups of apartment communities generally do not meet the requirements for reporting within discontinued operations. During the three months ended March 31, 2014, we sold five apartment communities with an aggregate of 1,606 apartment homes. Based on our prospective application of the revised discontinued operation definition, the results of operations for the three months ended March 31, 2014 and 2013, for these apartment communities is reflected within income from continuing operations in our condensed consolidated statements of operations. These apartment communities did not generate a significant amount of income (before gain on dispositions) prior to their sale during the three months ended March 31, 2014. The sale of these apartment communities resulted in a gain on disposition of real estate, net of tax, of $69.5 million for the three months ended March 31, 2014, which is reflected below income from discontinued operations within our condensed consolidated statements of operations. We report gains on disposition net of incremental direct costs incurred in connection with the transactions, including any prepayment penalties incurred upon repayment of property debt collateralized by the apartment communities being sold. Such prepayment penalties totaled $5.8 million for dispositions during the three months ended March 31, 2014.

In accordance with GAAP prior to our adoption of ASU 2014-08, we reported as discontinued operations apartment communities that met the definition of a component of an entity and had been sold or met the criteria to be classified as held for sale. For years ended December 31, 2013 or earlier, and interim periods within those years, we included the results of such apartment communities, including any gain or loss on their disposition, less applicable income taxes, in income from discontinued operations within the consolidated statements of operations. During the three months ended March 31, 2013, we sold three apartment communities with an aggregate of 66 apartment homes, and during the year ended December 31, 2013, we sold 29 consolidated apartment communities with an aggregate of 6,953 apartment homes. The results of operations for the three months ended March 31, 2013, for those apartment communities sold as of December 31, 2013, and gains related to apartment communities sold during the three months ended March 31, 2013, are included in discontinued operations and are summarized below, along with the related amounts of income from discontinued operations attributable to Aimco, the Aimco Operating Partnership and noncontrolling interests (in thousands).

	Three Months Ended March 31, 2013
Rental and other property revenues	$	18,620
Property operating expenses	(8,553		)
Depreciation and amortization	(4,880		)
Recovery of real estate impairment losses	227
Operating income	5,414
Interest income	78
Interest expense	(4,201		)
Income before gain on dispositions of real estate and income tax	1,291
Gain on dispositions of real estate	3,329
Income tax expense	(124		)
Income from discontinued operations, net	$	4,496
Loss from discontinued operations attributable to noncontrolling interests in consolidated real estate partnerships	2,217
Income from discontinued operations attributable to the Aimco Operating Partnership	6,713
Income from discontinued operations attributable to noncontrolling interests in Aimco Operating Partnership	(316		)
Income from discontinued operations attributable to Aimco	$	6,397

The gain on dispositions for the three months ended March 31, 2013, is net of incremental direct costs incurred in connection with the transactions, including $0.3 million of prepayment penalties incurred upon repayment of property debt collateralized by the apartment communities sold. For periods prior to our adoption of ASU 2014-08, we classified interest expense related to property debt within discontinued operations when the related apartment community was sold or classified as held for sale.

In connection with sales of apartment communities during the three months ended March 31, 2014 and 2013, the purchasers assumed approximately $29.8 million and $2.1 million, respectively, of non-recourse property debt.