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0000950123-10-098278.txt : 20101101
0000950123-10-098278.hdr.sgml : 20101101
20101029175354
ACCESSION NUMBER: 0000950123-10-098278
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 11
CONFORMED PERIOD OF REPORT: 20100930
FILED AS OF DATE: 20101101
DATE AS OF CHANGE: 20101029
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AIMCO PROPERTIES LP
CENTRAL INDEX KEY: 0000926660
STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513]
IRS NUMBER: 841275621
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-24497
FILM NUMBER: 101152988
BUSINESS ADDRESS:
STREET 1: 4582 S ULSTER ST PARKWAY
STREET 2: SUITE 1100
CITY: DENVER
STATE: CO
ZIP: 80237
BUSINESS PHONE: 3037578101
MAIL ADDRESS:
STREET 1: 4582 S ULSTER ST PARKWAY
STREET 2: SUITE 1100
CITY: DENVER
STATE: CO
ZIP: 80237
10-Q
1
c05778e10vq.htm
FORM 10-Q
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
OR
o
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 0-24497
AIMCO Properties, L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
84-1275621
(I.R.S. Employer
Identification No.)
4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado
(Address of principal executive offices)
80237
(Zip Code)
(303) 757-8101
(Registrants 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
þ No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
The
number of Partnership Common Units outstanding as of October 28,
2010: 122,907,406
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
(Unaudited)
NOTE 1 Organization
AIMCO Properties, L.P., a Delaware limited partnership, or the Partnership, and together with
its consolidated subsidiaries was formed on May 16, 1994 to conduct the business of acquiring,
redeveloping, leasing, and managing multifamily apartment properties. Our securities include
Partnership Common Units, or common OP Units, Partnership Preferred Units, or preferred OP Units,
and High Performance Partnership Units, or High Performance Units, which are collectively referred
to as OP Units. Apartment Investment and Management Company, or Aimco, is the owner of our
general partner, AIMCO-GP, Inc., or the General Partner, and special limited partner, AIMCO-LP
Trust, or the Special Limited Partner. The General Partner and Special Limited Partner hold common
OP Units and are the primary holders of outstanding preferred OP Units. Limited Partners refers
to individuals or entities that are our limited partners, other than Aimco, the General Partner or
the Special Limited Partner, and own common OP Units or preferred OP Units. Generally, after
holding the common OP Units for one year, the Limited Partners have the right to redeem their
common OP Units for cash, subject to our prior right to cause Aimco to acquire some or all of the
common OP Units tendered for redemption in exchange for shares of Aimco Class A Common Stock.
Common OP Units redeemed for Aimco Class A Common Stock are generally exchanged on a one-for-one
basis (subject to antidilution adjustments). Preferred OP Units and High Performance Units may or
may not be redeemable based on their respective terms, as provided for in the Fourth Amended and
Restated Agreement of Limited Partnership of AIMCO Properties, L.P., as amended, or the Partnership
Agreement.
We, through our operating divisions and subsidiaries, hold substantially all of Aimcos assets
and manage the daily operations of Aimcos business and assets. Aimco is required to contribute
all proceeds from offerings of its securities to us. In addition, substantially all of Aimcos
assets must be owned through the Partnership; therefore, Aimco is generally required to contribute
all assets acquired to us. In exchange for the contribution of offering proceeds or assets, Aimco
receives additional interests in us with similar terms (e.g., if Aimco contributes proceeds of a
preferred stock offering, Aimco (through the General Partner and Special Limited Partner) receives
preferred OP Units with terms substantially similar to the preferred securities issued by Aimco).
Aimco frequently consummates transactions for our benefit. For legal, tax or other business
reasons, Aimco may hold title or ownership of certain assets until they can be transferred to us.
However, we have a controlling financial interest in substantially all of Aimcos assets in the
process of transfer to us. Except as the context otherwise requires, we, our and us refer to
the Partnership, and the Partnerships consolidated entities, collectively. Except as the context
otherwise requires, Aimco refers to Aimco and Aimcos consolidated entities, collectively.
Our goal is to provide above average returns with lower volatility. Our business plan to
achieve this goal is to:
own and operate a broadly diversified portfolio of primarily class B/B+ assets with
properties concentrated in the 20 largest markets in the United States (as measured by
total apartment value, which is the total market value of institutional-grade apartment
properties in a particular market);
improve our portfolio through selling assets with lower projected returns and
reinvesting those proceeds through the purchase of new assets or redevelopment of assets in
our portfolio; and
finance our operations using non-recourse, long-dated, fixed-rate property debt and
perpetual preferred equity.
As of September 30, 2010, we:
owned an equity interest in 227 conventional real estate properties with 70,844 units;
owned an equity interest in 251 affordable real estate properties with 29,097 units; and
provided services for or managed 27,357 units in 323 properties, primarily pursuant to
long-term asset management agreements. In certain cases, we may indirectly own generally
less than one percent of the operations of such properties through a syndication or other
fund.
Of these properties, we consolidated 225 conventional properties with 69,540 units and 194
affordable properties with 23,468 units. These conventional and affordable properties generated
84% and 16%, respectively, of consolidated property
net operating income (as defined in Note 7) during the nine months ended September 30, 2010,
or 88% and 12%, respectively, after adjustments for our ownership in these properties.
At September 30, 2010, after elimination of units held by consolidated subsidiaries, we had
outstanding 122,972,734 common OP Units, 32,007,462 preferred OP Units and 2,339,950 High
Performance Units. At September 30, 2010, Aimco owned 117,033,718 of the common OP Units and
28,940,114 of the preferred OP Units.
NOTE 2 Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain
information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America, or GAAP,
have been condensed or omitted in accordance with such rules and regulations, although management
believes the disclosures are adequate to prevent the information presented from being misleading.
In the opinion of management, all adjustments (consisting of normal recurring items) considered
necessary for a fair presentation have been included. Operating results for the three and nine
months ended September 30, 2010, are not necessarily indicative of the results that may be expected
for the year ending December 31, 2010.
The balance sheet at December 31, 2009, has been derived from the audited financial statements
at that date, but does not include all of the information and disclosures required by GAAP for
complete financial statements. For further information, refer to the financial statements and
notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009.
Certain 2009 financial statement amounts have been reclassified to conform to the 2010
presentation, including adjustments for discontinued operations, and certain 2009 unit and per unit
information has been revised as compared to the amounts reported in our Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2009, as further discussed in Note 6.
During the three months ended March 31, 2010, we reduced the investment and noncontrolling
interest balances for certain of our consolidated partnerships by $38.7 million related to excess
amounts allocated to the investments upon our consolidation of such partnerships. Additionally,
during the three months ended March 31, 2010, we reversed approximately $11.2 million of excess
equity in losses recognized during 2008 and 2009 related to these partnerships, with a
corresponding adjustment to net income attributed to noncontrolling interests in consolidated real
estate partnerships. These adjustments had no significant effect on partners capital attributed
to the Partnership or net income or loss attributable to the Partnership during the affected
periods.
During the
three months ended September 30, 2010, certain of our consolidated tax credit funds reduced by $9.8 million their December
31, 2009 investment balances related to unconsolidated low income housing tax credit partnerships
based on changes in the estimated future tax benefits and residual proceeds. We recognized the
equity in losses in our consolidated financial statements during the three months ended September
30, 2010. Substantially all of the equity in losses were attributed to noncontrolling interests in
the consolidated tax credit funds that hold such investments and, accordingly, had an insignificant
effect on net loss attributable to the Partnership during period.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the
Partnership and its consolidated entities. Pursuant to a Management and Contribution Agreement
between the Partnership and Aimco, we have acquired, in exchange for interests in the Partnership,
the economic benefits of subsidiaries of Aimco in which we do not have an interest, and Aimco has
granted us a right of first refusal to acquire such subsidiaries assets for no additional
consideration. Pursuant to the agreement, Aimco has also granted us certain rights with respect to
assets of such subsidiaries. We consolidate all variable interest entities for which we are the
primary beneficiary. Generally, we consolidate real estate partnerships and other entities that
are not variable interest entities when we own, directly or indirectly, a majority voting interest
in the entity or are otherwise able to control the entity. All significant intercompany balances
and transactions have been eliminated in consolidation.
Interests in consolidated real estate partnerships held by third parties are reflected in the
accompanying balance sheets as noncontrolling interests in consolidated real estate partnerships.
The assets of consolidated real estate partnerships owned or controlled by Aimco or us generally
are not available to pay creditors of Aimco or the Partnership.
As used herein, and except where the context otherwise requires, partnership refers to a
limited partnership or a limited liability company and partner refers to a partner in a limited
partnership or a member in a limited liability company.
We consolidate all variable interest entities for which we are the primary beneficiary.
Generally, a variable interest entity, or VIE, is an entity with one or more of the following
characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to
finance its activities without additional subordinated financial support; (b) as a group, the
holders of the equity investment at risk lack (i) the ability to make decisions about an
entitys activities through voting or similar rights, (ii) the obligation to absorb the expected
losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or
(c) the equity investors have voting rights that are not proportional to their economic interests
and substantially all of the entitys activities either involve, or are conducted on behalf of, an
investor that has disproportionately few voting rights.
Effective January 1, 2010, we adopted the provisions of FASB Accounting Standards Update
2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities, or ASU 2009-17, on a prospective basis. ASU 2009-17, which modified the guidance in FASB
ASC Topic 810, introduces a more qualitative approach to evaluating VIEs for consolidation and
requires a company to perform an analysis to determine whether its variable interests give it a
controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE
as the entity that has (a) the power to direct the activities of the VIE that most significantly
impact the VIEs economic performance, and (b) the obligation to absorb losses or the right to
receive benefits that could potentially be significant to the VIE. In determining whether it has
the power to direct the activities of the VIE that most significantly affect the VIEs performance,
ASU 2009-17 requires a company to assess whether it has an implicit financial responsibility to
ensure that a VIE operates as designed, requires continuous reassessment of primary beneficiary
status rather than periodic, event-driven assessments as previously required, and incorporates
expanded disclosure requirements.
In determining whether we are the primary beneficiary of a VIE, we consider qualitative and
quantitative factors, including, but not limited to: which activities most significantly impact
the VIEs economic performance and which party controls such activities; the amount and
characteristics of our investment; the obligation or likelihood for us or other investors to
provide financial support; and the similarity with and significance to the business activities of
us and the other investors. Significant judgments related to these determinations include
estimates about the current and future fair values and performance of real estate held by these
VIEs and general market conditions.
As a result of our adoption of ASU 2009-17, we concluded we are the primary beneficiary of,
and therefore consolidated, approximately 49 previously unconsolidated partnerships. Those
partnerships own, or control other entities that own, 31 apartment properties. Our direct and
indirect interests in the profits and losses of those partnerships range from less than 1% to 35%,
and average approximately 7%. We applied the practicability exception for initial measurement of
consolidated VIEs to partnerships that own 13 properties and accordingly recognized the
consolidated assets, liabilities and noncontrolling interests at fair value effective January 1,
2010 (refer to the Fair Value Measurements section for further information regarding certain of the
fair value amounts recognized upon consolidation). We deconsolidated partnerships that own ten
apartment properties in which we hold an average interest of approximately 55%. The initial
consolidation and deconsolidation of these partnerships resulted in increases (decreases), net of
intercompany eliminations, in amounts included in our consolidated balance sheet as of January 1,
2010, as follows (in thousands):
Consolidation
Deconsolidation
Real estate, net
$
144,292
$
(86,151
)
Cash and cash equivalents and restricted cash
25,047
(7,425
)
Accounts and notes receivable
(13,456
)
6,002
Investment in unconsolidated real estate partnerships
31,434
11,302
Other assets
4,190
(1,084
)
Total assets
$
191,507
$
(77,356
)
Total indebtedness
$
131,710
$
(56,938
)
Accrued and other liabilities
37,504
(15,005
)
Total liabilities
169,214
(71,943
)
Cumulative effect of a change in accounting principle:
During the three months ended September 30, 2010, we reduced by $16.5 million the investments
in unconsolidated real estate partnerships and related noncontrolling interests in consolidated
real estate partnerships balances related to certain tax credit funds we consolidated in
connection with our adoption of AUS 2009-17. These revisions related to the tax credit
funds reduction of their December 31, 2009 investment balances related to unconsolidated low income housing tax credit partnerships based on changes in the
estimated future tax benefits and residual proceeds.
These adjustments had no effect on partners capital or net income or loss
attributable to the Partnership.
In periods prior to 2009, when consolidated real estate partnerships made cash distributions
to partners in excess of the carrying amount of the noncontrolling interest, we generally recorded
a charge to earnings equal to the amount of such excess distribution, even though there was no
economic effect or cost. Also prior to 2009, we allocated the noncontrolling
partners share of partnership losses to noncontrolling partners to the extent of the carrying
amount of the noncontrolling interest. Consolidation of a partnership does not ordinarily result
in a change to the net amount of partnership income or loss that is recognized using the equity
method. However, prior to 2009, when a partnership had a deficit in equity, GAAP may have required
the controlling partner that consolidates the partnership to recognize any losses that would
otherwise be allocated to noncontrolling partners, in addition to the controlling partners share
of losses. Certain of the partnerships that we consolidated in accordance with ASU 2009-17 had
deficits in equity that resulted from losses or deficit distributions during prior periods when we
accounted for our investment using the equity method. We would have been required to recognize the
noncontrolling partners share of those losses had we consolidated those partnerships in those
periods prior to 2009. In accordance with our prospective transition method for the adoption of
ASU 2009-17 related to our consolidation of previously unconsolidated partnerships, we recorded a
$37.2 million charge to our partners capital, the majority of which was attributed to the
cumulative amount of additional losses that we would have recognized had we applied ASU 2009-17 in
periods prior to 2009. Substantially all of those losses were attributable to real estate
depreciation expense.
Our consolidated statements of operations for the three and nine months ended September 30,
2010, include the following amounts for the entities and related real estate properties
consolidated as of January 1, 2010, in accordance with ASU 2009-17 (in thousands):
Three Months
Nine Months
Ended
Ended
September 30,
September 30,
2010
2010
Rental and other property revenues
$
8,097
$
24,369
Operating expenses
(4,795
)
(13,998
)
Depreciation and amortization
(2,750
)
(7,435
)
Other expenses
(888
)
(1,257
)
Operating income
(336
)
1,679
Interest income
6
22
Interest expense
(2,299
)
(6,723
)
Equity in losses of unconsolidated real estate partnerships
(4,279
)
(8,855
)
Gain on disposition of unconsolidated real estate and other
97
2,835
Net loss
(6,811
)
(11,042
)
Net loss attributable to noncontrolling interests in
consolidated
real estate partnerships
6,883
11,754
Net income attributable to the Partnership
$
72
$
712
Our equity in the results of operations of the partnerships and related properties we
deconsolidated in connection with our adoption of ASU 2009-17 is included in equity in earnings or
losses of unconsolidated real estate partnerships in our consolidated statements of operations for
the three and nine months ended September 30, 2010. Based on our effective ownership in these
entities, these amounts are not significant.
As of September 30, 2010, we were the primary beneficiary of, and therefore consolidated,
approximately 142 VIEs, which owned 101 apartment properties with 14,652 units. Real estate with a
carrying value of $895.7 million collateralized $673.9 million of debt of those VIEs. Any
significant amounts of assets and liabilities related to our consolidated VIEs are identified
parenthetically on our accompanying condensed consolidated balance sheets. The creditors of the
consolidated VIEs do not have recourse to our general credit.
As of September 30, 2010, we also held variable interests in 284 VIEs for which we were not
the primary beneficiary. Those VIEs consist primarily of partnerships that are engaged, directly
or indirectly, in the ownership and management of 337 apartment properties with 21,215 units. We
are involved with those VIEs as an equity holder, lender, management agent, or through other
contractual relationships. The majority of our investments in unconsolidated VIEs, or
approximately $61.9 million at September 30, 2010, are held through consolidated tax credit funds
that are VIEs and in which we generally hold a 1% or less general partner or equivalent interest.
Accordingly, substantially all of the investment balances related to these unconsolidated VIEs are
attributed to the noncontrolling interests in the consolidated tax credit funds that hold the
investments in these unconsolidated VIEs. Our maximum risk of loss related to our investment in
these VIEs is generally limited to our equity interest in the consolidated tax credit funds, which
is insignificant. The remainder of our investment in unconsolidated
VIEs, or approximately $12.2
million at September 30, 2010, is held through consolidated tax credit funds that are VIEs and in
which we hold substantially all of the economic interests. Our maximum risk of loss related to our
investment in these VIEs is limited to our $12.2 million recorded investment in such entities.
In addition to our investments in these unconsolidated VIEs discussed above, at September 30,
2010, we had in aggregate $101.4 million of receivables from these VIEs and we had a contractual
obligation to advance funds to certain VIEs totaling $4.0 million. Our maximum risk of loss
associated with our lending and management activities related to these unconsolidated VIEs is
limited to these amounts. We may be subject to additional losses to the extent of any receivables
relating to future provision of services to these entities or financial support that we voluntarily
provide.
Partners Capital (including Noncontrolling Interests)
The following table presents a reconciliation of our December 31, 2009 and September 30, 2010
consolidated partners capital accounts:
Temporary
capital
Partners Capital
Noncontrolling
Partners capital
interests in
Redeemable
attributable to the
consolidated real
Total partners
preferred units
Partnership
estate partnerships
capital
Balance, December 31, 2009
$
116,656
$
1,233,248
$
317,126
$
1,550,374
Contributions
7,422
7,422
Issuance of preferred units
94,775
94,775
Distributions
(5,057
)
(65,292
)
(37,635
)
(102,927
)
Repurchases of common units
(1,805
)
(1,805
)
Stock option exercises
1,806
1,806
Repurchases of preferred units
(11,354
)
3,000
3,000
Stock based compensation cost
5,411
5,411
Effect of entities newly consolidated
6,324
6,324
Effect of changes in ownership for
consolidated subsidiaries (1)
(1,116
)
(724
)
(1,840
)
Adjustment of noncontrolling
interests related to revision of
investment balances
(38,718
)
(38,718
)
Cumulative effect of a change in
accounting principle
(34,130
)
51,010
16,880
Change in accumulated other
comprehensive loss
(3,317
)
(489
)
(3,806
)
Other
740
(453
)
287
Net income (loss)
3,292
(56,267
)
(1,795
)
(58,062
)
Balance, September 30, 2010
$
103,537
$
1,177,053
$
302,068
$
1,479,121
(1)
During the three months ended September 30, 2010, we acquired a limited partners interest
in one of our consolidated real estate partnerships. We recognized the excess of the
consideration paid over the carrying amount of the noncontrolling interests as an adjustment
of partners capital.
Derivative Financial Instruments
We primarily use long-term, fixed-rate and self-amortizing non-recourse debt to avoid, among
other things, risk related to fluctuating interest rates. For our variable rate debt, we are
sometimes required by our lenders to limit our exposure to interest rate fluctuations by entering
into interest rate swap or cap agreements. The interest rate swap agreements moderate our exposure
to interest rate risk by effectively converting the interest on variable rate debt to a fixed rate.
The interest rate cap agreements effectively limit our exposure to interest rate risk by providing
a ceiling on the underlying variable interest rate. The fair values of the interest rate swaps are
reflected as assets or liabilities in the balance sheet, and periodic changes in fair value are
included in interest expense or partners capital, as appropriate. The interest rate caps are not
material to our financial position or results of operations.
At September 30, 2010 and December 31, 2009, we had interest rate swaps with aggregate
notional amounts of $52.3 million, and recorded fair values of $5.4 million and $1.6 million,
respectively, reflected in accrued liabilities and other in our condensed consolidated balance
sheets. At September 30, 2010, these interest rate swaps had a weighted average term of 10.4
years. We have designated these interest rate swaps as cash flow hedges and recognize any changes
in their fair value as an adjustment of accumulated other comprehensive income within partners
capital to the extent of their effectiveness. For the nine months ended September 30, 2010 and
2009, we recognized changes in fair value of $3.8 million and $0.1 million, respectively, of which
$3.8 million and $0.6 million, respectively, resulted in an adjustment to consolidated partners
capital. We recognized less than $0.1 million and $0.5 million of ineffectiveness as an adjustment
of interest expense during the nine months ended September 30, 2010 and 2009, respectively. Our
consolidated comprehensive loss for the three and nine months ended September 30, 2010, totaled
$30.1 million and $58.6 million, respectively, and consolidated comprehensive loss for the three
and nine months ended September 30, 2009, totaled $10.9 million and $48.5 million, respectively,
before the effects of noncontrolling interests. If the forward rates at September 30, 2010 remain
constant, we estimate that during the next twelve months, we would reclassify into earnings
approximately $1.6 million of the unrealized losses in accumulated other comprehensive income. If
market interest rates increase above the 3.43% weighted average fixed rate under these interest
rate swaps we will benefit from a lower effective rate than the underlying variable rates on this
debt.
