Acquisitions, Dispositions and Other Significant Transactions

9 Months Ended

Sep. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Disposals and Other Significant Transactions

Dispositions and Other Significant Transactions

Investments in Apartment Communities

In August 2016, we purchased a 463-apartment home community in the final stages of construction at the time of acquisition. This community is located in Redwood City, California. At closing, we paid $303.0 million in cash, of which $11.1 million was placed in escrow to be released to the seller upon completion of the remaining apartment homes. We also issued $17.0 million in 6.0% Class Ten preferred OP Units to the seller. The purchase price, plus $1.8 million of capitalized transaction costs, was allocated as follows: $93.0 million to land; $226.8 million to buildings and improvements (including construction in progress); and $2.0 million to furniture and fixtures. Our purchase price allocation is based upon preliminary estimates and is therefore subject to change.

Disposition of Apartment Communities and Assets Held for Sale

Summarized information regarding apartment communities sold during the three and nine months ended September 30, 2016 and 2015, is set forth in the table below (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Apartment communities	1		—		4		8
Apartment homes	296		—		1,939		2,891
Income before income taxes and gain on disposition	$	78	$	398	$	1,619	$	2,845
Gain on disposition of real estate, net of tax (1)	$	14,498	$	—	$	237,226	$	130,474

(1) 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 $19.8 million for consolidated dispositions during the nine months ended September 30, 2015 ($13.2 million of which represented the mark-to-market adjustment).

In addition to the apartment communities we sold, we are currently marketing for sale certain apartment communities that are inconsistent with our long-term investment strategy. At the end of each reporting period, we evaluate whether such apartment communities meet the criteria to be classified as held for sale. As of September 30, 2016, we had four conventional apartment communities with 1,402 apartment homes classified as held for sale.

Asset Management Business Disposition

In 2012, we sold the Napico portfolio, our legacy asset management business. The transaction was primarily seller-financed, and the associated notes were scheduled to be repaid from the operation and liquidation of the Napico portfolio and were collateralized by the buyer’s interests in the portfolio. In January 2016, we received final payment on the first of the two seller-financed notes. In June 2016, the buyer prepaid the second seller-financed note as well as an agreed upon final payment representing future contingent consideration that may have been due under the terms of the sale. The June 2016 payment represents the final amounts that the buyer owed to us; however, we have continuing involvement in two of the communities within the Napico portfolio in the form of legal interest in the properties and pre-existing guarantees related to property level debt.

In accordance with the provisions of GAAP applicable to sales of real estate or interests therein, we recognized the sale of the assets and liabilities of the Napico portfolio, with the exception of the amounts related to the final two communities, in June 2016, upon receipt of the final payment. The sale recognition resulted in our reduction of other assets, and accrued liabilities and other, by $105.4 million and $111.6 million, respectively, and our recognition of a gain of $5.0 million, which is recorded in other, net on our condensed consolidated statements of operations. We also wrote off a deficit balance in noncontrolling interest in consolidated real estate partnerships associated with the Napico portfolio of $7.8 million, which is recorded in net income attributable to noncontrolling interests in consolidated real estate partnerships for the nine months ended September 30, 2016.

We will continue to account for the final two communities under the profit sharing method until we have been released from the guarantees and our legal interests have been transfered to the buyer. Accordingly, we will defer profit recognition associated with these communities, and will continue to recognize their assets and liabilities, each condensed into single line items within other assets and accrued liabilities and other, respectively, and a related balance in noncontrolling interests in consolidated real estate partnerships in our consolidated balance sheets. Such amounts were $36.5 million, $41.7 million and $0.1 million, respectively, as of September 30, 2016.

Equity and Partners’ Capital Transactions

On July 29, 2016, Aimco redeemed all of the outstanding shares of its Class Z Cumulative Preferred Stock at a redemption value of $34.8 million. We reflected the $0.7 million excess of the redemption value over the carrying amount and $1.3 million of issuance costs previously recorded as a reduction of additional paid-in capital as an adjustment of net income attributable to preferred stockholders for the three and nine months ended September 30, 2016. In connection with Aimco’s redemption of preferred stock, the Aimco Operating Partnership redeemed from Aimco an equal number of the corresponding class of partnership preferred units.