Significant Transactions

Reacquisition of Limited Partner Interest in Palazzo Joint Venture

During the year ended December 31, 2017, we reacquired for $451.5 million, the 47% noncontrolling limited partner interest in the Palazzo joint venture, which owns three communities with a total of 1,382 apartment homes located in Los Angeles, California. We assumed $140.5 million of the noncontrolling interest partner’s share of existing non-recourse property-level debt and paid $311.0 million in cash consideration, which was funded by short term borrowings. We now own all of the interests in the Palazzo joint venture and its underlying apartment communities. Prior to the transaction, we consolidated into our financial statements the joint venture and underlying apartment communities, therefore this transaction has been accounted for as an equity transaction. In accordance with GAAP, we recognized the $155.6 million of consideration paid in excess of the noncontrolling interest balance as a reduction of additional paid-in capital within Aimco’s equity and the Aimco Operating Partnership’s partners’ capital.

Acquisitions of Apartment Communities

During the year ended December 31, 2016, we purchased a 463-apartment community in Redwood City, California that was in the final stages of construction at the time of acquisition. At closing, we paid $303.0 million in cash and issued $17.0 million of 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: $26.9 million to land; $292.7 million to buildings and improvements (including construction in progress); and $2.2 million to furniture and fixtures.

In February 2018, we purchased a 748-apartment home community in Fairfax County, Virginia for $160.0 million. Based on the timing of this acquisition, we have not completed our purchase price allocation.

Dispositions of Apartment Communities and Assets Held for Sale

Summarized information regarding apartment communities sold during the years ended December 31, 2017, 2016 and 2015 is set forth in the table below (dollars in thousands):



	2017	2016	2015
Real Estate portfolio:
Apartment communities sold	5	7	11
Apartment homes sold	2,291	3,045	3,855
Gain on disposition, net of tax	297,944	377,280	180,593
Consolidated partnerships served by the Asset Management business:
Apartment communities sold	2	1	—
Apartment homes sold	252	296	—
Gain on disposition, net of tax	1,615	16,510	—

The apartment communities sold from our Real Estate portfolio during 2017, 2016 and 2015 were predominantly located outside of our primary markets or in lower-rated locations within our primary markets and had average revenues per apartment home significantly below those of our retained portfolio.

In January 2018, we agreed to sell our interests in the entities owning the La Jolla Cove property in settlement of legal actions filed in 2014 by a group of disappointed buyers who had hoped to acquire the property. As a result of the settlement, we recognized in our 2017 results of operations a gross impairment loss of $35.8 million, $25.6 million of which relates to the establishment of a deferred tax liability assumed in connection with our acquisition of the business entities. Upon closing of the transaction, the tax liability will be assumed by the buyer, resulting in no economic loss to Aimco.

In addition to the apartment communities we sold during the periods presented, from time to time we may be 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 communities meet the criteria to be classified as held for sale. As of December 31, 2017, we had three apartment communities with 513 apartment homes in our Real Estate portfolio that were classified as held for sale. In January 2018, we sold these apartment homes for a gain on disposition of $51.0 million, net of tax, and gross proceeds of $71.9 million resulting in $64.6 million of net proceeds to Aimco. Proceeds from the sales were primarily used to repay outstanding borrowings under our Credit Agreement.

Napico Disposition

In 2012, we sold the Napico business. The transaction was primarily seller-financed, and the associated notes were scheduled to be repaid from the operation and liquidation of the Napico business and were collateralized by the buyer’s interests in the portfolio. During 2016, the buyer paid in full the seller-financed notes as well as an agreed upon final payment representing future contingent consideration that may have been due under the terms of the sale. As a result, we derecognized the net assets and liabilities of the Napico business with the exception of the amounts related to one community in which we had continuing involvement in the form of a legal interest in the community and a guarantee related to property-level debt. We recognized a gain of $5.2 million in other, net on our consolidated statement of operations for the year ended December 31, 2016. We also wrote off a deficit balance in noncontrolling interests in consolidated real estate partnerships associated with the Napico business of $8.1 million, which is recorded in net income attributable to noncontrolling interests in consolidated real estate partnerships for the year ended December 31, 2016.

In 2017, the owner refinanced the mortgage related to the final community, resulting in the release of our remaining guarantee, which allowed us to transfer the nominal general partner interest in the community to the buyer. In connection with the transfer, we reduced other assets and accrued liabilities and other by $34.5 million and $38.4 million, respectively, and recognized a gain of $7.1 million, net of tax, in other, net in our consolidated financial statements for the year ended December 31, 2017.