We have entered into total rate of return swaps on various fixed-rate secured tax-exempt bonds
payable and fixed-rate notes payable to convert these borrowings from a fixed rate to a variable
rate and provide an efficient financing product to lower our cost of borrowing. In exchange for
our receipt of a fixed rate generally equal to the underlying borrowings interest rate, the total
rate of return swaps require that we pay a variable rate, equivalent to the Securities Industry and
Financial Markets Association Municipal Swap Index, or SIFMA, rate for tax-exempt bonds payable and
the 30-day LIBOR rate for notes payable, plus a risk spread. These swaps generally have a second
or third lien on the property collateralized by the related borrowings and the obligations under
certain of these swaps are cross-collateralized with certain of the other swaps with a particular
counterparty. The underlying borrowings are generally callable at our option, with no prepayment
penalty, with 30 days advance notice, and the swaps generally have a term of less than five years.
The total rate of return swaps have a contractually defined termination value generally equal to
the difference between the fair value and the counterpartys purchased value of the underlying
borrowings, which may require payment by us or to us for such difference. Accordingly, we believe
fluctuations in the fair value of the borrowings from the inception of the hedging relationship
generally will be offset by a corresponding fluctuation in the fair value of the total rate of
return swaps.
We designate total rate of return swaps as hedges of the risk of overall changes in the fair
value of the underlying borrowings. At each reporting period, we estimate the fair value of these
borrowings and the total rate of return swaps and recognize any changes therein as an adjustment of
interest expense.
As of September 30, 2010 and December 31, 2009, we had borrowings payable subject to total
rate of return swaps with aggregate outstanding principal balances of $307.2 million and $352.7
million. At September 30, 2010, the weighted average fixed receive rate under the total return
swaps was 6.8% and the weighted average variable pay rate was 0.9%, based on the applicable SIFMA
and LIBOR rates effective as of that date. Information related to the fair value of these
instruments at September 30, 2010 and December 31, 2009, is discussed further below.
Fair Value Measurements
We measure certain assets and liabilities in our consolidated financial statements at fair
value, both on a recurring and nonrecurring basis. Certain of these fair value measurements are
based on significant unobservable inputs classified within Level 3 of the valuation hierarchy
defined in FASB ASC Topic 820. When a determination is made to classify a fair value measurement
within Level 3 of the valuation hierarchy, the determination is based upon the significance of the
unobservable factors to the overall fair value measurement. However, Level 3 fair value
measurements typically include, in addition to the unobservable or Level 3 components, observable
components that can be validated to observable external sources; accordingly, the changes in fair
value in the table below are due in part to observable factors that are part of the valuation
methodology.
The table below presents information regarding significant items measured in our consolidated
financial statements at fair value on a recurring basis (in thousands):
Level 2
Level 3
Interest rate
Total rate of
Changes in fair
swaps (1)
return swaps (2)
value of debt (3)
Total
Fair value at December 31, 2008
$
(2,557
)
$
(29,495
)
$
29,495
$
(2,557
)
Unrealized gains (losses)
included in earnings (4)(5)
(478
)
3,395
(3,395
)
(478
)
Realized gains (losses)
included in earnings
Unrealized gains (losses)
included in partners
capital
607
607
Fair value at September 30,
2009
$
(2,428
)
$
(26,100
)
$
26,100
$
(2,428
)
Fair value at December 31, 2009
$
(1,596
)
$
(24,307
)
$
24,307
$
(1,596
)
Unrealized gains (losses)
included in earnings (4)(5)
(35
)
5,771
(5,771
)
(35
)
Realized gains (losses)
included in earnings
Unrealized gains (losses)
included in partners
capital
(3,806
)
(3,806
)
Fair value at September 30,
2010
$
(5,437
)
$
(18,536
)
$
18,536
$
(5,437
)
(1)
The fair value of interest rate swaps is estimated using an income approach with
primarily observable inputs including information regarding the hedged variable cash flows
and forward yield curves relating to the variable interest rates on which the hedged cash
flows are based.
(2)
Total rate of return swaps have contractually-defined termination values generally equal
to the difference between the fair value and the counterpartys purchased value of the
underlying borrowings. We calculate the termination value, which we believe is
representative of the fair value, of total rate of return swaps using a market approach by
reference to estimates of the fair value of the underlying borrowings, which are discussed
below, and an evaluation of potential changes in the credit quality of the counterparties to
these arrangements.
(3)
This represents changes in fair value of debt subject to our total rate of return swaps.
We estimate the fair value of debt instruments using an income and market approach,
including comparison of the contractual terms to observable and unobservable inputs such as
market interest rate risk spreads, collateral quality and loan-to-value ratios on similarly
encumbered assets within our portfolio. These borrowings are collateralized and
non-recourse to us; therefore, we believe changes in our credit rating will not materially
affect a market participants estimate of the borrowings fair value.
(4)
Unrealized gains (losses) relate to periodic revaluations of fair value and have not
resulted from the settlement of a swap position.
(5)
These amounts are included in interest expense in the accompanying condensed consolidated
statements of operations.
The table below presents information regarding amounts measured at fair value in our
consolidated financial statements on a nonrecurring basis during the nine months ended September
30, 2010, all of which were based, in part, on significant unobservable inputs classified within
Level 3 of the valuation hierarchy (in thousands):
Fair value
Total
measurement
gain (loss)
Real estate (impairments losses) (1)
$
43,961
$
(8,341
)
Real estate (newly consolidated) (2)(3)
117,083
1,104
Property debt (newly consolidated) (2)(4)
83,890
(1)
During the nine months ended September 30, 2010, we reduced the aggregate carrying
amounts of $52.3 million for real estate assets classified as held for sale to their
estimated fair value, less estimated costs to sell. These impairment losses recognized
generally resulted from a reduction in the estimated holding period for these assets. In
periods prior to their classification as held for sale, we evaluated the recoverability of
their carrying amounts based on an analysis of the undiscounted cash flows over anticipated
expected holding period.
In connection with our adoption of ASU 2009-17 (see preceding discussion of Variable
Interest Entities) and reconsideration events during the nine months ended September 30,
2010, we consolidated 17 partnerships at fair
value. With the exception of such partnerships investments in real estate properties and
related non-recourse property debt obligations, we determined the carrying amounts of the
related assets and liabilities approximated their fair values. The difference between our
recorded investments in such partnerships and the fair value of the assets and liabilities
recognized in consolidation, resulted in an adjustment of consolidated partners capital
(allocated between the Partnership and noncontrolling interests) for those partnerships
consolidated in connection with our adoption of ASU 2009-17. For the partnerships we
consolidated at fair value due to reconsideration events during the nine months ended
September 30, 2010, the difference between our recorded investments in such partnerships and
the fair value of the assets, liabilities and noncontrolling interests recognized upon
consolidation resulted in our recognition of a gain, which is included in gain on disposition
of unconsolidated real estate and other in our consolidated statement of operations for the
nine months ended September 30, 2010.
(3)
We estimate the fair value of real estate using income and market valuation techniques
using information such as broker estimates, purchase prices for recent transactions on
comparable assets and net operating income capitalization analyses using observable and
unobservable inputs such as capitalization rates, asset quality grading, geographic location
analysis, and local supply and demand observations.
(4)
Refer to the recurring fair value measurements table for an explanation of the valuation
techniques we use to estimate the fair value of debt.
We believe that the aggregate fair value of our cash and cash equivalents, receivables,
payables and short-term secured debt approximates their aggregate carrying amounts at September 30,
2010 and December 31, 2009, due to their relatively short-term nature and high probability of
realization. We estimate fair value for our notes receivable and debt instruments using present
value techniques that include income and market valuation approaches using observable inputs such
as market rates for debt with the same or similar terms and unobservable inputs such as collateral
quality and loan-to-value ratios on similarly encumbered assets. Because of the significance of
unobservable inputs to these fair value measurements, we classify them within Level 3 of the fair
value hierarchy. Present value calculations vary depending on the assumptions used, including the
discount rate and estimates of future cash flows. In many cases, the fair value estimates may not
be realizable in immediate settlement of the instruments. The estimated aggregate fair value of
our notes receivable was approximately $128.3 million and $126.1 million at September 30, 2010 and
December 31, 2009, respectively, as compared to their carrying amounts of $140.8 million and $139.6
million. The estimated aggregate fair value of our consolidated debt (including amounts reported
in liabilities related to assets held for sale) was approximately $6.0 billion and $5.7 billion at
September 30, 2010 and December 31, 2009, respectively, as compared to aggregate carrying amounts
of $5.5 billion and $5.6 billion, respectively. The fair values of our derivative instruments at
September 30, 2010 and December 31, 2009, are included in the table presented above.
Concentration of Credit Risk
Financial instruments that potentially could subject us to significant concentrations of
credit risk consist principally of notes receivable and total rate of return swaps. Approximately
$88.4 million of our notes receivable, or 1.2% of our total assets, at
September 30, 2010, are collateralized by 84 buildings with 1,596 residential units in the West
Harlem area of New York City. There are no other significant concentrations of credit risk with
respect to our notes receivable due to the large number of partnerships that are borrowers under
the notes and the geographic diversification of the properties that serve as the primary source of
repayment of the notes.
At September 30, 2010, we had total rate of return swap positions with two financial
institutions totaling $307.5 million. We periodically evaluate counterparty credit risk associated
with these arrangements. At the current time, we have concluded we do not have material exposure.
In the event either counterparty were to default under these arrangements, loss of the net interest
benefit we generally receive under these arrangements, which is equal to the difference between the
fixed rate we receive and the variable rate we pay, may adversely impact our results of operations
and operating cash flows. Additionally, the swap agreements with a specific counterparty provide
for collateral calls to maintain specified loan-to-value ratios. As of September 30, 2010, we were
not required to provide cash collateral pursuant to the total rate of return swaps. In the event
the values of the real estate properties serving as collateral under these agreements decline, we
may be required to provide additional collateral pursuant to the swap agreements, which may
adversely affect our cash flows.
In July 2010, the FASB issued Accounting Standards Update 2010-20, Disclosures Regarding
Credit Quality and the Allowance for Credit Losses, or ASU 2010-20, to address concerns regarding
the sufficiency of disclosures regarding credit risk for finance receivables and the related
allowance for credit losses. ASU 2010-20 defines finance receivables and requires disclosure of
disaggregated information regarding receivables by portfolio segment and class. New disclosures
include a detailed description of and changes to the allowance policy, a rollforward of the
allowance for credit losses, and information about credit quality indicators we evaluate in
assessing receivables, impaired receivables and past-due or
nonaccrual financing receivables, including the aging of such receivables. The Partnerships
notes receivable and certain other receivables with contractual maturities in excess of one year
will be subject to the revised disclosure guidance. The new disclosures will be phased in for our
financial statements for the year ending December 31, 2010 and the quarter ending March 31, 2011.
We have not yet determined the effect ASU 2010-20 will have on the disclosures included in our
annual and quarterly financial statements.
In March 2008, we were notified by the Internal Revenue Service, or the IRS, that it intended
to examine our 2006 Federal tax return. During June 2008, the IRS issued AIMCO-GP, Inc., our
general partner and tax matters partner, a summary report including the IRSs proposed adjustments
to our 2006 Federal tax return. In addition, in May 2009, we were notified by the IRS that it
intended to examine our 2007 Federal tax return. During November 2009, the IRS issued AIMCO-GP,
Inc. a summary report including the IRSs proposed adjustments to our 2007 Federal tax return. We
do not expect the 2006 or 2007 proposed adjustments to have any material effect on our unrecognized
tax benefits, financial condition or results of operations.
Use of Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported amounts included in
the financial statements and accompanying notes thereto. Actual results could differ from those
estimates.
NOTE 3 Real Estate Dispositions
Real Estate Dispositions (Discontinued Operations)
We are currently marketing for sale certain real estate properties that are inconsistent with
our long-term investment strategy. At the end of each reporting period, we evaluate whether such
properties meet the criteria to be classified as held for sale, including whether such properties
are expected to be sold within 12 months. Additionally, certain properties that do not meet all of
the criteria to be classified as held for sale at the balance sheet date may nevertheless be sold
and included in discontinued operations in the subsequent 12 months; thus, the number of properties
that may be sold during the subsequent 12 months could exceed the number classified as held for
sale. At September 30, 2010 and December 31, 2009, we had one and 32 properties, with an aggregate
of 164 and 5,212 units, respectively, classified as held for sale. Amounts classified as held for
sale in the accompanying condensed consolidated balance sheets are as follows (in thousands):
September 30,
December 31,
2010
2009
Real estate, net
$
4,963
$
199,743
Other assets
216
3,927
Assets held for sale
$
5,179
$
203,670
Property debt
$
6,447
$
178,339
Other liabilities
44
5,553
Liabilities related to assets held for sale
$
6,491
$
183,892
During the nine months ended September 30, 2010 and 2009, we sold 31 properties and 57
properties with an aggregate of 5,048 units and 13,405 units, respectively. During the year ended
December 31, 2009, we sold 89 consolidated properties with an aggregate of 22,503 units. For the
three and nine months ended September 30, 2010 and 2009, discontinued operations includes the
results of operations for the periods prior to the date of sale for all properties sold and for
properties classified as held for sale as of September 30, 2010.
The following is a summary of the components of income from discontinued operations and the
related amounts of income from discontinued operations attributable to the Partnership and to
noncontrolling interests for the three and nine months ended September 30, 2010 and 2009 (in
thousands):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2010
2009
2010
2009
Rental and other property revenues
$
2,081
$
45,126
$
20,654
$
170,309
Property operating expenses
(392
)
(22,619
)
(9,255
)
(85,233
)
Depreciation and amortization
(734
)
(14,521
)
(4,581
)
(52,718
)
Provision for operating real estate impairment losses
(1,142
)
(26,298
)
(9,263
)
(40,712
)
Other expenses, net
(720
)
(2,266
)
(470
)
(7,859
)
Operating loss
(907
)
(20,578
)
(2,915
)
(16,213
)
Interest income
83
85
186
278
Interest expense
(709
)
(8,751
)
(4,137
)
(34,142
)
Loss before gain on dispositions of real estate
and income tax
(1,533
)
(29,244
)
(6,866
)
(50,077
)
Gain on extinguishment of debt
259
259
Gain on dispositions of real estate
21,043
70,889
74,364
133,428
Income tax benefit
189
3,500
1,034
2,679
Income from discontinued operations, net
$
19,699
$
45,404
$
68,532
$
86,289
Income from discontinued operations attributable to:
Noncontrolling interests in consolidated real
estate partnerships
$
(5,298
)
$
(32,349
)
$
(21,900
)
$
(58,077
)
The Partnership
$
14,401
$
13,055
$
46,632
$
28,212
Gain on dispositions of real estate is reported net of incremental direct costs incurred in
connection with the transactions, including any prepayment penalties incurred upon repayment of
property loans collateralized by the properties being sold. Such prepayment penalties totaled $0.6
million and $3.8 million for the three and nine months ended September 30, 2010, respectively, and
$7.6 million and $19.4 million for the three and nine months ended September 30, 2009,
respectively. We classify interest expense related to property debt within discontinued operations
when the related real estate asset is sold or classified as held for sale.
In connection with properties sold or classified as held for sale during the three and nine
months ended September 30, 2010, we allocated $0.5 million and $3.3 million, respectively, of
goodwill related to our conventional and affordable segments to the carrying amounts of the
properties sold or classified as held for sale. Of these amounts, $0.3 million and $2.9 million,
respectively, were treated as a reduction of gain on dispositions of real estate and $0.2 million
and $0.4 million, respectively, were treated as an adjustment of impairment losses during the three
and nine months ended September 30, 2010. In connection with properties sold or classified as held
for sale during the three and nine months ended September 30, 2009, we allocated $3.5 million and
$6.5 million of goodwill related to our conventional and affordable segments to the carrying
amounts of the properties sold or classified as held for sale. The amounts of goodwill allocated
to these properties were based on the relative fair values of the properties sold or classified as
held for sale and the retained portions of the reporting units to which the goodwill was allocated.
Gain on Dispositions of Unconsolidated Real Estate and Other
During the three months ended September 30, 2010, we recognized $0.9 million of gains on the
disposition of interests in unconsolidated real estate partnerships and other, primarily due to our
consolidation during 2010 of several previously unconsolidated real estate partnerships. We
consolidated these partnerships at fair value upon our removal of the previous general partner and
at the time of consolidation we recognized a gain equal to the difference between the fair value of
the net assets and liabilities consolidated and the carrying amount of our investment in these
entities.
During the nine months ended September 30, 2010, we recognized $5.4 million of gains on the
disposition of interests in unconsolidated real estate partnerships and other. These gains were
primarily related to sales of investments held by partnerships we consolidated in accordance with
our adoption of ASU 2009-17 (see Note 2) and in which we generally hold a nominal general partner
interest. Accordingly, these gains were primarily attributed to noncontrolling interests in
consolidated real estate partnerships.
During the three months ended September 30, 2009, we recognized $2.8 million of gains on the
disposition of unconsolidated real estate and other, which consisted of a $3.9 million gain from
the disposition of our interest in a group purchasing organization, partially offset by losses
related to unconsolidated real estate partnerships.
During the nine months ended September 30, 2009, we recognized $18.2 million of gains on the
disposition of unconsolidated real estate and other. These gains consisted of $8.6 million
resulting from our receipt in 2009 of additional proceeds related to our disposition during 2008 of
an interest in an unconsolidated real estate partnership, a $3.9 million gain from the disposition
of our interest in a group purchasing organization and approximately $5.7 million of gains related
to dispositions of interests in unconsolidated real estate partnerships.
NOTE 4 Other Significant Transactions
Restructuring Costs
During 2009, in connection with the repositioning of our portfolio, we completed
organizational restructuring activities that included reductions in workforce and related costs and
the abandonment of additional leased corporate facilities and redevelopment projects. During the
nine months ended September 30, 2010, we reduced our restructuring accruals by $1.7 million and
$4.7 million related to payments on unrecoverable lease obligations and severance and personnel
related costs, respectively. As of September 30, 2010, the remaining accruals associated with our
restructuring activity are $5.2 million for estimated unrecoverable lease obligations, which will
be paid over the remaining terms of the affected leases.
Preferred
Unit Transactions
On September 7, 2010, Aimco issued 4,000,000 shares of its 7.75% Class U Cumulative Preferred
Stock, par value $.01 per share, or the Class U Preferred Stock, in an underwritten public offering
for a price per share of $24.09 (reflecting a price to the public of $24.86 per share, less an
underwriting discount and commissions of $0.77 per share). The offering generated net proceeds of
$96.1 million (after deducting underwriting discounts and commissions and estimated transaction
expenses). Aimco contributed the net proceeds to us in exchange for 4,000,000 units of our 7.75%
Class U Cumulative Preferred Units. We recorded issuance costs of $3.3 million, consisting
primarily of underwriting commissions, as an adjustment of partners capital attributable to the
Partnership within our condensed consolidated balance sheet.
On October 7, 2010, using the net proceeds from the issuance of Class U Preferred Stock
supplemented by corporate funds, Aimco redeemed all of the 4,050,000 outstanding shares of its
9.375% Class G Cumulative Preferred Stock, inclusive of 10,000 shares held by a consolidated
subsidiary that are eliminated in consolidation. This redemption was for cash at a price equal to
$25.00 per share, or $101.3 million in aggregate, plus accumulated and unpaid dividends of $2.2
million. Concurrent with this redemption, we redeemed all of our outstanding Class G Cumulative
Preferred Units, 4,040,000 of which were held by Aimco and 10,000 of which were held by a
consolidated subsidiary. In connection with the redemption, $4.3 million of issuance costs
previously recorded as a reduction of partners capital attributable to the Partnership will be
reflected as an increase in net income attributable to preferred unitholders for purposes of
calculating earnings per unit for the three months and year ending December 31, 2010.
NOTE 5 Commitments and Contingencies
Commitments
In connection with our redevelopment activities, we have commitments of approximately $0.3
million related to construction projects that are expected to be completed during 2010.
Additionally, we enter into certain commitments for future purchases of goods and services in
connection with the operations of our properties. Those commitments generally have terms of one
year or less and reflect expenditure levels comparable to our historical expenditures.
We have committed to fund an additional $4.0 million in loans on certain properties in West
Harlem in New York City. In certain circumstances, the obligor under these notes has the ability
to put properties to us, which would result in a cash payment between $30.6 million and $97.7
million and the assumption of $118.6 million in property debt. The ability to exercise the put and
the amount of cash payment required upon exercise is dependent upon the achievement of specified
thresholds by the current owner of the properties.
In June 2009, Aimco
entered into an agreement that allows the holder of some of its Series A Community
Reinvestment Act Preferred Stock, or CRA Preferred Stock, to require Aimco to repurchase a portion
of the CRA Preferred Stock at a 30% discount to the liquidation preference. In accordance with this
repurchase agreement, in May 2010, Aimco repurchased 20 shares, or $10.0 million in liquidation
preference, of CRA Preferred Stock for $7.0 million. Concurrent with this
redemption, we repurchased from Aimco an equivalent number of our Series A Community
Reinvestment Act Perpetual Preferred Units, or CRA Preferred Units. We reflected the $3.0 million
excess of the carrying value over the repurchase price, offset by $0.2 million of issuance costs
previously recorded as a reduction of partners capital, as a reduction of net income attributable
to preferred unitholders for the nine months ended September 30, 2010.
As of September 30, 2010, Aimco had a remaining potential obligation under this agreement to
repurchase up to $20.0 million in liquidation preference of its CRA Preferred Stock. If required,
these additional repurchases will be for up to $10.0 million in liquidation preference in May 2011
and 2012. Upon any repurchases required of Aimco under this agreement, we will repurchase from
Aimco an equivalent number of our CRA Preferred Units. Based on the holders ability to require
Aimco to repurchase these amounts and our obligation to purchase from Aimco a corresponding number
of our CRA Preferred Units, the $20.0 million in liquidation preference of CRA Preferred Units, or
the maximum redemption value of such preferred units, is classified within temporary capital in our
consolidated balance sheet at September 30, 2010.
Tax Credit Arrangements
We are required to manage certain consolidated real estate partnerships in compliance with
various laws, regulations and contractual provisions that apply to our historic and low-income
housing tax credit syndication arrangements. In some instances, noncompliance with applicable
requirements could result in projected tax benefits not being realized and require a refund or
reduction of investor capital contributions, which are reported as deferred income in our
consolidated balance sheet, until such time as our obligation to deliver tax benefits is relieved.
The remaining compliance periods for our tax credit syndication arrangements range from less than
one year to 15 years. We do not anticipate that any material refunds or reductions of investor
capital contributions will be required in connection with these arrangements.
Legal Matters
In addition to the matters described below, we are a party to various legal actions and
administrative proceedings arising in the ordinary course of business, some of which are covered by
our general liability insurance program, and none of which we expect to have a material adverse
effect on our consolidated financial condition, results of operations or cash flows.
Limited Partnerships
In connection with our acquisitions of interests in real estate partnerships, we are sometimes
subject to legal actions, including allegations that such activities may involve breaches of
fiduciary duties to the partners of such real estate partnerships or violations of the relevant
partnership agreements. We may incur costs in connection with the defense or settlement of such
litigation. We believe that we comply with our fiduciary obligations and relevant partnership
agreements. Although the outcome of any litigation is uncertain, we do not expect any such legal
actions to have a material adverse effect on our consolidated financial condition, results of
operations or cash flows.
Environmental
Various Federal, state and local laws subject property owners or operators to liability for
management, and the costs of removal or remediation, of certain hazardous substances present on a
property, including lead-based paint. Such laws often impose liability without regard to whether
the owner or operator knew of, or was responsible for, the release or presence of the hazardous
substances. The presence of, or the failure to manage or remedy properly, hazardous substances may
adversely affect occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and remediation actions
brought by government agencies, and potential fines or penalties imposed by such agencies in
connection therewith, 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, remediation or disposal of hazardous substances through a
licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of
hazardous 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 facility. In
connection with the ownership, operation and management of properties, we could potentially be
liable for environmental liabilities or costs associated with our properties or properties we
acquire or manage in the future.
We have determined that our legal obligations to remove or remediate hazardous substances may
be conditional asset retirement obligations, as defined in GAAP. Except in limited circumstances
where the asset retirement activities are expected to be performed in connection with a planned
construction project or property casualty, we believe that the fair value of our asset retirement
obligations cannot be reasonably estimated due to significant uncertainties in the timing and
manner of settlement of those obligations. Asset retirement obligations that are reasonably
estimable as of September 30, 2010, are immaterial to our consolidated financial condition, results
of operations and cash flows.
We calculate earnings (loss) per unit based on the weighted average number of common OP Units,
participating securities, common OP unit equivalents and dilutive convertible securities
outstanding during the period. We consider both common OP Units and High Performance Units, which
have identical rights to distributions and undistributed earnings, to be common units for purposes
of the earnings (loss) per unit data presented below. The following table illustrates the
calculation of basic and diluted earnings (loss) per unit for the three and nine months ended
September 30, 2010 and 2009 (in thousands, except per unit):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2010
2009
2010
2009
Numerator:
Loss from continuing operations
$
(47,965
)
$
(54,754
)
$
(123,302
)
$
(135,431
)
Loss from continuing operations attributable to
noncontrolling interests
16,511
13,095
23,695
33,412
Income attributable to the Partnerships preferred
unitholders
(13,492
)
(14,731
)
(39,918
)
(42,189
)
Income attributable to participating securities
(2
)
Loss from continuing operations attributable
to the Partnerships common unitholders
$
(44,948
)
$
(56,390
)
$
(139,525
)
$
(144,208
)
Income from discontinued operations
$
19,699
$
45,404
$
68,532
$
86,289
Income from discontinued operations attributable to
noncontrolling interests
(5,298
)
(32,349
)
(21,900
)
(58,077
)
Income from discontinued operations attributable to
the Partnerships common unitholders
$
14,401
$
13,055
$
46,632
$
28,212
Net loss
$
(28,266
)
$
(9,350
)
$
(54,770
)
$
(49,142
)
Loss (income) attributable to noncontrolling interests
11,213
(19,254
)
1,795
(24,665
)
Income attributable to the Partnerships preferred
unitholders
(13,492
)
(14,731
)
(39,918
)
(42,189
)
Income attributable to participating securities
(2
)
Net loss attributable to the Partnerships
common unitholders
$
(30,547
)
$
(43,335
)
$
(92,893
)
$
(115,996
)
Denominator:
Denominator for basic earnings per unit weighted
average number of common units outstanding
124,739
124,376
124,601
122,790
Effect of dilutive securities:
Dilutive potential common units
Denominator for diluted earnings per unit
124,739
124,376
124,601
122,790
Earnings (loss) per common unit:
Basic and diluted earnings (loss) per common unit:
Loss from continuing operations attributable to the
Partnerships common unitholders
$
(0.36
)
$
(0.45
)
$
(1.12
)
$
(1.17
)
Income from discontinued operations attributable to
the Partnerships common unitholders
0.11
0.10
0.37
0.23
Net loss attributable to the Partnerships common
unitholders
$
(0.25
)
$
(0.35
)
$
(0.75
)
$
(0.94
)
As of September 30, 2010 and 2009, the common unit equivalents that could potentially dilute
basic earnings per unit in future periods totaled 7.2 million and 9.9 million, respectively. These
securities, representing options to purchase shares of Aimco Class A Common Stock, have been
excluded from the earnings (loss) per unit computations for the three and nine months ended
September 30, 2010 and 2009, because their effect would have been anti-dilutive. Participating
securities, consisting of unvested restricted shares of Aimco Class A Common Stock and shares of
Aimco Class A Common Stock purchased pursuant to officer loans, receive dividends similar to shares
of Aimco Class A Common Stock and common OP Units and totaled 0.6 million and 0.9 million at
September 30, 2010 and 2009, respectively. The effect of participating
securities is reflected in basic and diluted earnings (loss) per unit computations for the
periods presented above using the two-class method of allocating distributed and undistributed
earnings.
Various classes of redeemable preferred OP Units are outstanding. Depending on the terms of
each class, these preferred OP Units are convertible into common OP Units or redeemable for cash
or, at our option, shares of Aimco Class A Common Stock, and are paid distributions varying from
1.84% to 9.5% per annum per unit, or equal to the dividends paid on Aimco Class A Common Stock
based on the conversion terms. As of September 30, 2010, a total of 3.1 million preferred OP Units
were outstanding with redemption values of $82.7 million and were potentially redeemable for
approximately 3.9 million shares of Aimco Class A Common Stock (based on the period end market
price), or cash at our option. We have a redemption policy that requires cash settlement of
redemption requests for the preferred OP Units, subject to limited exceptions. The potential
dilutive effect of these securities would have been antidilutive in the periods presented; however,
based on our cash redemption policy, they may also be excluded from future earnings (loss) per unit
computations in periods during which their effect is dilutive.
In December 2009, we adopted the provisions of FASB Accounting Standards Update 2010-01,
Accounting for Distributions to Shareholders with Components of Stock and Cash, or ASU 2010-01,
which are codified in FASB ASC Topic 505. ASU 2010-01 requires that for distributions with
components of cash and stock, the portion distributed in stock should be accounted for
prospectively as a stock issuance with no retroactive adjustment to basic and diluted earnings per
share. In accordance with ASU 2010-01, we retrospectively revised the accounting treatment of our
special distribution paid in January 2009, resulting in a 1.6 million reduction in the number of
weighted average units outstanding and a $0.01 increase in the loss per unit attributed to the
Partnerships common unitholders for the nine months ended September 30, 2009, as compared to the
amounts reported in our Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2009.
NOTE 7 Business Segments
Based on a planned reduction in our transactional activities, during the three months ended
March 31, 2010, we reevaluated our reportable segments and determined our investment management
reporting unit no longer meets the requirements for a reportable segment. Additionally, to provide
more meaningful information regarding our real estate operations, we elected to disaggregate
information for the prior real estate segment. Following these changes, we have two reportable
segments: conventional real estate operations and affordable real estate operations. Our
conventional real estate operations consist of market-rate apartments with rents paid by the
resident and include 227 properties with 70,844 units. Our affordable real estate operations
consist of 251 properties with 29,097 units, with rents that are generally paid, in whole or part,
by a government agency.
Our chief operating decision maker uses various generally accepted industry financial measures
to assess the performance of the business, including: property net operating income, which is
rental and other property revenues less direct property operating expenses, including real estate
taxes; Net Asset Value, which is the estimated fair value of our assets, net of debt; Pro forma
Funds From Operations, which is Funds From Operations excluding operating real estate impairment
losses and preferred unit redemption related gains or losses; Adjusted Funds From Operations, which
is Pro forma Funds From Operations less spending for Capital Replacements; same store property
operating results; Free Cash Flow, which is net operating income less spending for Capital
Replacements; Free Cash Flow internal rate of return; financial coverage ratios; and leverage as
shown on our balance sheet. The chief operating decision maker emphasizes net operating income as
a key measurement of segment profit or loss. Segment net operating income is generally defined as
segment revenues less direct segment operating expenses.
The following tables present the revenues, net operating income (loss) and income (loss) from
continuing operations of our conventional and affordable real estate operations segments for the
three and nine months ended September 30, 2010 and 2009 (in thousands):
Corporate and
Conventional
Affordable
Amounts Not
Real Estate
Real Estate
Allocated to
Operations
Operations (1)
Segments
Total
Three Months Ended September 30, 2010:
Rental and other property revenues (2)
$
228,327
$
53,612
$
656
$
282,595
Asset management and tax credit revenues
9,707
9,707
Total revenues
228,327
53,612
10,363
292,302
Property operating expenses (2)
88,782
25,479
13,913
128,174
Asset management and tax credit expenses
2,609
2,609
Depreciation and amortization (2)
107,309
107,309
Provision for operating real estate impairment losses (2)
287
287
General and administrative expenses
12,096
12,096
Other expenses, net
4,394
4,394
Total operating expenses
88,782
25,479
140,608
254,869
Net operating income (loss)
139,545
28,133
(130,245
)
37,433
Other items included in continuing operations
(85,398
)
(85,398
)
Income (loss) from continuing operations
$
139,545
$
28,133
$
(215,643
)
$
(47,965
)
Three Months Ended September 30, 2009:
Rental and other property revenues (2)
$
227,917
$
46,040
$
1,115
$
275,072
Asset management and tax credit revenues
10,325
10,325
Total revenues
227,917
46,040
11,440
285,397
Property operating expenses (2)
92,969
23,112
17,143
133,224
Asset management and tax credit expenses
4,213
4,213
Depreciation and amortization (2)
110,290
110,290
Provision for operating real estate impairment losses (2)
Provision for operating real estate impairment losses (2)
287
287
General and administrative expenses
39,015
39,015
Other expenses, net
2,097
2,097
Total operating expenses
272,135
78,649
419,851
770,635
Net operating income (loss)
411,122
81,019
(393,596
)
98,545
Other items included in continuing operations
(221,847
)
(221,847
)
Income (loss) from continuing operations
$
411,122
$
81,019
$
(615,443
)
$
(123,302
)
Nine Months Ended September 30, 2009:
Rental and other property revenues (2)
$
682,488
$
140,793
$
4,098
$
827,379
Asset management and tax credit revenues
32,469
32,469
Total revenues
682,488
140,793
36,567
859,848
Property operating expenses (2)
273,841
68,676
48,504
391,021
Asset management and tax credit expenses
12,719
12,719
Depreciation and amortization (2)
321,661
321,661
Provision for operating real estate impairment
losses (2)
1,635
1,635
General and administrative expenses
43,612
43,612
Other expenses, net
12,453
12,453
Total operating expenses
273,841
68,676
440,584
783,101
Net operating income (loss)
408,647
72,117
(404,017
)
76,747
Other items included in continuing operations
(212,178
)
(212,178
)
Income (loss) from continuing operations
$
408,647
$
72,117
$
(616,195
)
$
(135,431
)
(1)
Net operating income amounts from our affordable real estate operations for 2010 are not
comparable to the 2009 amounts due to our adoption during 2010 of revised accounting guidance
regarding consolidation of variable interest entities (see Note 2).
(2)
Our chief operating decision maker assesses the performance of our conventional and
affordable real estate operations using, among other measures, net operating income,
excluding property management revenues and certain property management expenses, casualty
gains and losses, depreciation and amortization and provision for operating real estate
impairment losses. Accordingly, we do not allocate these amounts to our segments.
The assets of our reportable segments are as follows (in thousands):
Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
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, within the meaning of the federal
securities laws, including, without limitation, statements regarding our ability to maintain
current or meet projected occupancy, rental rates and property operating results. Actual results
may differ materially from those described in these forward-looking statements and, in addition,
will be affected by a variety of risks and factors, some of which are beyond our control,
including, without limitation: financing risks, including the availability and cost of capital
markets financing and the risk that our cash flows from operations may be insufficient to meet
required payments of principal and interest; earnings may not be sufficient to maintain compliance
with debt covenants; real estate risks, including fluctuations in real estate values and the
general economic climate in the markets in which we operate and competition for residents in such
markets; national and local economic conditions, including the pace of
job growth and the level of unemployment; the terms of governmental regulations that affect
us and interpretations of those regulations; the competitive environment in which we operate; the
timing of acquisitions and dispositions; insurance risk, including the cost of insurance; natural
disasters and severe weather such as hurricanes; litigation, including costs associated with
prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental
liabilities, including costs, fines or penalties that may be incurred due to necessary remediation
of contamination of properties presently owned or previously owned by us. In addition, Aimcos
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, distribution levels and diversity of stock ownership. Readers should carefully review our
financial statements and the notes thereto, as well as the section
entitled Risk Factors describedin Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009, and the other
documents we file from time to time with the Securities and Exchange Commission. As used herein
and except as the context otherwise requires, we, our, us and the Company refer to AIMCO
Properties, L.P. (which we refer to as the Partnership) and the Partnerships consolidated
corporate subsidiaries and consolidated real estate partnerships, collectively.
Executive Overview
We are the operating partnership for Aimco, which is a self-administered and self-managed real
estate investment trust, or REIT. Our goal is to provide above average returns with lower
volatility. Our business plan to achieve this goal is to:
own and operate a broadly diversified portfolio of primarily class B/B+ assets with
properties concentrated in the 20 largest markets in the United States (as measured by
total apartment value, which is the total market value of institutional-grade apartment
properties in a particular market);
improve our portfolio through selling assets with lower projected returns and
reinvesting those proceeds through the purchase of new assets or redevelopment of assets in
our portfolio; and
finance our operations using non-recourse, long-dated, fixed rate property debt and
perpetual preferred equity.
Our owned real estate portfolio includes 227 conventional properties with 70,844 units and 251
affordable properties with 29,097 units. Our conventional and affordable portfolios comprise 88%
and 12% of our total property net asset value. For the three months ended September 30, 2010, our
conventional portfolio monthly rents averaged $1,044 and provided 62% operating margins. These
average rents increased from $1,042 for the three months ended June 30, 2010, which were
approximately 101% of local market averages (based on June 30, 2010 market data, the most recent
period for which third party data is available). Our diversified portfolio resulted in improved property
operating results from 2008 to 2010. After adjustments for
discontinued operations, the increase or decrease in net operating income of our total real estate
operations, total same store portfolio and conventional same store portfolio during 2008, 2009 and
year-to-date September 30, 2010 was as follows:
Real Estate
Total Same
Conventional
Operations
Store
Same Store
2008 as compared to 2007
3.9
%
3.7
%
3.5
%
2009 as compared to 2008
-0.5
%
-3.3
%
-4.2
%
Nine months ended September
30, 2010 as compared to nine months ended September 30, 2009
0.9
%
-1.0
%
-1.4
%
Three months ended September
30, 2010 as compared to three months ended September 30, 2009
We continue to work toward simplifying our business, including a de-emphasis on transactional
based activity fees and a corresponding reduction in personnel involved in those activities.
Income from transactional activities has decreased during the nine months ended September 30, 2010
as compared to 2009, and our offsite costs have been reduced by $13.1 million. Our 2009 and 2010
results are discussed in the Results of Operations section below.
We upgrade the quality of our portfolio through the sale of communities with rents below
average market rents. We prefer the redevelopment of select properties in our existing portfolio
to ground-up development, as we believe it provides superior risk adjusted returns with lower
volatility.
Our leverage strategy focuses on minimizing risk. At September 30, 2010, approximately 85% of
our leverage consisted of property-level, non-recourse, long-dated, fixed-rate, amortizing debt,
15% consisted of perpetual preferred equity, which limits our refunding and re-pricing risk, and we
had no outstanding corporate level debt. Our leverage strategy limits refunding risk on our
property-level debt, with 2% of our debt maturing in 2011, less than 10% maturing in each of 2012
and 2013, and less than 8% maturing in each of 2014 and 2015, and
provides a hedge against increases in interest rates and
inflation, with approximately 90% of our property-level debt being fixed-rate.
During September 2010, we expanded our credit facility from $180.0 million to $300.0 million,
providing additional liquidity for short-term or unexpected cash
requirements.
The key financial indicators that we use in managing our business and in evaluating our
financial condition and operating performance are: property net operating income, which is rental
and other property revenues less direct property operating expenses, including real estate taxes;
Net Asset Value, which is the estimated fair value of our assets, net of debt; Pro forma Funds From
Operations, which is Funds From Operations excluding operating real estate impairment losses and
preferred unit redemption related gains or losses; Adjusted Funds From Operations, which is Pro
forma Funds From Operations less spending for Capital Replacements; same store property operating
results; Free Cash Flow, which is net operating income less spending for Capital Replacements; Free
Cash Flow internal rate of return; financial coverage ratios; and leverage as shown on our balance
sheet. Funds From Operations represents net income or loss, computed in accordance with GAAP,
excluding gains from sales of depreciable property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Capital Replacements represent
capital additions that are deemed to replace the consumed portion of acquired capital assets. The
key macro-economic factors and non-financial indicators that affect our financial condition and
operating performance are: household formations; rates of job growth; single-family and multifamily
housing starts; interest rates; and availability and cost of financing.
Because our operating results depend primarily on income from our properties, the supply and
demand for apartments influences our operating results. Additionally, the level of expenses
required to operate and maintain our properties and the pace and price at which we redevelop,
acquire and dispose of our apartment properties affect our operating results. Our cost of capital
is affected by the conditions in the capital and credit markets and the terms that we negotiate for
our equity and debt financings.
Highlights of our results of operations for the three months ended September 30, 2010, are
summarized below:
Average daily occupancy for our Conventional Same Store properties remained high at
96.0%.
Conventional Same Store revenues and expenses for the three months ended September 30,
2010, decreased by 0.1% and 4.2%, respectively, as compared to the three months ended
September 30, 2009, resulting in a 2.6% increase in net operating income.
Conventional Same Store net operating income for the three months ended September 30,
2010, increased by 1.0% as compared to the three months ended June 30, 2010.
Operating income related to our asset management, tax credit and investment management
activities have increased slightly relative to 2009, primarily due to reductions in
personnel and related costs based on a reduced emphasis on this part of our business.
Property sales declined relative to 2009. We expect property sales to continue to
decline in the remainder of 2010, as property sales completed through July allowed us to
fully repay the remainder of our term debt.
The following discussion and analysis of the results of our operations and financial condition
should be read in conjunction with the accompanying condensed consolidated financial statements in
Item 1.
Results of Operations
Overview
Three and nine months ended September 30, 2010 compared to September 30, 2009
We reported net loss attributable to the Partnership of $17.1 million and net loss
attributable to the Partnerships common unitholders of $30.5 million for the three months ended
September 30, 2010, compared to net loss attributable to the Partnership of $28.6 million and net
loss attributable to the Partnerships common unitholders of $43.3 million for the three months
ended September 30, 2009, decreases in losses of $11.5 million and $12.8 million, respectively.
These decreases in net loss were principally due to the following items, all of which are
discussed in further detail below:
an increase in net operating income of our properties included in continuing operations,
reflecting improved operations; and
a decrease in earnings allocated to noncontrolling interests in consolidated real estate
partnerships, primarily due to their share of the decrease in gains on disposition of
consolidated real estate properties discussed below.
The effects of these items on our operating results were partially offset by a decrease in
income from discontinued operations, primarily related to a decrease in gains on dispositions of
real estate due to a decrease in property sales in 2010 as compared to 2009.
For the nine months ended September 30, 2010, we reported net loss attributable to the
Partnership of $53.0 million and net loss attributable to the Partnerships common unitholders of
$92.9 million, compared to net loss attributable to the Partnership of $73.8 million and net loss
attributable to the Partnerships common unitholders of $116.0 million for the nine months ended
September 30, 2009, decreases of $20.8 million and $23.1 million, respectively.
These decreases in net loss were principally due to the following items, all of which are
discussed in further detail below:
an increase in net operating income of our properties included in continuing operations,
reflecting improved operations;
a decrease in earnings allocated to noncontrolling interests in consolidated real estate
partnerships, primarily due to their share of the decrease in gains on disposition of
consolidated real estate properties as discussed below; and
a decrease in other expenses, primarily attributable to the settlement of certain
litigation matters in 2010.
The effects of these items on our operating results were partially offset by:
a decrease in income from discontinued operations, primarily related to a decrease in
gains on dispositions of real estate due to a decrease in property sales in 2010 as
compared to 2009; and
a decrease in gain on dispositions of unconsolidated real estate and other, primarily
attributable to additional proceeds received in 2009 related to our disposition during 2008
of an interest in an unconsolidated real estate partnership.
The following paragraphs discuss these and other items affecting the results of our operations in
more detail.
Real Estate Operations
Our real estate portfolio is comprised of two business components: conventional real estate
operations and affordable real estate operations, which also represent our two reportable segments.
Our conventional real estate portfolio consists of market-rate apartments with rents paid by the
resident and includes 227 properties with 70,844 units. Our affordable real estate portfolio
consists of 251 properties with 29,097 units, with rents that are generally paid, in whole or part,
by a government agency. Our conventional and affordable properties contributed 88% and 12%,
respectively, of our ownership adjusted property net operating income amounts during the nine
months ended September 30, 2010.
The following table summarizes the net operating income of our real estate operations,
including our conventional and affordable segments, for the three and nine months ended September
30, 2010 and 2009 (in thousands):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2010
2009
2010
2009
Rental and other property revenues:
Conventional real estate operations
$
228,327
$
227,917
$
683,257
$
682,488
Affordable real estate operations
53,612
46,040
159,668
140,793
Corporate and amounts not allocated
656
1,115
2,695
4,098
Total
282,595
275,072
845,620
827,379
Property operating expenses:
Conventional real estate operations
88,782
92,969
272,135
273,841
Affordable real estate operations
25,479
23,112
78,649
68,676
Corporate and amounts not allocated
13,913
17,143
45,080
48,504
Total
128,174
133,224
395,864
391,021
Real estate operations net operating income:
Conventional real estate operations
139,545
134,948
411,122
408,647
Affordable real estate operations
28,133
22,928
81,019
72,117
Corporate and amounts not allocated
(13,257
)
(16,028
)
(42,385
)
(44,406
)
Total
$
154,421
$
141,848
$
449,756
$
436,358
For the three months ended September 30, 2010, compared to the three months ended September
30, 2009, our real estate operations net operating income increased by $12.6 million, or 8.9%, and
consisted of an increase in rental and other property revenues of $7.5 million, or 2.7%, and a
decrease in property operating expenses of $5.1 million, or 3.8%.
Our conventional segment consists of conventional properties we classify as same store,
redevelopment and other conventional properties. Same store properties are properties we manage
and that have reached and maintained a stabilized level of occupancy during the current and prior
year comparable period. Redevelopment properties are those in which a substantial number of
available units have been vacated for major renovations or have not been stabilized in occupancy
for at least one year as of the earliest period presented, or for which other significant non-unit
renovations are underway or have been complete for less than one year. Other conventional
properties may include conventional properties that have significant rent control restrictions,
acquisition properties, university housing properties and properties that are not multifamily, such
as commercial properties or fitness centers. Our conventional segments net operating income
increased $4.6 million, or 3.4%, during the three months ended September 30, 2010 as compared to
2009.
Conventional same
store net operating income increased by $3.2 million, primarily due to
a reduction in previously estimated real estate tax obligations resulting from
successful appeals settled during the period, and decreases in marketing expenses. This overall decrease in expenses was partially
offset by a decrease in our conventional same store revenues of $0.2 million, resulting from lower
average rent (approximately $26 per unit), partially offset by an increase of 120 basis points in
average physical occupancy and higher utility reimbursement and miscellaneous income. Rental rates
on new leases transacted during the three months ended September 30, 2010, were 1.4% lower than expiring lease rates, while
renewal rates were 1.5% higher than expiring lease rates.
The net operating income of our conventional redevelopment properties increased by $1.0
million, due to a $0.8 million increase in revenues resulting from a 6% increase in the number of
units in service at these properties relative to 2009 and a $0.2 million decrease in expenses.
The
net operating income of our conventional other properties increased by $0.4 million,
primarily due to decreases in real estate taxes.
The net operating income of our affordable segment, which includes same store and
redevelopment properties, increased $5.2 million, or 22.7%, during the three months ended September
30, 2010 as compared to 2009. Revenues and expenses of our affordable properties increased by $7.6
million and $2.4 million, respectively, primarily due to properties we consolidated based on our
adoption of revised accounting guidance regarding consolidation of variable interest entities (see
Note 2 to our condensed consolidated financial statements in Item 1). Our other affordable
properties revenues increased by $1.5 million, due to increases in average rent and occupancy.
For the three months ended September 30, 2010, average month-end occupancy for our affordable
properties was 97.4%, an increase of 60 basis points as compared to the three months ended
September 30, 2009, while average rent per unit increased 2.7% from $773 to $794 per unit.
For the nine months ended September 30, 2010, compared to the nine months ended September 30,
2009, our real estate operations net operating income increased by $13.4 million, or 3.1%, and
consisted of an increase in rental and other property revenues of $18.2 million, or 2.2%, and an
offsetting increase in property operating expenses of $4.8 million, or 1.2%.
Our conventional segment net operating income increased $2.5 million, or 0.6%, during the nine
months ended September 30, 2010 as compared to 2009.
Our conventional same store net operating income decreased $1.3 million. This decrease was
attributed to a $3.0 million decrease in revenue, primarily due to lower average rent
(approximately $43 per unit), partially offset by an increase of 230 basis points in average
physical occupancy and higher utility reimbursement and miscellaneous income. The decrease in
revenue was partially offset by a $1.7 million decrease in
expense, primarily due to a reduction in previously estimated real
estate tax obligations resulting from successful appeals settled during the
period, and decreases in marketing expenses.
Conventional redevelopment net operating income increased by $5.1 million, due to a $4.4
million increase in revenues resulting from a 13% increase in the number of units in service at
these properties relative to 2009, and a $0.7 million decrease in expense, primarily due to a
reductions in marketing expenses as the occupancy at these properties increased.
Our conventional other net operating income decreased by $1.3 million primarily due to
decreases in revenues, a result of fewer units in service at certain properties that incurred
casualty losses, and increases in expenses.
Our affordable segment net operating income increased $8.9 million, or 12.3%, during the nine
months ended September 30, 2010 as compared to 2009. Revenues and expenses of our affordable
properties increased by $18.9 million and $10.0 million, respectively, $15.5 million and $9.3
million of which was due to properties we consolidated based on our adoption of revised accounting
guidance regarding consolidation of variable interest entities (see Note 2 to our condensed
consolidated financial statements in Item 1). Revenues of our other affordable properties
increased by $3.4 million, primarily due to a $21 per unit increase in average rent.
Real estate operations net operating income amounts not attributed to our conventional or
affordable segments include property management revenues and expenses and casualty losses, which we
do not allocate to our conventional or affordable segments for purposes of evaluating segment
performance. For the three and nine months ended September 30, 2010, as compared to the three and
nine months ended September 30, 2009, property management revenues decreased by $0.5 million and
$1.4 million, respectively, primarily due to the elimination of revenues related to properties
consolidated during 2010 in connection with our adoption of revised accounting guidance regarding
consolidation of variable interest entities discussed above. For the three and nine months ended
September 30, 2010, as compared to the three and nine months ended September 30, 2009, expenses not
allocated to our conventional or affordable segments decreased by $3.2 million and $3.4 million,
respectively. Casualty losses decreased by $1.7 million during the three months ended September
30, 2010, as compared to 2009, whereas casualty losses increased by $0.8 million during the nine
months ended September 30, 2010, as compared to 2009. Property management expenses decreased by
$1.5 million and $4.3 million, respectively, during the three and nine months ended September 30,
2010, as compared to 2009, primarily due to reductions in personnel and related costs attributed to
our restructuring activities (see Note 4 to the condensed consolidated financial statements in Item
1).
Asset Management and Tax Credit Revenues
We perform activities and services for consolidated and unconsolidated real estate
partnerships, including portfolio strategy, capital allocation, joint ventures, tax credit
syndication, acquisitions, dispositions and other transaction activities. These activities are
conducted in part by our taxable subsidiaries, and the related net operating income may be subject
to income taxes.
For the three months ended September 30, 2010, compared to the three months ended September
30, 2009, asset management and tax credit revenues decreased $0.6 million. This decrease is
attributable to a $1.8 million decrease in disposition and other fees we earn in connection with
transactional activities, a $0.7 million decrease in income related to our affordable housing tax
credit syndication business, which primarily relates to a reduction in amortization of deferred tax
credit income, and a $0.5 million decrease in current asset management fees, partially offset by a
$2.4 million increase in promote income, which is income earned in connection with the disposition
of properties owned by our consolidated joint ventures.
For the nine months ended September 30, 2010, compared to the nine months ended September 30,
2009, asset management and tax credit revenues decreased $8.9 million. This decrease is
attributable to a $5.3 million decrease in income related to our affordable housing tax credit
syndication business, which includes a $2.5 million write off of syndication fees receivable we
determined were uncollectible during 2010 and a $2.8 million decrease in amortization of
related tax credit income, primarily related to adjustments in the amount and timing of
anticipated cash flows for several tax credit projects. The decrease in revenues also includes a
$3.2 million decrease in disposition and other fees we earn in connection with transactional
activities and a $1.6 million decrease in current asset management fees, primarily due to the
elimination of fees associated with certain partnerships we consolidated during 2010 (see Note 2 to
our condensed consolidated financial statements in Item 1 discussing our adoption of revised
accounting guidance regarding the consolidation of variable interest entities), partially offset by
a $1.2 million increase in promote income, which is income earned in connection with the
disposition of properties owned by our consolidated joint ventures.
Investment Management Expenses
Investment management expenses consist primarily of the costs of personnel that perform asset
management and tax credit activities. For the three months ended September 30, 2010, compared to
the three months ended September 30, 2009, investment management expenses decreased $1.6 million.
This decrease is primarily due to a $1.3 million reduction in personnel and related costs from our
organizational restructurings.
For the nine months ended September 30, 2010, compared to the nine months ended September 30,
2009, investment management expenses decreased $1.7 million. This decrease is primarily due to a
$4.0 million reduction in personnel and related costs from our organizational restructurings,
offset by a $2.3 million increase in expenses, primarily related to our write off of previously
deferred costs related to tax credit projects we recently abandoned.
Depreciation and Amortization
For the three months ended September 30, 2010, compared to the three months ended September
30, 2009, depreciation and amortization decreased $3.0 million, or 2.7%. This decrease was
primarily due to depreciation adjustments recognized in 2009 to reduce the carrying amount of
certain properties. This decrease was partially offset by an increase in depreciation related to
properties we consolidated during 2010 based on our adoption of revised accounting guidance
regarding consolidation of variable interest entities (see Note 2 to our condensed consolidated
financial statements in Item 1).
For the nine months ended September 30, 2010, compared to the nine months ended September 30,
2009, depreciation and amortization increased $0.7 million, or 0.2%. This increase was primarily
related to completed redevelopments and other capital projects recently placed in service and
properties we consolidated during 2010 as discussed above. These increases were partially offset
by depreciation adjustments recognized in 2009 to reduce the carrying amount of certain properties.
General and Administrative Expenses
For the three months ended September 30, 2010, compared to the three months ended September
30, 2009, general and administrative expenses decreased $0.7 million, or 5.3%, and for the nine
months ended September 30, 2010, compared to the nine months ended September 30, 2009, general and
administrative expenses decreased $4.6 million, or 10.5%. These decreases are primarily
attributable to net reductions in personnel and related expenses, partially offset by an increase
in information technology outsourcing costs.
In connection with our organizational restructuring activities discussed in Note 4 to the
condensed consolidated financial statements in Item 1, we have reduced our total offsite costs,
which include costs reported in general and administrative expenses and property operating
expenses, by 14% during the nine months ended September 30, 2010 as compared to the nine months
ended September 30, 2009.
Other Expenses, Net
Other expenses, net includes franchise taxes, risk management activities, partnership
administration expenses and certain non-recurring items.
For the three months ended September 30, 2010, compared to the three months ended September
30, 2009, other expenses, net decreased by $3.2 million, primarily due to $2.8 million of
restructuring costs incurred during 2009 for which there were no comparable costs during 2010 (see
Note 4 to the condensed consolidated financial statements in Item 1 for additional information).
For the nine months ended September 30, 2010, compared to the nine months ended September 30,
2009, other expenses, net changed favorably by $10.4 million, primarily attributable to the
settlement of certain litigation matters in 2010 and restructuring costs incurred during 2009 for
which there were no comparable costs during 2010.
For the three months ended September 30, 2010, compared to the three months ended September
30, 2009, interest expense, which includes the amortization of deferred financing costs, increased
by $1.1 million, or 1.5%. Property related interest expense increased by $3.4 million, primarily
due to a $1.5 million increase related to properties newly consolidated in 2010 (see Note 2 to our
condensed consolidated financial statements in Item 1 for further discussion of our adoption of ASU
2009-17) and an increase in interest related to properties refinanced with higher average rates,
partially offset by lower average outstanding balances. The increase in property related interest
expense was partially offset by a $2.3 million decrease in corporate interest expense, primarily
due to a decrease in the average outstanding balance on our term loan, which was repaid during July
2010.
For the nine months ended September 30, 2010, compared to the nine months ended September 30,
2009, interest expense decreased by $1.4 million, or 0.6%. Interest expense decreased due
to a $6.5 million decrease in corporate interest expense, primarily due to a decrease in the
average outstanding balance on our term loan, which was repaid during July 2010. The decrease in
corporate interest expense was offset by a $5.1 million increase in property related interest
expense. Property related interest expense increased by $3.3 million due to properties newly
consolidated in 2010 and $1.8 million due to properties refinanced with higher average rates,
partially offset by lower average outstanding balances.
The increases in property interest expense discussed above are a consequence of our
aforementioned leverage strategy, which focuses on limiting our refunding and re-pricing risk.
Pursuant to this strategy, during 2010 we capitalized on historically low interest rates by
refinancing properties with low variable interest rates and near term maturities with long-dated,
fixed-rate debt. These refinancing transactions eliminated maturity and re-pricing risk from our
balance sheet and the long-term fixed-rates will hedge against inflation.
Equity in (Losses) Earnings of Unconsolidated Real Estate Partnerships
Equity in (losses) earnings of unconsolidated real estate partnerships includes our share of
net earnings or losses of our unconsolidated real estate partnerships, and may include impairment
losses, gains or losses on the disposition of real estate assets or depreciation expense which
generally exceeds the net operating income recognized by such unconsolidated partnerships.
For the three months ended September 30, 2010, compared to the three months ended September
30, 2009, equity in losses of unconsolidated real estate partnerships increased $11.9 million.
During the three months ended September 30, 2010, certain of our consolidated tax credit funds reduced by $9.8 million their December 31,
2009 investment balances related to unconsolidated low income housing tax credit partnerships based
on changes in the estimated future tax benefits and residual proceeds. We recognized the equity in
losses in our consolidated financial statements during the three months ended September 30, 2010.
Substantially all of the equity in losses were attributed to noncontrolling interests in the
consolidated tax credit funds that hold such investments and, accordingly, had an insignificant
effect on net loss attributable to the Partnership during period. The remainder of the increase in
equity in losses related primarily to losses recognized by certain partnerships we consolidated
during 2010 (see Note 2 to our condensed consolidated financial statements in Item 1 for further
discussion of our adoption of ASU 2009-17) for which no comparable losses were recognized in 2009.
For the nine months ended September 30, 2010, equity in losses of unconsolidated real estate
partnerships increased $3.1 million. The net increase in losses included our reversal during the
three months ended March 31, 2010, of approximately $11.2 million of excess equity in losses
recognized during 2008 and 2009, partially offset by the $9.8 million increase in equity in losses
during the three months ended September 30, 2010 discussed above. The reversal of excess losses
during the three months ended March 31, 2010 and the increase in equity in losses during the three
months ended September 30, 2010 were substantially attributed to noncontrolling interests in our
consolidated real estate partnerships that hold the related investments and, accordingly, had an
insignificant effect on net loss attributable to the Partnership during the affected periods. This
net decrease discussed above was offset primarily by an increase in equity in losses recognized by
certain partnerships we consolidated during 2010.
Gain on Dispositions of Unconsolidated Real Estate and Other, Net
Gain on dispositions of unconsolidated real estate and other includes gains on disposition of
interests in unconsolidated real estate partnerships, gains on dispositions of land and other
non-depreciable assets and certain costs related to asset disposal activities. Changes in the
level of gains recognized from period to period reflect the changing level of disposition activity
from period to period. Additionally, gains on properties sold are determined on an individual
property basis or in the aggregate for a group of properties that are sold in a single transaction,
and are not comparable period to period.
For the three months ended September 30, 2010, compared to the three months ended September
30, 2009, gain on dispositions of unconsolidated real estate and other decreased $1.9 million.
This decrease is primarily attributable to a $3.9 million gain from the disposition of our interest
in a group purchasing organization during 2009, partially offset by gains recognized during 2010
related to our consolidation of certain previously unconsolidated real estate partnerships (see
Note 3 to the condensed consolidated financial statements in Item 1) and other transactions.
For the nine months ended September 30, 2010, compared to the nine months ended September 30,
2009, gain on dispositions of unconsolidated real estate and other decreased $12.7 million. This
decrease is primarily attributable to $8.6 million of additional proceeds received in 2009 related
to our disposition during 2008 of an interest in an unconsolidated real estate partnership, for
which there were no comparable gains during 2010 and a $3.9 million gain from the disposition of
our interest in a group purchasing organization during 2009.
Income Tax Benefit
In conjunction with Aimcos UPREIT structure, certain of our operations or a portion thereof,
such as property management, asset management and risk management, are conducted through, and
certain of our properties are owned by, taxable subsidiaries. Income taxes related to the results
of continuing operations of our taxable subsidiaries are included in income tax benefit in our
consolidated statements of operations.
For the three and nine months ended September 30, 2010, compared to the three and nine months
ended September 30, 2009, income tax benefit increased by $1.9 million and $4.3 million,
respectively, primarily due to increases in losses of our TRS entities.
Income from Discontinued Operations, Net
The results of operations for properties sold during the period or designated as held for sale
at the end of the period are generally required to be classified as discontinued operations for all
periods presented. The components of net earnings that are classified as discontinued operations
include all property-related revenues and operating expenses, depreciation expense recognized prior
to the classification as held for sale, property-specific interest expense and debt extinguishment
gains and losses to the extent there is secured debt on the property. In addition, any impairment
losses on assets held for sale and the net gain or loss on the eventual disposal of properties held
for sale are reported in discontinued operations.
For the three months ended September 30, 2010 and 2009, income from discontinued operations
totaled $19.7 million and $45.4 million, respectively. The $25.7 million decrease in income from
discontinued operations was principally due to a $53.0 million decrease in gain on dispositions of
real estate, net of income taxes, partially offset by a $8.0 million decrease in interest expense
and a $19.7 million decrease in operating loss (inclusive of a $25.2 million decrease in real
estate impairment losses).
For the nine months ended September 30, 2010 and 2009, income from discontinued operations
totaled $68.5 million and $86.3 million, respectively. The $17.8 million decrease in income from
discontinued operations was principally due to a $56.4 million decrease in gain on dispositions of
real estate, net of income taxes, partially offset by a $30.0 million decrease in interest expense
and a $13.3 million decrease in operating loss (inclusive of a $31.4 million decrease in real
estate impairment losses).
During the three months ended September 30, 2010, we sold eight consolidated properties for
gross proceeds of $98.7 million and net proceeds of $33.2 million, resulting in a net gain on sale
of approximately $21.1 million (which is net of less than $0.1 million of related income taxes).
During the three months ended September 30, 2009, we sold 28 consolidated properties for gross
proceeds of $366.6 million and net proceeds of $137.8 million, resulting in a gain on sale of
approximately $74.1 million (which includes $3.2 million of related income taxes).
During the nine months ended September 30, 2010, we sold 31 consolidated properties for gross
proceeds of $283.5 million and net proceeds of $80.6 million, resulting in a net gain on sale of
approximately $75.3 million (which includes $0.9 million of related income taxes). During the nine
months ended September 30, 2009, we sold 57 consolidated properties for gross proceeds of $720.5
million and net proceeds of $259.6 million, resulting in a gain on sale of approximately $131.8
million (which is net of $1.7 million of related income taxes).
For the three and nine months ended September 30, 2010 and 2009, income from discontinued
operations includes the operating results of the properties sold or classified as held for sale as
of September 30, 2010.
Changes in the level of gains recognized from period to period reflect the changing level of
our disposition activity from period to period. Additionally, gains on properties sold are
determined on an individual property basis or in the aggregate for a group of properties that are
sold in a single transaction, and are not comparable period to period (see Note 3 to the condensed
consolidated financial statements in Item 1 for additional information on discontinued operations).
Noncontrolling Interests in Consolidated Real Estate Partnerships
Noncontrolling interests in consolidated real estate partnerships reflects the non-Aimco
partners, or noncontrolling partners, share of operating results of consolidated real estate
partnerships, as well as the noncontrolling partners share of property management fees, interest
on notes and other amounts that we charge to such partnerships.
For the three
months ended September 30, 2010, we allocated net losses of $11.2 million to
noncontrolling interests in consolidated real estate partnerships, as compared to $19.3 million of
earnings allocated to these noncontrolling interests during the three months ended September 30,
2009, or a favorable variance of $30.5 million. This favorable change was primarily due to a $27.1
million decrease in the noncontrolling interest partners share of income from discontinued
operations, which decreased primarily due to a reduction in gains on the disposition of real estate
from 2009 to 2010 and a $3.4 million decrease in the
noncontrolling interest partners share of income from continuing operations of our consolidated
real estate partnerships.
For the nine months ended September 30, 2010, compared to the nine months ended September 30,
2009, net income attributed to noncontrolling interests in consolidated real estate partnerships
decreased by $26.6 million. This decrease was primarily due to a $36.2 million decrease in the
noncontrolling interest partners share of income from discontinued operations, which decreased
primarily due to a reduction in gains on the dispositions of real estate from 2009 to 2010. This
decrease was partially offset by a $9.6 million increase in the noncontrolling interest partners
share of income from continuing operations of our consolidated real estate partnerships.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America, or GAAP, which requires us to make estimates
and assumptions. We believe that the following critical accounting policies involve our more
significant judgments and estimates used in the preparation of our consolidated financial
statements.
Impairment of Long-Lived Assets
Real estate and other long-lived assets to be held and used are stated at cost, less
accumulated depreciation and amortization, unless the carrying amount of the asset is not
recoverable. If events or circumstances indicate that the carrying amount of a property may not be
recoverable, we make an assessment of its recoverability by comparing the carrying amount to our
estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the
carrying amount exceeds the estimated aggregate undiscounted future cash flows, we recognize an
impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.
From time to time, we have non-revenue producing properties that we hold for future
redevelopment. We assess the recoverability of the carrying amount of these redevelopment
properties by comparing our estimate of undiscounted future cash flows based on the expected
service potential of the redevelopment property upon completion to the carrying amount. In certain
instances, we use a probability-weighted approach to determine our estimate of undiscounted future
cash flows when alternative courses of action are under consideration.
Real estate investments are subject to varying degrees of risk. Several factors may adversely
affect the economic performance and value of our real estate investments. These factors include:
the general economic climate;
competition from other apartment communities and other housing options;
local conditions, such as loss of jobs or an increase in the supply of apartments, that
might adversely affect apartment occupancy or rental rates;
changes in governmental regulations and the related cost of compliance;
increases in operating costs (including real estate taxes) due to inflation and other
factors, which may not be offset by increased rents;
changes in tax laws and housing laws, including the enactment of rent control laws or
other laws regulating multifamily housing; and
changes in interest rates and the availability of financing.
Any adverse changes in these and other factors could cause an impairment of our long-lived
assets, including real estate and investments in unconsolidated real estate partnerships. Based on
periodic tests of recoverability of long-lived assets, for the three and nine months ended
September 30, 2010, we recorded $0.3 million of impairment losses related to properties to be held
and used, and for the three and nine months ended September 30, 2009, we recognized impairment
losses of $0.1 million and $1.6 million, respectively, related to properties to be held and used.
Other assets in our condensed consolidated balance sheet in Item 1 include $68.4 million of
goodwill related to our conventional and affordable reportable segments as of September 30, 2010.
We annually evaluate impairment of intangible assets using an impairment test that compares the
fair value of the reporting units with the carrying amounts, including goodwill. We performed our
annual impairment analysis during the three months ended September 30, 2010 and concluded no
impairment was necessary. We will perform our next impairment analysis during the second half of
2011 and do not anticipate recognizing an impairment of goodwill in connection with this analysis.
As further discussed in Note 3 to the condensed consolidated financial statements in Item 1, we
allocate goodwill to real estate properties when they are sold or classified as held for sale,
based on the relative fair values of these properties and the retained properties in each
reportable segment.
Notes Receivable and Interest Income Recognition
Notes receivable from unconsolidated real estate partnerships consist primarily of notes
receivable from partnerships in which we are the general partner. Notes receivable from
non-affiliates consist of notes receivable from unrelated third parties. The ultimate repayment of
these notes is subject to a number of variables, including the performance and value of the
underlying real estate and the claims of unaffiliated mortgage lenders. Our notes receivable
include loans extended by us that we carry at the face amount plus accrued interest, which we refer
to as par value notes, and loans extended by predecessors, some of whose positions we generally
acquired at a discount, which we refer to as discounted notes.
We record interest income on par value notes as earned in accordance with the terms of the
related loan agreements. We discontinue the accrual of interest on such notes when the notes are
impaired, as discussed below, or when there is otherwise significant uncertainty as to the
collection of interest. We record income on such nonaccrual loans using the cost recovery method,
under which we apply cash receipts first to the recorded amount of the loan; thereafter, any
additional receipts are recognized as income.
We recognize interest income on discounted notes receivable based upon whether the amount and
timing of collections are both probable and reasonably estimable. We consider collections to be
probable and reasonably estimable when the borrower has closed transactions or has entered into
certain pending transactions (which include real estate sales, refinancings, foreclosures and
rights offerings) that provide a reliable source of repayment. In such instances, we recognize
accretion income, on a prospective basis using the effective interest method over the estimated
remaining term of the loans, equal to the difference between the carrying amount of the discounted
notes and the estimated collectible value. We record income on all other discounted notes using
the cost recovery method. Accretion income recognized in any given period is based on our ability
to complete transactions to monetize the notes receivable and the difference between the carrying
value and the estimated collectible amount of the notes; therefore, accretion income varies on a
period by period basis and could be lower or higher than in prior periods.
Provision for Losses on Notes Receivable
We assess the collectibility of notes receivable on a periodic basis, which assessment
consists primarily of an evaluation of cash flow projections of the borrower to determine whether
estimated cash flows are sufficient to repay principal and interest in accordance with the
contractual terms of the note. We recognize impairments on notes receivable when it is probable
that principal and interest will not be received in accordance with the contractual terms of the
loan. The amount of the impairment to be recognized generally is based on the fair value of the
partnerships real estate that represents the primary source of loan repayment. In certain
instances where other sources of cash flow are available to repay the loan, the impairment is
measured by discounting the estimated cash flows.
During the three months ended September 30, 2010, we recognized net provisions for losses on
notes receivable of less than $0.1 million and during the three months ended September 30, 2009, we
recognized a $1.2 million net recovery of previously recognized provision for losses on notes
receivable. During the nine months ended September 30, 2010 and
2009, we recorded provisions for losses on notes receivable of $0.3 million and $0.5 million,
respectively. We will continue to evaluate the collectibility of these notes, and we will adjust
related allowances in the future due to changes in market conditions and other factors.
We capitalize costs, including certain indirect costs, incurred in connection with our capital
additions activities, including redevelopment and construction projects, other tangible property
improvements and replacements of existing property components. Included in these capitalized costs
are payroll costs associated with time spent by site employees in connection with the planning,
execution and control of all capital additions activities at the property level. We characterize
as indirect costs an allocation of certain department costs, including payroll, at the area
operations and corporate levels that clearly relate to capital additions activities. We capitalize
interest, property taxes and insurance during periods in which redevelopment and construction
projects are in progress. We charge to expense as incurred costs that do not relate to capital
additions activities, including ordinary repairs, maintenance, resident turnover costs and general
and administrative expenses.
For the three months ended September 30, 2010 and 2009, for continuing and discontinued
operations, we capitalized $3.2 million and $2.7 million of interest costs, respectively, and $5.9
million and $7.8 million of site payroll and indirect costs, respectively. For the nine months
ended September 30, 2010 and 2009, for continuing and discontinued operations, we capitalized $8.6
million and $7.1 million of interest costs, respectively, and $18.7 million and $32.9 million of
site payroll and indirect costs, respectively. The net increase in interest capitalized from 2009
to 2010 was primarily due to our refinancing of the project financing on a large redevelopment
project at a higher interest rate, partially offset by a decrease in the average number of units
subject to capital projects. The decrease in the amounts of site payroll and indirect costs
capitalized from 2009 to 2010 is primarily due to a reduced level of redevelopment activities.
Liquidity and Capital Resources
Liquidity is the ability to meet present and future financial obligations. Our primary source
of liquidity is cash flow from our operations. Additional sources are proceeds from property sales,
proceeds from refinancings of existing property loans, borrowings under new property loans and
borrowings under our revolving credit facility.
Our principal uses for liquidity include normal operating activities, payments of principal
and interest on outstanding property debt, capital expenditures, distributions paid to unitholders
and distributions paid to noncontrolling interest partners and acquisitions of, and investments in,
properties. We use our cash and cash equivalents and our cash provided by operating activities to
meet short-term liquidity needs. In the event that our cash and cash equivalents and cash provided
by operating activities are not sufficient to cover our short-term liquidity demands, we have
additional means, such as short-term borrowing availability and proceeds from property sales and
refinancings, to help us meet our short-term liquidity demands. We may use our revolving credit
facility for general corporate purposes and to fund investments on an interim basis. We expect to
meet our long-term liquidity requirements, such as debt maturities and property acquisitions,
through long-term borrowings, primarily secured, the issuance of equity securities (including OP
Units), the sale of properties and cash generated from operations.
The availability of credit and its related effect on the overall economy may affect our
liquidity and future financing activities, both through changes in interest rates and access to
financing. Currently, interest rates are low compared to historical levels, many lenders have
reentered the market and the CMBS market is showing signs of recovery. However, any adverse
changes in these factors could negatively affect on our liquidity. We believe we mitigate this
exposure through our continued focus on reducing our short and intermediate term maturity risk, by
refinancing such loans with long-dated, fixed-rate property loans. If property financing options
become unavailable for our debt needs, we may consider alternative sources of liquidity, such as
reductions in certain capital spending or proceeds from asset dispositions.
As further discussed in Item 3, Quantitative and Qualitative Disclosures About Market Risk, we
are subject to interest rate risk associated with certain variable rate liabilities, preferred
units and assets. Based on our net variable rate liabilities, preferred units and assets
outstanding at September 30, 2010, we estimate that a 1.0% increase in 30-day LIBOR with constant
credit risk spreads would reduce our income (or increase our loss) attributable to the
Partnerships common unitholders by approximately $0.2 million on an annual basis.
As further discussed in Note 2 to our condensed consolidated financial statements in Item 1,
we use total rate of return swaps as a financing product to lower our cost of borrowing through
conversion of fixed-rate debt to variable-rates. The cost of financing through these arrangements
is generally lower than the fixed rate on the debt. As of September 30, 2010,
we had total rate of return swap positions with two financial institutions with notional
amounts totaling $307.5 million. Swaps with notional amounts totaling $278.3 million and $29.2
million have maturity dates in May 2012 and October 2012, respectively. During the three and nine
months ended September 30, 2010, we received net cash receipts of $3.6 million and $14.7 million,
respectively, under the total return swaps, which positively affected our liquidity. To the extent
interest rates increase above the fixed rates on the underlying borrowings, our obligations under
the total return swaps will negatively affect our liquidity.
We periodically evaluate counterparty credit risk associated with these arrangements. At the
current time, we have concluded we do not have material exposure. In the event a counterparty were
to default under these arrangements, loss of the net interest benefit we generally receive under
these arrangements, which is equal to the difference between the fixed rate we receive and the
variable rate we pay, may adversely affect our liquidity.
The total rate of return swaps require specified loan-to-value ratios. In the event the
values of the real estate properties serving as collateral under these agreements decline or if we
sell properties in the collateral pool with low loan-to-value ratios, certain of our consolidated
subsidiaries have an obligation to pay down the debt or provide additional collateral pursuant to
the swap agreements, which may adversely affect our cash flows. The obligation to provide
collateral is limited to these subsidiaries and is non-recourse to the Partnership. At September
30, 2010, these subsidiaries were not required to provide cash collateral based on the
loan-to-value ratios of the real estate properties serving as collateral under these agreements.
As of September 30, 2010, the amount available under our revolving credit facility was $258.7
million (after giving effect to $41.3 million outstanding for undrawn letters of credit issued
under the revolving credit facility).
At September 30, 2010, we had $145.1 million in cash and cash equivalents, an increase of
$63.8 million from December 31, 2009. At September 30, 2010, we had $216.4 million of restricted
cash, primarily consisting of reserves and escrows held by lenders for bond sinking funds, capital
additions, property taxes and insurance. In addition, cash, cash equivalents and restricted cash
are held by partnerships that are not presented on a consolidated basis. The following discussion
relates to changes in cash due to operating, investing and financing activities, which are
presented in our condensed consolidated statements of cash flows in Item 1.
Operating Activities
For the nine months ended September 30, 2010, our net cash provided by operating activities of
$190.2 million was primarily related to operating income from our consolidated properties, which is
affected primarily by rental rates, occupancy levels and operating expenses related to our
portfolio of properties, in excess of payments of operating accounts payable and accrued
liabilities, including amounts related to our organizational restructuring (see Note 4 to the
condensed consolidated financial statements in Item 1). Cash provided by operating activities
increased $52.8 million compared with the nine months ended September 30, 2009, driven primarily by
a decrease in payments on accounts payable and accrued expenses, including payments
related to our restructuring accruals, in 2010 as compared to 2009.
Investing Activities
For the nine months ended September 30, 2010, our net cash provided by investing activities of
$41.7 million consisted primarily of proceeds from disposition of real estate and a net increase in
cash from partnerships consolidated and deconsolidated in connection with our adoption of ASU
2009-17 (see Note 2 to our condensed consolidated financial statements in Item 1), partially offset
by capital expenditures.
Although we hold all of our properties for investment, we sell properties when they do not
meet our investment criteria or are located in areas that we believe do not justify our continued
investment when compared to alternative uses for our capital. During the nine months ended
September 30, 2010, we sold 31 consolidated properties for an aggregate sales price of $283.5
million, generating proceeds totaling $273.5 million, after the payment of transaction costs and
debt prepayment penalties. The $273.5 million in proceeds is inclusive of debt assumed by buyers.
Net cash proceeds from property sales were used primarily to repay property debt and for other
corporate purposes.
Capital expenditures totaled $130.8 million during the nine months ended September 30, 2010,
and consisted primarily of Capital Improvements and Capital Replacements, and to a lesser extent
included spending for redevelopment projects and casualties.
Financing Activities
For the nine months ended September 30, 2010, net cash used in financing activities of $168.1
million was primarily attributed to debt principal payments, distributions paid to common and
preferred unitholders and distributions to noncontrolling interests. Proceeds from property loans
and our issuance of preferred units partially offset the cash outflows.
Property Debt
At September 30, 2010 and December 31, 2009, we had $5.5 billion and $5.6 billion,
respectively, in consolidated property debt outstanding, which included $6.4 million and $178.3
million, respectively, of property debt classified within liabilities related to assets held for
sale. During the nine months ended September 30, 2010, we refinanced or closed property loans on
14 properties generating $167.4 million of proceeds from borrowings with a weighted average
interest rate of 5.26%. Our share of the net proceeds after repayment of existing debt, payment of
transaction costs and distributions to limited partners, was $82.6 million. We used these total
net proceeds for capital additions and other corporate purposes. We intend to continue to
refinance property debt primarily as a means of extending current and near term maturities and to
finance certain capital projects.
Credit Facility
We have an Amended and Restated Senior Secured Credit Agreement, as amended, which we refer to
as the Credit Agreement. During September 2010, we amended the Credit Agreement to, among other
things, increase the revolving commitments from $180.0 million to $300.0 million, extend the
maturity from May 2012 to May 2014 (both inclusive of a one year extension option) and reduce the
LIBOR floor on the facilitys base interest rate from 2.00% to 1.50%.
As of September 30, 2010, the Credit Agreement consisted of $300.0 million of revolving loan
commitments. Borrowings under the revolving credit facility bear interest based on a pricing
grid determined by leverage (either at LIBOR plus 5.00% with a LIBOR floor of 1.50% or, at our
option, a base rate equal to the Prime rate plus a spread of 3.75%). The revolving credit facility
matures May 1, 2013, and may be extended for an additional year, subject to certain conditions,
including payment of a 35.0 basis point fee on the total revolving commitments.
The amount available under the revolving credit facility at September 30, 2010, was $258.7
million (after giving effect to $41.3 million outstanding for undrawn letters of credit issued
under the revolving credit facility). The proceeds of revolving loans are generally
used to fund working capital and for other corporate purposes.
Our Credit Agreement requires us to satisfy covenant ratios of earnings before interest, taxes
and depreciation and amortization to debt service and earnings to fixed charges of 1.40:1 and
1.20:1, respectively. For the twelve months ended September 30, 2010, as calculated based on the
provisions in our Credit Agreement, we had a ratio of earnings before interest, taxes and
depreciation and amortization to debt service of 1.58:1 and a ratio of earnings to fixed charges of
1.34:1.
Partners Capital Transactions
During the nine months ended September 30, 2010, we paid cash distributions totaling $43.8
million and $37.7 million to preferred and common unitholders, respectively.
During the nine months ended September 30, 2010, we paid cash distributions of $37.6 million
to noncontrolling interests in consolidated real estate partnerships, primarily related to property
sales during 2010 and late 2009.
During the three months ended September 30, 2010, Aimco sold 4,000,000 shares of its 7.75%
Class U Cumulative Preferred Stock for net proceeds of $96.1 million (after deducting underwriting
discounts and commissions and estimated transaction expenses of $3.3 million). Aimco contributed
the net proceeds to us in exchange for 4,000,000 units of our 7.75% Class U Cumulative Preferred
Units. During September 2010, Aimco also gave notice that it intended to redeem the 4,050,000
outstanding shares of its 9.375% Class G Cumulative Preferred Stock, and on October 7, 2010, Aimco
completed this redemption for $101.3 million plus accrued and unpaid dividends of $2.2 million.
Concurrent with this redemption, we redeemed all of our outstanding Class G Cumulative Preferred
Units, 4,040,000 of which were held by Aimco and 10,000 of which were held by a consolidate
subsidiary.
We and Aimco have a shelf registration statement that provides for the issuance of debt
securities by us and debt and equity securities by Aimco.
Future Capital Needs
We expect to fund any future acquisitions, redevelopment projects, capital improvements and
capital replacements principally with proceeds from property sales (including tax-free exchange
proceeds), short-term borrowings, debt and equity financing (including tax credit equity) and
operating cash flows.
Dodd-Frank Wall Street Reform and Consumer Protection Act
During July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Act,
was signed into federal law. The provisions of the Act include new regulations for over-the-counter
derivatives and substantially increased regulation and risk of liability for credit rating
agencies, all of which could increase our cost of capital. The Act also includes provisions
concerning corporate governance and executive compensation which, among other things, require
additional executive compensation disclosures and enhanced independence requirements for board
compensation committees and related advisors, as well as provide explicit authority for the
Securities and Exchange Commission to adopt proxy access, all of which could result in additional
expenses in order to maintain compliance. The Act is wide-ranging, and the provisions are broad
with significant discretion given to the many and varied agencies tasked with adopting and
implementing the Act. The majority of the provisions of the Act do not go into effect immediately
and may be adopted and implemented over many months or years. As such, we cannot predict the full
impact of the Act on our financial condition or results of operations.
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk exposure relates to changes in base interest rates, credit risk
spreads and availability of credit. We are not subject to any other material market rate or price
risks. We use predominantly long-term, fixed-rate non-recourse property debt in order to avoid the
refunding and repricing risks of short-term borrowings. We use short-term debt financing and
working capital primarily to fund short-term uses and acquisitions and generally expect to
refinance such borrowings with cash from operating activities, property sales proceeds, long-term
debt or equity financings. We use total rate-of-return swaps to obtain the benefit of variable
rates on certain of our fixed-rate debt instruments. We make limited use of other derivative
financial instruments and we do not use them for trading or other speculative purposes.
We had $525.0 million of floating rate debt and $57.0 million of floating rate preferred units
outstanding at September 30, 2010. Of the total floating rate debt, the major components were
floating rate tax-exempt bond financing ($405.7 million) and floating rate secured notes ($108.5
million). At September 30, 2010, we had approximately $502.2 million in cash and cash equivalents,
restricted cash and notes receivable, the majority of which bear interest. The effect of our
interest bearing assets would partially reduce the effect of an increase in variable interest
rates. Historically, changes in tax-exempt interest rates have been at a ratio of less than 1:1
with changes in taxable interest rates. Floating rate tax-exempt bond financing is benchmarked
against the SIFMA rate, which since 1990 has averaged 74% of the 30-day LIBOR rate. If the
historical relationship continues, we estimate that an increase in 30-day LIBOR of 100 basis points
(74 basis points for tax-exempt interest rates) with constant credit risk spreads would result in
net income and net income attributable to the Partnerships common unitholders being reduced (or
the amounts of net loss and net loss attributable to the Partnerships common unitholders being
increased) by $0.7 million and $0.2 million, respectively, on an annual basis.
The estimated aggregate fair value and carrying amount of our consolidated debt (including
amounts reported in liabilities related to assets held for sale) was approximately $6.0 billion and
$5.5 billion, respectively at September 30, 2010. If market rates for our fixed-rate debt were
higher by 1.0% with constant credit risk spreads, the estimated fair value of our debt discussed
above would decrease from $6.0 billion to $5.7 billion. If market rates for our debt discussed
above were lower by 1.0% with constant credit risk spreads, the estimated fair value of our
fixed-rate debt would increase from $6.0 billion to $6.4 billion.
The Partnerships management, with the participation of the chief executive officer and chief
financial officer of the General Partner, who are the equivalent of the Partnerships chief
executive officer and chief financial officer, respectively, has evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period
covered by this report. Based on such evaluation, the chief executive officer and chief financial
officer of the General Partner have concluded that, as of the end of such period, our disclosure
controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the third quarter of 2010 that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
As of the date of this report, there have been no material changes from the risk factors in
the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sales of Equity Securities. We did not issue any common OP Units in exchange
for shares of Aimco Class A Common Stock during the three months
ended September 30, 2010. On September 7, 2010, we issued 4,000,000 Class U Partnership Preferred Units to the Special
Limited Partner for $96.1 million in cash, which was contributed by Aimco to the Special Limited
Partner and represents the net proceeds from the concurrent underwritten public offering of Aimcos
7.75% Class U Cumulative Preferred Stock. The issuance of the Class U Partnership Preferred Units
was exempt from registration under Section 4(2) of the Securities Act of 1933, as amended.
(c) Repurchases of Equity Securities. Our Partnership Agreement generally provides that after
holding the common OP Units for one year, our Limited Partners have the right to redeem their
common OP Units for cash, subject to our prior right to cause Aimco to acquire some or all of the
common OP Units tendered for redemption in exchange for shares of Aimco Class A Common Stock.
Common OP Units redeemed for Aimco Class A Common Stock are generally exchanged on a one-for-one
basis (subject to antidilution adjustments). During the three months ended September 30, 2010, no
common OP Units were redeemed in exchange for Aimco Class A Common Stock. The following table
summarizes repurchases of our equity securities for the three months ended September 30, 2010.
Maximum
Number
Total Number of
of Units that
Units Purchased
May Yet Be
Total
Average
as Part of
Purchased
Number
Price
Publicly
Under the
of Units
Paid
Announced Plans
Plans or
Period
Purchased
per Unit
or Programs (1)
Programs (2)
July 1 July 31, 2010
8,259
$
21.32
N/A
N/A
August 1 August 31, 2010
25,803
21.32
N/A
N/A
September 1 September
30, 2010
10,268
20.24
N/A
N/A
Total
44,330
$
21.07
(1)
The terms of our Partnership Agreement do not provide for a maximum number of units that
may be repurchased, and other than the express terms of our Partnership Agreement, we have
no publicly announced plans or programs of repurchase. However, whenever Aimco repurchases
shares of its Class A Common Stock, it is expected that Aimco will fund the repurchase with
proceeds from a concurrent repurchase by us of common OP Units held by Aimco at a price per
unit that is equal to the price per share paid for its Class A Common Stock.
(2)
Aimcos board of directors has, from time to time, authorized Aimco to repurchase shares
of its Class A Common Stock. As of September 30, 2010, Aimco was authorized to repurchase
approximately 19.3 million additional shares. This authorization has no expiration date.
These repurchases may be made from time to time in the open market or in privately
negotiated transactions.
Distribution Payments. Our Credit Agreement includes customary covenants, including a
restriction on distributions and other restricted payments, but permits distributions during any
12-month period in an aggregate amount of up to 95% of our Funds From Operations, subject to
certain non-cash adjustments, for such period or such amount as may be necessary for Aimco to
maintain its REIT status.
The following exhibits are filed with this report:
EXHIBIT NO. (1)
10.1
Tenth Amendment to Senior Secured Credit Agreement, dated as of
September 29, 2010, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein, Bank of America, N.A., as administrative agent,
swing line lender and L/C issuer, and the lenders party thereto
(Exhibit 10.1 to Aimcos Current Report on Form 8-K, dated
September 29, 2010, is incorporated herein by this reference)
31.1
Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1
Agreement Regarding Disclosure of Long-Term Debt Instruments
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.
AIMCO PROPERTIES, L.P.
By:
AIMCO-GP, Inc., its general partner
By:
/s/ ERNEST M. FREEDMAN
Ernest M. Freedman
Executive Vice President and Chief Financial Officer
(duly authorized officer and
principal financial officer)
By:
/s/ PAUL BELDIN
Paul Beldin
Senior Vice President and
Chief Accounting Officer
Tenth Amendment to Senior Secured Credit Agreement, dated as of
September 29, 2010, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein, Bank of America, N.A., as administrative agent,
swing line lender and L/C issuer, and the lenders party thereto
(Exhibit 10.1 to Aimcos Current Report on Form 8-K, dated
September 29, 2010, is incorporated herein by this reference)
31.1
Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1
Agreement Regarding Disclosure of Long-Term Debt Instruments
I have reviewed this quarterly report on Form 10-Q of AIMCO Properties, L.P.;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4.
The registrants other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and
procedures, or caused such disclosure
controls and procedures to be designed
under our supervision, to ensure that
material information relating to the
registrant, including its consolidated
subsidiaries, is made known to us by
others within those entities,
particularly during the period in
which this report is being prepared;
(b)
Designed such internal control over
financial reporting, or caused such
internal control over financial
reporting to be designed under our
supervision, to provide reasonable
assurance regarding the reliability of
financial reporting and the
preparation of financial statements
for external purposes in accordance
with generally accepted accounting
principles;
(c)
Evaluated the effectiveness of the
registrants disclosure controls and
procedures and presented in this
report our conclusions about the
effectiveness of the disclosure
controls and procedures, as of the end
of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in
the registrants internal control over
financial reporting that occurred
during the registrants most recent
fiscal quarter (the registrants
fourth fiscal quarter in the case of
an annual report) that has materially
affected, or is reasonably likely to
materially affect, the registrants
internal control over financial
reporting; and
5.
The registrants other certifying officer(s) and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and
material weaknesses in the design or
operation of internal control over
financial reporting which are
reasonably likely to adversely affect
the registrants ability to record,
process, summarize and report
financial information; and
(b)
Any fraud, whether or not material,
that involves management or other
employees who have a significant role
in the registrants internal control
over financial reporting.
Date: October 29, 2010
/s/ Terry Considine
Terry Considine
Chairman and Chief Executive Officer (equivalent of the chief executive officer of AIMCO
Properties, L.P.)
I have reviewed this quarterly report on Form 10-Q of AIMCO Properties, L.P.;
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4.
The registrants other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and
procedures, or caused such disclosure
controls and procedures to be designed
under our supervision, to ensure that
material information relating to the
registrant, including its consolidated
subsidiaries, is made known to us by
others within those entities,
particularly during the period in
which this report is being prepared;
(b)
Designed such internal control over
financial reporting, or caused such
internal control over financial
reporting to be designed under our
supervision, to provide reasonable
assurance regarding the reliability of
financial reporting and the
preparation of financial statements
for external purposes in accordance
with generally accepted accounting
principles;
(c)
Evaluated the effectiveness of the
registrants disclosure controls and
procedures and presented in this
report our conclusions about the
effectiveness of the disclosure
controls and procedures, as of the end
of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in
the registrants internal control over
financial reporting that occurred
during the registrants most recent
fiscal quarter (the registrants
fourth fiscal quarter in the case of
an annual report) that has materially
affected, or is reasonably likely to
materially affect, the registrants
internal control over financial
reporting; and
5.
The registrants other certifying officer(s) and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and
material weaknesses in the design or
operation of internal control over
financial reporting which are
reasonably likely to adversely affect
the registrants ability to record,
process, summarize and report
financial information; and
(b)
Any fraud, whether or not material,
that involves management or other
employees who have a significant role
in the registrants internal control
over financial reporting.
Date: October 29, 2010
/s/ Ernest M. Freedman
Ernest M. Freedman
Executive Vice President and Chief Financial Officer
(equivalent of the chief financial officer of AIMCO Properties, L.P.)
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of AIMCO Properties, L.P. (the Partnership) on Form 10-Q
for the quarterly period ended September 30, 2010 as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, Terry Considine, as Chief Executive Officer of the
Partnership hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Partnership.
/s/ Terry Considine
Terry Considine
Chairman and Chief Executive Officer (equivalent of the chief
executive officer of AIMCO Properties, L.P.) October 29, 2010
Certification of CFO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of AIMCO Properties, L.P. (the Partnership) on Form 10-Q
for the quarterly period ended September 30, 2010 as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, Ernest M. Freedman, as Chief Financial Officer of
the Partnership hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Partnership.
/s/ Ernest M. Freedman
Ernest M. Freedman
Executive Vice President and Chief Financial Officer (equivalent of
the chief financial officer of AIMCO Properties, L.P.) October 29, 2010
Agreement Regarding Disclosure of Long-Term Debt Instruments
In reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K, AIMCO Properties, L.P., a Delaware
limited partnership (the Partnership), has not filed as an exhibit to its Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2010, any instrument with respect to
long-term debt not being registered where the total amount of securities authorized thereunder does
not exceed ten percent of the total assets of the Partnership and its subsidiaries on a
consolidated basis. Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Partnership hereby
agrees to furnish a copy of any such agreement to the Securities and Exchange Commission upon
request.
AIMCO Properties, L.P.
By:
AIMCO-GP, Inc., its general partner
By:
/s/ Ernest M. Freedman
Ernest M. Freedman
Executive Vice President and Chief Financial
Officer October 29, 2010
EX-101.INS
7
aimco-20100930.xml
EX-101 INSTANCE DOCUMENT
00009266602009-01-012009-12-3100009266602009-09-3000009266602008-12-3100009266602010-10-2800009266602010-07-012010-09-3000009266602009-07-012009-09-3000009266602009-01-012009-09-3000009266602010-09-3000009266602009-12-3100009266602010-01-012010-09-30iso4217:USDxbrli:sharesxbrli:sharesiso4217:USD<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:NatureOfOperations-->
<div align="left" style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b></div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 1 — Organization</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">AIMCO Properties, L.P., a Delaware limited partnership, or the Partnership, and together with
its consolidated subsidiaries was formed on May 16, 1994 to conduct the business of acquiring,
redeveloping, leasing, and managing multifamily apartment properties. Our securities include
Partnership Common Units, or common OP Units, Partnership Preferred Units, or preferred OP Units,
and High Performance Partnership Units, or High Performance Units, which are collectively referred
to as “OP Units.” Apartment Investment and Management Company, or Aimco, is the owner of our
general partner, AIMCO-GP, Inc., or the General Partner, and special limited partner, AIMCO-LP
Trust, or the Special Limited Partner. The General Partner and Special Limited Partner hold common
OP Units and are the primary holders of outstanding preferred OP Units. “Limited Partners” refers
to individuals or entities that are our limited partners, other than Aimco, the General Partner or
the Special Limited Partner, and own common OP Units or preferred OP Units. Generally, after
holding the common OP Units for one year, the Limited Partners have the right to redeem their
common OP Units for cash, subject to our prior right to cause Aimco to acquire some or all of the
common OP Units tendered for redemption in exchange for shares of Aimco Class A Common Stock.
Common OP Units redeemed for Aimco Class A Common Stock are generally exchanged on a one-for-one
basis (subject to antidilution adjustments). Preferred OP Units and High Performance Units may or
may not be redeemable based on their respective terms, as provided for in the Fourth Amended and
Restated Agreement of Limited Partnership of AIMCO Properties, L.P., as amended, or the Partnership
Agreement.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We, through our operating divisions and subsidiaries, hold substantially all of Aimco’s assets
and manage the daily operations of Aimco’s business and assets. Aimco is required to contribute
all proceeds from offerings of its securities to us. In addition, substantially all of Aimco’s
assets must be owned through the Partnership; therefore, Aimco is generally required to contribute
all assets acquired to us. In exchange for the contribution of offering proceeds or assets, Aimco
receives additional interests in us with similar terms (e.g., if Aimco contributes proceeds of a
preferred stock offering, Aimco (through the General Partner and Special Limited Partner) receives
preferred OP Units with terms substantially similar to the preferred securities issued by Aimco).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Aimco frequently consummates transactions for our benefit. For legal, tax or other business
reasons, Aimco may hold title or ownership of certain assets until they can be transferred to us.
However, we have a controlling financial interest in substantially all of Aimco’s assets in the
process of transfer to us. Except as the context otherwise requires, “we,” “our” and “us” refer to
the Partnership, and the Partnership’s consolidated entities, collectively. Except as the context
otherwise requires, “Aimco” refers to Aimco and Aimco’s consolidated entities, collectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our goal is to provide above average returns with lower volatility. Our business plan to
achieve this goal is to:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">own and operate a broadly diversified portfolio of primarily class “B/B+” assets with
properties concentrated in the 20 largest markets in the United States (as measured by
total apartment value, which is the total market value of institutional-grade apartment
properties in a particular market);
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">improve our portfolio through selling assets with lower projected returns and
reinvesting those proceeds through the purchase of new assets or redevelopment of assets in
our portfolio; and
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">finance our operations using non-recourse, long-dated, fixed-rate property debt and
perpetual preferred equity.
</div></td>
</tr>
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2010, we:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">owned an equity interest in 227 conventional real estate properties with 70,844 units;
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">owned an equity interest in 251 affordable real estate properties with 29,097 units; and
</div></td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>
<div style="text-align: justify">provided services for or managed 27,357 units in 323 properties, primarily pursuant to
long-term asset management agreements. In certain cases, we may indirectly own generally
less than one percent of the operations of such properties through a syndication or other
fund.
</div></td>
</tr>
</table>
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Of these properties, we consolidated 225 conventional properties with 69,540 units and 194
affordable properties with 23,468 units. These conventional and affordable properties generated
84% and 16%, respectively, of consolidated property
net operating income (as defined in Note 7) during the nine months ended September 30, 2010,
or 88% and 12%, respectively, after adjustments for our ownership in these properties.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At September 30, 2010, after elimination of units held by consolidated subsidiaries, we had
outstanding 122,972,734 common OP Units, 32,007,462 preferred OP Units and 2,339,950 High
Performance Units. At September 30, 2010, Aimco owned 117,033,718 of the common OP Units and
28,940,114 of the preferred OP Units.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 2 — Basis of Presentation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain
information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America, or GAAP,
have been condensed or omitted in accordance with such rules and regulations, although management
believes the disclosures are adequate to prevent the information presented from being misleading.
In the opinion of management, all adjustments (consisting of normal recurring items) considered
necessary for a fair presentation have been included. Operating results for the three and nine
months ended September 30, 2010, are not necessarily indicative of the results that may be expected
for the year ending December 31, 2010.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The balance sheet at December 31, 2009, has been derived from the audited financial statements
at that date, but does not include all of the information and disclosures required by GAAP for
complete financial statements. For further information, refer to the financial statements and
notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009.
Certain 2009 financial statement amounts have been reclassified to conform to the 2010
presentation, including adjustments for discontinued operations, and certain 2009 unit and per unit
information has been revised as compared to the amounts reported in our Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2009, as further discussed in Note 6.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three months ended March 31, 2010, we reduced the investment and noncontrolling
interest balances for certain of our consolidated partnerships by $38.7 million related to excess
amounts allocated to the investments upon our consolidation of such partnerships. Additionally,
during the three months ended March 31, 2010, we reversed approximately $11.2 million of excess
equity in losses recognized during 2008 and 2009 related to these partnerships, with a
corresponding adjustment to net income attributed to noncontrolling interests in consolidated real
estate partnerships. These adjustments had no significant effect on partners’ capital attributed
to the Partnership or net income or loss attributable to the Partnership during the affected
periods.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three months ended September 30, 2010, certain of our consolidated tax credit funds reduced by $9.8 million their December
31, 2009 investment balances related to unconsolidated low income housing tax credit partnerships
based on changes in the estimated future tax benefits and residual proceeds. We recognized the
equity in losses in our consolidated financial statements during the three months ended September
30, 2010. Substantially all of the equity in losses were attributed to noncontrolling interests in
the consolidated tax credit funds that hold such investments and, accordingly, had an insignificant
effect on net loss attributable to the Partnership during period.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Principles of Consolidation</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying condensed consolidated financial statements include the accounts of the
Partnership and its consolidated entities. Pursuant to a Management and Contribution Agreement
between the Partnership and Aimco, we have acquired, in exchange for interests in the Partnership,
the economic benefits of subsidiaries of Aimco in which we do not have an interest, and Aimco has
granted us a right of first refusal to acquire such subsidiaries’ assets for no additional
consideration. Pursuant to the agreement, Aimco has also granted us certain rights with respect to
assets of such subsidiaries. We consolidate all variable interest entities for which we are the
primary beneficiary. Generally, we consolidate real estate partnerships and other entities that
are not variable interest entities when we own, directly or indirectly, a majority voting interest
in the entity or are otherwise able to control the entity. All significant intercompany balances
and transactions have been eliminated in consolidation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Interests in consolidated real estate partnerships held by third parties are reflected in the
accompanying balance sheets as noncontrolling interests in consolidated real estate partnerships.
The assets of consolidated real estate partnerships owned or controlled by Aimco or us generally
are not available to pay creditors of Aimco or the Partnership.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As used herein, and except where the context otherwise requires, “partnership” refers to a
limited partnership or a limited liability company and “partner” refers to a partner in a limited
partnership or a member in a limited liability company.
</div>
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</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Variable Interest Entities</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We consolidate all variable interest entities for which we are the primary beneficiary.
Generally, a variable interest entity, or VIE, is an entity with one or more of the following
characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to
finance its activities without additional subordinated financial support; (b) as a group, the
holders of the equity investment at risk lack (i) the ability to make decisions about an
entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected
losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or
(c) the equity investors have voting rights that are not proportional to their economic interests
and substantially all of the entity’s activities either involve, or are conducted on behalf of, an
investor that has disproportionately few voting rights.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Effective January 1, 2010, we adopted the provisions of FASB Accounting Standards Update
2009-17, <i>Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities, </i>or ASU 2009-17, on a prospective basis. ASU 2009-17, which modified the guidance in FASB
ASC Topic 810, introduces a more qualitative approach to evaluating VIEs for consolidation and
requires a company to perform an analysis to determine whether its variable interests give it a
controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE
as the entity that has (a) the power to direct the activities of the VIE that most significantly
impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to
receive benefits that could potentially be significant to the VIE. In determining whether it has
the power to direct the activities of the VIE that most significantly affect the VIE’s performance,
ASU 2009-17 requires a company to assess whether it has an implicit financial responsibility to
ensure that a VIE operates as designed, requires continuous reassessment of primary beneficiary
status rather than periodic, event-driven assessments as previously required, and incorporates
expanded disclosure requirements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In determining whether we are the primary beneficiary of a VIE, we consider qualitative and
quantitative factors, including, but not limited to: which activities most significantly impact
the VIEs economic performance and which party controls such activities; the amount and
characteristics of our investment; the obligation or likelihood for us or other investors to
provide financial support; and the similarity with and significance to the business activities of
us and the other investors. Significant judgments related to these determinations include
estimates about the current and future fair values and performance of real estate held by these
VIEs and general market conditions.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As a result of our adoption of ASU 2009-17, we concluded we are the primary beneficiary of,
and therefore consolidated, approximately 49 previously unconsolidated partnerships. Those
partnerships own, or control other entities that own, 31 apartment properties. Our direct and
indirect interests in the profits and losses of those partnerships range from less than 1% to 35%,
and average approximately 7%. We applied the practicability exception for initial measurement of
consolidated VIEs to partnerships that own 13 properties and accordingly recognized the
consolidated assets, liabilities and noncontrolling interests at fair value effective January 1,
2010 (refer to the Fair Value Measurements section for further information regarding certain of the
fair value amounts recognized upon consolidation). We deconsolidated partnerships that own ten
apartment properties in which we hold an average interest of approximately 55%. The initial
consolidation and deconsolidation of these partnerships resulted in increases (decreases), net of
intercompany eliminations, in amounts included in our consolidated balance sheet as of January 1,
2010, as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidation</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Deconsolidation</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">144,292</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(86,151</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents and restricted cash
</div></td>
<td> </td>
<td> </td>
<td align="right">25,047</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,425</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts and notes receivable
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(13,456</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">6,002</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Investment in unconsolidated real estate partnerships
</div></td>
<td> </td>
<td> </td>
<td align="right">31,434</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,302</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">4,190</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,084</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">191,507</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(77,356</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total indebtedness
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">131,710</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(56,938</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued and other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">37,504</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(15,005</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">169,214</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(71,943</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cumulative effect of a change in accounting principle:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Noncontrolling interests
</div></td>
<td> </td>
<td> </td>
<td align="right">59,511</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,501</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">The Partnership
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(37,218</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">3,088</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total partners’ capital
</div></td>
<td> </td>
<td> </td>
<td align="right">22,293</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,413</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total liabilities and partners’ capital
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">191,507</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(77,356</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three months ended September 30, 2010, we reduced by $16.5 million the investments
in unconsolidated real estate partnerships and related noncontrolling interests in consolidated
real estate partnerships balances related to certain tax credit funds we consolidated in
connection with our adoption of AUS 2009-17. These revisions related to the tax credit
funds’ reduction of their December 31, 2009 investment balances related to unconsolidated low income housing tax credit partnerships based on changes in the
estimated future tax benefits and residual proceeds. These adjustments had no effect on partners’ capital or net income or loss
attributable to the Partnership.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In periods prior to 2009, when consolidated real estate partnerships made cash distributions
to partners in excess of the carrying amount of the noncontrolling interest, we generally recorded
a charge to earnings equal to the amount of such excess distribution, even though there was no
economic effect or cost. Also prior to 2009, we allocated the noncontrolling
partners’ share of partnership losses to noncontrolling partners to the extent of the carrying
amount of the noncontrolling interest. Consolidation of a partnership does not ordinarily result
in a change to the net amount of partnership income or loss that is recognized using the equity
method. However, prior to 2009, when a partnership had a deficit in equity, GAAP may have required
the controlling partner that consolidates the partnership to recognize any losses that would
otherwise be allocated to noncontrolling partners, in addition to the controlling partner’s share
of losses. Certain of the partnerships that we consolidated in accordance with ASU 2009-17 had
deficits in equity that resulted from losses or deficit distributions during prior periods when we
accounted for our investment using the equity method. We would have been required to recognize the
noncontrolling partners’ share of those losses had we consolidated those partnerships in those
periods prior to 2009. In accordance with our prospective transition method for the adoption of
ASU 2009-17 related to our consolidation of previously unconsolidated partnerships, we recorded a
$37.2 million charge to our partners’ capital, the majority of which was attributed to the
cumulative amount of additional losses that we would have recognized had we applied ASU 2009-17 in
periods prior to 2009. Substantially all of those losses were attributable to real estate
depreciation expense.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our consolidated statements of operations for the three and nine months ended September 30,
2010, include the following amounts for the entities and related real estate properties
consolidated as of January 1, 2010, in accordance with ASU 2009-17 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Three Months</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Nine Months</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental and other property revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">8,097</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">24,369</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Operating expenses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,795</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(13,998</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,750</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,435</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other expenses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(888</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,257</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Operating income
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(336</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,679</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest income
</div></td>
<td> </td>
<td> </td>
<td align="right">6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest expense
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,299</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,723</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Equity in losses of unconsolidated real estate partnerships
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,279</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,855</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gain on disposition of unconsolidated real estate and other
</div></td>
<td> </td>
<td> </td>
<td align="right">97</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,835</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,811</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11,042</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss attributable to noncontrolling interests in
consolidated
real estate partnerships
</div></td>
<td> </td>
<td> </td>
<td align="right">6,883</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,754</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net income attributable to the Partnership
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">72</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">712</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our equity in the results of operations of the partnerships and related properties we
deconsolidated in connection with our adoption of ASU 2009-17 is included in equity in earnings or
losses of unconsolidated real estate partnerships in our consolidated statements of operations for
the three and nine months ended September 30, 2010. Based on our effective ownership in these
entities, these amounts are not significant.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2010, we were the primary beneficiary of, and therefore consolidated,
approximately 142 VIEs, which owned 101 apartment properties with 14,652 units. Real estate with a
carrying value of $895.7 million collateralized $673.9 million of debt of those VIEs. Any
significant amounts of assets and liabilities related to our consolidated VIEs are identified
parenthetically on our accompanying condensed consolidated balance sheets. The creditors of the
consolidated VIEs do not have recourse to our general credit.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2010, we also held variable interests in 284 VIEs for which we were not
the primary beneficiary. Those VIEs consist primarily of partnerships that are engaged, directly
or indirectly, in the ownership and management of 337 apartment properties with 21,215 units. We
are involved with those VIEs as an equity holder, lender, management agent, or through other
contractual relationships. The majority of our investments in unconsolidated VIEs, or
approximately $61.9 million at September 30, 2010, are held through consolidated tax credit funds
that are VIEs and in which we generally hold a 1% or less general partner or equivalent interest.
Accordingly, substantially all of the investment balances related to these unconsolidated VIEs are
attributed to the noncontrolling interests in the consolidated tax credit funds that hold the
investments in these unconsolidated VIEs. Our maximum risk of loss related to our investment in
these VIEs is generally limited to our equity interest in the consolidated tax credit funds, which
is insignificant. The remainder of our investment in unconsolidated
VIEs, or approximately $12.2
million at September 30, 2010, is held through consolidated tax credit funds that are VIEs and in
which we hold substantially all of the economic interests. Our maximum risk of loss related to our
investment in these VIEs is limited to our $12.2 million recorded investment in such entities.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition to our investments in these unconsolidated VIEs discussed above, at September 30,
2010, we had in aggregate $101.4 million of receivables from these VIEs and we had a contractual
obligation to advance funds to certain VIEs totaling $4.0 million. Our maximum risk of loss
associated with our lending and management activities related to these unconsolidated VIEs is
limited to these amounts. We may be subject to additional losses to the extent of any receivables
relating to future provision of services to these entities or financial support that we voluntarily
provide.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Partners’ Capital (including Noncontrolling Interests)</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following table presents a reconciliation of our December 31, 2009 and September 30, 2010
consolidated partners’ capital accounts:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Temporary</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>capital</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Partners’ Capital</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Noncontrolling</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Partners’ capital</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>interests in</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Redeemable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>attributable to the</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>consolidated real</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Total partners’</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>preferred units</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Partnership</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>estate partnerships</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>capital</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2009
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">116,656</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,233,248</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">317,126</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,550,374</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Contributions
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,422</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,422</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Issuance of preferred units
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">94,775</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">94,775</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Distributions
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,057</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(65,292</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(37,635</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(102,927</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Repurchases of common units
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,805</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,805</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock option exercises
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,806</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,806</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Repurchases of preferred units
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11,354</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">3,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock based compensation cost
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,411</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,411</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of entities newly consolidated
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,324</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,324</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of changes in ownership for
consolidated subsidiaries (1)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,116</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(724</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,840</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustment of noncontrolling
interests related to revision of
investment balances
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(38,718</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(38,718</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cumulative effect of a change in
accounting principle
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(34,130</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">51,010</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,880</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Change in accumulated other
comprehensive loss
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,317</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(489</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,806</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">740</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(453</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">287</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income (loss)
</div></td>
<td> </td>
<td> </td>
<td align="right">3,292</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(56,267</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">(1,795</td>
<td>)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(58,062</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, September 30, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">103,537</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,177,053</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">302,068</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,479,121</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify">During the three months ended September 30, 2010, we acquired a limited partner’s interest
in one of our consolidated real estate partnerships. We recognized the excess of the
consideration paid over the carrying amount of the noncontrolling interests as an adjustment
of partners’ capital.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Derivative Financial Instruments</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We primarily use long-term, fixed-rate and self-amortizing non-recourse debt to avoid, among
other things, risk related to fluctuating interest rates. For our variable rate debt, we are
sometimes required by our lenders to limit our exposure to interest rate fluctuations by entering
into interest rate swap or cap agreements. The interest rate swap agreements moderate our exposure
to interest rate risk by effectively converting the interest on variable rate debt to a fixed rate.
The interest rate cap agreements effectively limit our exposure to interest rate risk by providing
a ceiling on the underlying variable interest rate. The fair values of the interest rate swaps are
reflected as assets or liabilities in the balance sheet, and periodic changes in fair value are
included in interest expense or partners’ capital, as appropriate. The interest rate caps are not
material to our financial position or results of operations.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At September 30, 2010 and December 31, 2009, we had interest rate swaps with aggregate
notional amounts of $52.3 million, and recorded fair values of $5.4 million and $1.6 million,
respectively, reflected in accrued liabilities and other in our condensed consolidated balance
sheets. At September 30, 2010, these interest rate swaps had a weighted average term of 10.4
years. We have designated these interest rate swaps as cash flow hedges and recognize any changes
in their fair value as an adjustment of accumulated other comprehensive income within partners’
capital to the extent of their effectiveness. For the nine months ended September 30, 2010 and
2009, we recognized changes in fair value of $3.8 million and $0.1 million, respectively, of which
$3.8 million and $0.6 million, respectively, resulted in an adjustment to consolidated partners’
capital. We recognized less than $0.1 million and $0.5 million of ineffectiveness as an adjustment
of interest expense during the nine months ended September 30, 2010 and 2009, respectively. Our
consolidated comprehensive loss for the three and nine months ended September 30, 2010, totaled
$30.1 million and $58.6 million, respectively, and consolidated comprehensive loss for the three
and nine months ended September 30, 2009, totaled $10.9 million and $48.5 million, respectively,
before the effects of noncontrolling interests. If the forward rates at September 30, 2010 remain
constant, we estimate that during the next twelve months, we would reclassify into earnings
approximately $1.6 million of the unrealized losses in accumulated other comprehensive income. If
market interest rates increase above the 3.43% weighted average fixed rate under these interest
rate swaps we will benefit from a lower effective rate than the underlying variable rates on this
debt.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have entered into total rate of return swaps on various fixed-rate secured tax-exempt bonds
payable and fixed-rate notes payable to convert these borrowings from a fixed rate to a variable
rate and provide an efficient financing product to lower our cost of borrowing. In exchange for
our receipt of a fixed rate generally equal to the underlying borrowing’s interest rate, the total
rate of return swaps require that we pay a variable rate, equivalent to the Securities Industry and
Financial Markets Association Municipal Swap Index, or SIFMA, rate for tax-exempt bonds payable and
the 30-day LIBOR rate for notes payable, plus a risk spread. These swaps generally have a second
or third lien on the property collateralized by the related borrowings and the obligations under
certain of these swaps are cross-collateralized with certain of the other swaps with a particular
counterparty. The underlying borrowings are generally callable at our option, with no prepayment
penalty, with 30 days advance notice, and the swaps generally have a term of less than five years.
The total rate of return swaps have a contractually defined termination value generally equal to
the difference between the fair value and the counterparty’s purchased value of the underlying
borrowings, which may require payment by us or to us for such difference. Accordingly, we believe
fluctuations in the fair value of the borrowings from the inception of the hedging relationship
generally will be offset by a corresponding fluctuation in the fair value of the total rate of
return swaps.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We designate total rate of return swaps as hedges of the risk of overall changes in the fair
value of the underlying borrowings. At each reporting period, we estimate the fair value of these
borrowings and the total rate of return swaps and recognize any changes therein as an adjustment of
interest expense.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2010 and December 31, 2009, we had borrowings payable subject to total
rate of return swaps with aggregate outstanding principal balances of $307.2 million and $352.7
million. At September 30, 2010, the weighted average fixed receive rate under the total return
swaps was 6.8% and the weighted average variable pay rate was 0.9%, based on the applicable SIFMA
and LIBOR rates effective as of that date. Information related to the fair value of these
instruments at September 30, 2010 and December 31, 2009, is discussed further below.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Fair Value Measurements</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We measure certain assets and liabilities in our consolidated financial statements at fair
value, both on a recurring and nonrecurring basis. Certain of these fair value measurements are
based on significant unobservable inputs classified within Level 3 of the valuation hierarchy
defined in FASB ASC Topic 820. When a determination is made to classify a fair value measurement
within Level 3 of the valuation hierarchy, the determination is based upon the significance of the
unobservable factors to the overall fair value measurement. However, Level 3 fair value
measurements typically include, in addition to the unobservable or Level 3 components, observable
components that can be validated to observable external sources; accordingly, the changes in fair
value in the table below are due in part to observable factors that are part of the valuation
methodology.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The table below presents information regarding significant items measured in our consolidated
financial statements at fair value on a recurring basis (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Level 3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Interest rate</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Total rate of</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Changes in fair</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>swaps (1)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>return swaps (2)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>value of debt (3)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value at December 31, 2008
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,557</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(29,495</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">29,495</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,557</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)
included in earnings (4)(5)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(478</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">3,395</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,395</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(478</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Realized gains (losses)
included in earnings
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)
included in partners’
capital
</div></td>
<td> </td>
<td> </td>
<td align="right">607</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">607</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value at September 30,
2009
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,428</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(26,100</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">26,100</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,428</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value at December 31, 2009
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,596</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(24,307</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">24,307</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,596</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)
included in earnings (4)(5)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(35</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">5,771</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,771</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(35</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Realized gains (losses)
included in earnings
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)
included in partners’
capital
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,806</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,806</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fair value at September 30,
2010
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(5,437</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(18,536</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">18,536</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(5,437</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify">The fair value of interest rate swaps is estimated using an income approach with
primarily observable inputs including information regarding the hedged variable cash flows
and forward yield curves relating to the variable interest rates on which the hedged cash
flows are based.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>
<div style="text-align: justify">Total rate of return swaps have contractually-defined termination values generally equal
to the difference between the fair value and the counterparty’s purchased value of the
underlying borrowings. We calculate the termination value, which we believe is
representative of the fair value, of total rate of return swaps using a market approach by
reference to estimates of the fair value of the underlying borrowings, which are discussed
below, and an evaluation of potential changes in the credit quality of the counterparties to
these arrangements.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(3)</td>
<td> </td>
<td>
<div style="text-align: justify">This represents changes in fair value of debt subject to our total rate of return swaps.
We estimate the fair value of debt instruments using an income and market approach,
including comparison of the contractual terms to observable and unobservable inputs such as
market interest rate risk spreads, collateral quality and loan-to-value ratios on similarly
encumbered assets within our portfolio. These borrowings are collateralized and
non-recourse to us; therefore, we believe changes in our credit rating will not materially
affect a market participant’s estimate of the borrowings’ fair value.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(4)</td>
<td> </td>
<td>
<div style="text-align: justify">Unrealized gains (losses) relate to periodic revaluations of fair value and have not
resulted from the settlement of a swap position.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(5)</td>
<td> </td>
<td>
<div style="text-align: justify">These amounts are included in interest expense in the accompanying condensed consolidated
statements of operations.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The table below presents information regarding amounts measured at fair value in our
consolidated financial statements on a nonrecurring basis during the nine months ended September
30, 2010, all of which were based, in part, on significant unobservable inputs classified within
Level 3 of the valuation hierarchy (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Total</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>measurement</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>gain (loss)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate (impairments losses) (1)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">43,961</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(8,341</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate (newly consolidated) (2)(3)
</div></td>
<td> </td>
<td> </td>
<td align="right">117,083</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,104</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Property debt (newly consolidated) (2)(4)
</div></td>
<td> </td>
<td> </td>
<td align="right">83,890</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify">During the nine months ended September 30, 2010, we reduced the aggregate carrying
amounts of $52.3 million for real estate assets classified as held for sale to their
estimated fair value, less estimated costs to sell. These impairment losses recognized
generally resulted from a reduction in the estimated holding period for these assets. In
periods prior to their classification as held for sale, we evaluated the recoverability of
their carrying amounts based on an analysis of the undiscounted cash flows over anticipated
expected holding period.
</div></td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>
<div style="text-align: justify">In connection with our adoption of ASU 2009-17 (see preceding discussion of Variable
Interest Entities) and reconsideration events during the nine months ended September 30,
2010, we consolidated 17 partnerships at fair
value. With the exception of such partnerships’ investments in real estate properties and
related non-recourse property debt obligations, we determined the carrying amounts of the
related assets and liabilities approximated their fair values. The difference between our
recorded investments in such partnerships and the fair value of the assets and liabilities
recognized in consolidation, resulted in an adjustment of consolidated partners’ capital
(allocated between the Partnership and noncontrolling interests) for those partnerships
consolidated in connection with our adoption of ASU 2009-17. For the partnerships we
consolidated at fair value due to reconsideration events during the nine months ended
September 30, 2010, the difference between our recorded investments in such partnerships and
the fair value of the assets, liabilities and noncontrolling interests recognized upon
consolidation resulted in our recognition of a gain, which is included in gain on disposition
of unconsolidated real estate and other in our consolidated statement of operations for the
nine months ended September 30, 2010.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(3)</td>
<td> </td>
<td>
<div style="text-align: justify">We estimate the fair value of real estate using income and market valuation techniques
using information such as broker estimates, purchase prices for recent transactions on
comparable assets and net operating income capitalization analyses using observable and
unobservable inputs such as capitalization rates, asset quality grading, geographic location
analysis, and local supply and demand observations.
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(4)</td>
<td> </td>
<td>
<div style="text-align: justify">Refer to the recurring fair value measurements table for an explanation of the valuation
techniques we use to estimate the fair value of debt.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We believe that the aggregate fair value of our cash and cash equivalents, receivables,
payables and short-term secured debt approximates their aggregate carrying amounts at September 30,
2010 and December 31, 2009, due to their relatively short-term nature and high probability of
realization. We estimate fair value for our notes receivable and debt instruments using present
value techniques that include income and market valuation approaches using observable inputs such
as market rates for debt with the same or similar terms and unobservable inputs such as collateral
quality and loan-to-value ratios on similarly encumbered assets. Because of the significance of
unobservable inputs to these fair value measurements, we classify them within Level 3 of the fair
value hierarchy. Present value calculations vary depending on the assumptions used, including the
discount rate and estimates of future cash flows. In many cases, the fair value estimates may not
be realizable in immediate settlement of the instruments. The estimated aggregate fair value of
our notes receivable was approximately $128.3 million and $126.1 million at September 30, 2010 and
December 31, 2009, respectively, as compared to their carrying amounts of $140.8 million and $139.6
million. The estimated aggregate fair value of our consolidated debt (including amounts reported
in liabilities related to assets held for sale) was approximately $6.0 billion and $5.7 billion at
September 30, 2010 and December 31, 2009, respectively, as compared to aggregate carrying amounts
of $5.5 billion and $5.6 billion, respectively. The fair values of our derivative instruments at
September 30, 2010 and December 31, 2009, are included in the table presented above.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Concentration of Credit Risk</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Financial instruments that potentially could subject us to significant concentrations of
credit risk consist principally of notes receivable and total rate of return swaps. Approximately
$88.4 million of our notes receivable, or 1.2% of our total assets, at
September 30, 2010, are collateralized by 84 buildings with 1,596 residential units in the West
Harlem area of New York City. There are no other significant concentrations of credit risk with
respect to our notes receivable due to the large number of partnerships that are borrowers under
the notes and the geographic diversification of the properties that serve as the primary source of
repayment of the notes.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At September 30, 2010, we had total rate of return swap positions with two financial
institutions totaling $307.5 million. We periodically evaluate counterparty credit risk associated
with these arrangements. At the current time, we have concluded we do not have material exposure.
In the event either counterparty were to default under these arrangements, loss of the net interest
benefit we generally receive under these arrangements, which is equal to the difference between the
fixed rate we receive and the variable rate we pay, may adversely impact our results of operations
and operating cash flows. Additionally, the swap agreements with a specific counterparty provide
for collateral calls to maintain specified loan-to-value ratios. As of September 30, 2010, we were
not required to provide cash collateral pursuant to the total rate of return swaps. In the event
the values of the real estate properties serving as collateral under these agreements decline, we
may be required to provide additional collateral pursuant to the swap agreements, which may
adversely affect our cash flows.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In July 2010, the FASB issued Accounting Standards Update 2010-20, <i>Disclosures Regarding
Credit Quality and the Allowance for Credit Losses</i>, or ASU 2010-20, to address concerns regarding
the sufficiency of disclosures regarding credit risk for finance receivables and the related
allowance for credit losses. ASU 2010-20 defines finance receivables and requires disclosure of
disaggregated information regarding receivables by portfolio segment and class. New disclosures
include a detailed description of and changes to the allowance policy, a rollforward of the
allowance for credit losses, and information about credit quality indicators we evaluate in
assessing receivables, impaired receivables and past-due or
nonaccrual financing receivables, including the aging of such receivables. The Partnership’s
notes receivable and certain other receivables with contractual maturities in excess of one year
will be subject to the revised disclosure guidance. The new disclosures will be phased in for our
financial statements for the year ending December 31, 2010 and the quarter ending March 31, 2011.
We have not yet determined the effect ASU 2010-20 will have on the disclosures included in our
annual and quarterly financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Income Taxes</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In March 2008, we were notified by the Internal Revenue Service, or the IRS, that it intended
to examine our 2006 Federal tax return. During June 2008, the IRS issued AIMCO-GP, Inc., our
general partner and tax matters partner, a summary report including the IRS’s proposed adjustments
to our 2006 Federal tax return. In addition, in May 2009, we were notified by the IRS that it
intended to examine our 2007 Federal tax return. During November 2009, the IRS issued AIMCO-GP,
Inc. a summary report including the IRS’s proposed adjustments to our 2007 Federal tax return. We
do not expect the 2006 or 2007 proposed adjustments to have any material effect on our unrecognized
tax benefits, financial condition or results of operations.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Use of Estimates</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of our condensed consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported amounts included in
the financial statements and accompanying notes thereto. Actual results could differ from those
estimates.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 3 — Real Estate Dispositions</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Real Estate Dispositions (Discontinued Operations)</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are currently marketing for sale certain real estate properties that are inconsistent with
our long-term investment strategy. At the end of each reporting period, we evaluate whether such
properties meet the criteria to be classified as held for sale, including whether such properties
are expected to be sold within 12 months. Additionally, certain properties that do not meet all of
the criteria to be classified as held for sale at the balance sheet date may nevertheless be sold
and included in discontinued operations in the subsequent 12 months; thus, the number of properties
that may be sold during the subsequent 12 months could exceed the number classified as held for
sale. At September 30, 2010 and December 31, 2009, we had one and 32 properties, with an aggregate
of 164 and 5,212 units, respectively, classified as held for sale. Amounts classified as held for
sale in the accompanying condensed consolidated balance sheets are as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,963</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">199,743</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">216</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,927</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Assets held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,179</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">203,670</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property debt
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">6,447</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">178,339</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other liabilities
</div></td>
<td> </td>
<td> </td>
<td align="right">44</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,553</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Liabilities related to assets held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">6,491</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">183,892</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the nine months ended September 30, 2010 and 2009, we sold 31 properties and 57
properties with an aggregate of 5,048 units and 13,405 units, respectively. During the year ended
December 31, 2009, we sold 89 consolidated properties with an aggregate of 22,503 units. For the
three and nine months ended September 30, 2010 and 2009, discontinued operations includes the
results of operations for the periods prior to the date of sale for all properties sold and for
properties classified as held for sale as of September 30, 2010.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following is a summary of the components of income from discontinued operations and the
related amounts of income from discontinued operations attributable to the Partnership and to
noncontrolling interests for the three and nine months ended September 30, 2010 and 2009 (in
thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental and other property revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,081</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">45,126</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">20,654</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">170,309</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property operating expenses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(392</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(22,619</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9,255</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(85,233</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(734</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(14,521</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,581</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(52,718</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for operating real estate impairment losses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,142</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(26,298</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9,263</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(40,712</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other expenses, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(720</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,266</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(470</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,859</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Operating loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(907</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(20,578</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,915</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(16,213</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest income
</div></td>
<td> </td>
<td> </td>
<td align="right">83</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">85</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">186</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">278</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest expense
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(709</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,751</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,137</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(34,142</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Loss before gain on dispositions of real estate
and income tax
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,533</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(29,244</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,866</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(50,077</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Gain on extinguishment of debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">259</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">259</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Gain on dispositions of real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">21,043</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">70,889</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74,364</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">133,428</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income tax benefit
</div></td>
<td> </td>
<td> </td>
<td align="right">189</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,500</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,034</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,679</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income from discontinued operations, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,699</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">45,404</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">68,532</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">86,289</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations attributable to:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Noncontrolling interests in consolidated real
estate partnerships
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(5,298</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(32,349</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(21,900</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(58,077</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">The Partnership
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">14,401</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">13,055</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46,632</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28,212</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Gain on dispositions of real estate is reported net of incremental direct costs incurred in
connection with the transactions, including any prepayment penalties incurred upon repayment of
property loans collateralized by the properties being sold. Such prepayment penalties totaled $0.6
million and $3.8 million for the three and nine months ended September 30, 2010, respectively, and
$7.6 million and $19.4 million for the three and nine months ended September 30, 2009,
respectively. We classify interest expense related to property debt within discontinued operations
when the related real estate asset is sold or classified as held for sale.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with properties sold or classified as held for sale during the three and nine
months ended September 30, 2010, we allocated $0.5 million and $3.3 million, respectively, of
goodwill related to our conventional and affordable segments to the carrying amounts of the
properties sold or classified as held for sale. Of these amounts, $0.3 million and $2.9 million,
respectively, were treated as a reduction of gain on dispositions of real estate and $0.2 million
and $0.4 million, respectively, were treated as an adjustment of impairment losses during the three
and nine months ended September 30, 2010. In connection with properties sold or classified as held
for sale during the three and nine months ended September 30, 2009, we allocated $3.5 million and
$6.5 million of goodwill related to our conventional and affordable segments to the carrying
amounts of the properties sold or classified as held for sale. The amounts of goodwill allocated
to these properties were based on the relative fair values of the properties sold or classified as
held for sale and the retained portions of the reporting units to which the goodwill was allocated.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Gain on Dispositions of Unconsolidated Real Estate and Other</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three months ended September 30, 2010, we recognized $0.9 million of gains on the
disposition of interests in unconsolidated real estate partnerships and other, primarily due to our
consolidation during 2010 of several previously unconsolidated real estate partnerships. We
consolidated these partnerships at fair value upon our removal of the previous general partner and
at the time of consolidation we recognized a gain equal to the difference between the fair value of
the net assets and liabilities consolidated and the carrying amount of our investment in these
entities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the nine months ended September 30, 2010, we recognized $5.4 million of gains on the
disposition of interests in unconsolidated real estate partnerships and other. These gains were
primarily related to sales of investments held by partnerships we consolidated in accordance with
our adoption of ASU 2009-17 (see Note 2) and in which we generally hold a nominal general partner
interest. Accordingly, these gains were primarily attributed to noncontrolling interests in
consolidated real estate partnerships.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three months ended September 30, 2009, we recognized $2.8 million of gains on the
disposition of unconsolidated real estate and other, which consisted of a $3.9 million gain from
the disposition of our interest in a group purchasing organization, partially offset by losses
related to unconsolidated real estate partnerships.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the nine months ended September 30, 2009, we recognized $18.2 million of gains on the
disposition of unconsolidated real estate and other. These gains consisted of $8.6 million
resulting from our receipt in 2009 of additional proceeds related to our disposition during 2008 of
an interest in an unconsolidated real estate partnership, a $3.9 million gain from the disposition
of our interest in a group purchasing organization and approximately $5.7 million of gains related
to dispositions of interests in unconsolidated real estate partnerships.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - aimco:OtherSignificantTransactionsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 4 — Other Significant Transactions</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Restructuring Costs</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During 2009, in connection with the repositioning of our portfolio, we completed
organizational restructuring activities that included reductions in workforce and related costs and
the abandonment of additional leased corporate facilities and redevelopment projects. During the
nine months ended September 30, 2010, we reduced our restructuring accruals by $1.7 million and
$4.7 million related to payments on unrecoverable lease obligations and severance and personnel
related costs, respectively. As of September 30, 2010, the remaining accruals associated with our
restructuring activity are $5.2 million for estimated unrecoverable lease obligations, which will
be paid over the remaining terms of the affected leases.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Preferred
Unit Transactions</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On September 7, 2010, Aimco issued 4,000,000 shares of its 7.75% Class U Cumulative Preferred
Stock, par value $.01 per share, or the Class U Preferred Stock, in an underwritten public offering
for a price per share of $24.09 (reflecting a price to the public of $24.86 per share, less an
underwriting discount and commissions of $0.77 per share). The offering generated net proceeds of
$96.1 million (after deducting underwriting discounts and commissions and estimated transaction
expenses). Aimco contributed the net proceeds to us in exchange for 4,000,000 units of our 7.75%
Class U Cumulative Preferred Units. We recorded issuance costs of $3.3 million, consisting
primarily of underwriting commissions, as an adjustment of partners’ capital attributable to the
Partnership within our condensed consolidated balance sheet.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On October 7, 2010, using the net proceeds from the issuance of Class U Preferred Stock
supplemented by corporate funds, Aimco redeemed all of the 4,050,000 outstanding shares of its
9.375% Class G Cumulative Preferred Stock, inclusive of 10,000 shares held by a consolidated
subsidiary that are eliminated in consolidation. This redemption was for cash at a price equal to
$25.00 per share, or $101.3 million in aggregate, plus accumulated and unpaid dividends of $2.2
million. Concurrent with this redemption, we redeemed all of our outstanding Class G Cumulative
Preferred Units, 4,040,000 of which were held by Aimco and 10,000 of which were held by a
consolidated subsidiary. In connection with the redemption, $4.3 million of issuance costs
previously recorded as a reduction of partners’ capital attributable to the Partnership will be
reflected as an increase in net income attributable to preferred unitholders for purposes of
calculating earnings per unit for the three months and year ending December 31, 2010.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 5 — Commitments and Contingencies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Commitments</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with our redevelopment activities, we have commitments of approximately $0.3
million related to construction projects that are expected to be completed during 2010.
Additionally, we enter into certain commitments for future purchases of goods and services in
connection with the operations of our properties. Those commitments generally have terms of one
year or less and reflect expenditure levels comparable to our historical expenditures.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have committed to fund an additional $4.0 million in loans on certain properties in West
Harlem in New York City. In certain circumstances, the obligor under these notes has the ability
to put properties to us, which would result in a cash payment between $30.6 million and $97.7
million and the assumption of $118.6 million in property debt. The ability to exercise the put and
the amount of cash payment required upon exercise is dependent upon the achievement of specified
thresholds by the current owner of the properties.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2009, Aimco
entered into an agreement that allows the holder of some of its Series A Community
Reinvestment Act Preferred Stock, or CRA Preferred Stock, to require Aimco to repurchase a portion
of the CRA Preferred Stock at a 30% discount to the liquidation preference. In accordance with this
repurchase agreement, in May 2010, Aimco repurchased 20 shares, or $10.0 million in liquidation
preference, of CRA Preferred Stock for $7.0 million. Concurrent with this
redemption, we repurchased from Aimco an equivalent number of our Series A Community
Reinvestment Act Perpetual Preferred Units, or CRA Preferred Units. We reflected the $3.0 million
excess of the carrying value over the repurchase price, offset by $0.2 million of issuance costs
previously recorded as a reduction of partners’ capital, as a reduction of net income attributable
to preferred unitholders for the nine months ended September 30, 2010.
</div>
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</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2010, Aimco had a remaining potential obligation under this agreement to
repurchase up to $20.0 million in liquidation preference of its CRA Preferred Stock. If required,
these additional repurchases will be for up to $10.0 million in liquidation preference in May 2011
and 2012. Upon any repurchases required of Aimco under this agreement, we will repurchase from
Aimco an equivalent number of our CRA Preferred Units. Based on the holder’s ability to require
Aimco to repurchase these amounts and our obligation to purchase from Aimco a corresponding number
of our CRA Preferred Units, the $20.0 million in liquidation preference of CRA Preferred Units, or
the maximum redemption value of such preferred units, is classified within temporary capital in our
consolidated balance sheet at September 30, 2010.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Tax Credit Arrangements</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are required to manage certain consolidated real estate partnerships in compliance with
various laws, regulations and contractual provisions that apply to our historic and low-income
housing tax credit syndication arrangements. In some instances, noncompliance with applicable
requirements could result in projected tax benefits not being realized and require a refund or
reduction of investor capital contributions, which are reported as deferred income in our
consolidated balance sheet, until such time as our obligation to deliver tax benefits is relieved.
The remaining compliance periods for our tax credit syndication arrangements range from less than
one year to 15 years. We do not anticipate that any material refunds or reductions of investor
capital contributions will be required in connection with these arrangements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Legal Matters</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition to the matters described below, we are a party to various legal actions and
administrative proceedings arising in the ordinary course of business, some of which are covered by
our general liability insurance program, and none of which we expect to have a material adverse
effect on our consolidated financial condition, results of operations or cash flows.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>Limited Partnerships</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with our acquisitions of interests in real estate partnerships, we are sometimes
subject to legal actions, including allegations that such activities may involve breaches of
fiduciary duties to the partners of such real estate partnerships or violations of the relevant
partnership agreements. We may incur costs in connection with the defense or settlement of such
litigation. We believe that we comply with our fiduciary obligations and relevant partnership
agreements. Although the outcome of any litigation is uncertain, we do not expect any such legal
actions to have a material adverse effect on our consolidated financial condition, results of
operations or cash flows.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>Environmental</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Various Federal, state and local laws subject property owners or operators to liability for
management, and the costs of removal or remediation, of certain hazardous substances present on a
property, including lead-based paint. Such laws often impose liability without regard to whether
the owner or operator knew of, or was responsible for, the release or presence of the hazardous
substances. The presence of, or the failure to manage or remedy properly, hazardous substances may
adversely affect occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and remediation actions
brought by government agencies, and potential fines or penalties imposed by such agencies in
connection therewith, 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, remediation or disposal of hazardous substances through a
licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of
hazardous 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 facility. In
connection with the ownership, operation and management of properties, we could potentially be
liable for environmental liabilities or costs associated with our properties or properties we
acquire or manage in the future.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have determined that our legal obligations to remove or remediate hazardous substances may
be conditional asset retirement obligations, as defined in GAAP. Except in limited circumstances
where the asset retirement activities are expected to be performed in connection with a planned
construction project or property casualty, we believe that the fair value of our asset retirement
obligations cannot be reasonably estimated due to significant uncertainties in the timing and
manner of settlement of those obligations. Asset retirement obligations that are reasonably
estimable as of September 30, 2010, are immaterial to our consolidated financial condition, results
of operations and cash flows.
</div>
<!-- Folio -->
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</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 6 — Earnings (Loss) per Unit</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We calculate earnings (loss) per unit based on the weighted average number of common OP Units,
participating securities, common OP unit equivalents and dilutive convertible securities
outstanding during the period. We consider both common OP Units and High Performance Units, which
have identical rights to distributions and undistributed earnings, to be common units for purposes
of the earnings (loss) per unit data presented below. The following table illustrates the
calculation of basic and diluted earnings (loss) per unit for the three and nine months ended
September 30, 2010 and 2009 (in thousands, except per unit):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Numerator:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from continuing operations
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(47,965</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(54,754</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(123,302</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(135,431</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from continuing operations attributable to
noncontrolling interests
</div></td>
<td> </td>
<td> </td>
<td align="right">16,511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,095</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,695</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,412</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to the Partnership’s preferred
unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(13,492</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(14,731</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39,918</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(42,189</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to participating securities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Loss from continuing operations attributable
to the Partnership’s common unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(44,948</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(56,390</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(139,525</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(144,208</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,699</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">45,404</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">68,532</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">86,289</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations attributable to
noncontrolling interests
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,298</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(32,349</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(21,900</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(58,077</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income from discontinued operations attributable to
the Partnership’s common unitholders
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">14,401</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">13,055</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46,632</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28,212</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(28,266</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,350</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(54,770</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(49,142</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss (income) attributable to noncontrolling interests
</div></td>
<td> </td>
<td> </td>
<td align="right">11,213</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(19,254</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1,795</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24,665</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to the Partnership’s preferred
unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(13,492</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(14,731</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39,918</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(42,189</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to participating securities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net loss attributable to the Partnership’s
common unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(30,547</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(43,335</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(92,893</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(115,996</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Denominator:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Denominator for basic earnings per unit — weighted
average number of common units outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">124,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">124,376</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">124,601</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">122,790</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of dilutive securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive potential common units
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Denominator for diluted earnings per unit
</div></td>
<td> </td>
<td> </td>
<td align="right">124,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">124,376</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">124,601</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">122,790</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Earnings (loss) per common unit:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic and diluted earnings (loss) per common unit:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from continuing operations attributable to the
Partnership’s common unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.36</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.45</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1.12</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1.17</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations attributable to
the Partnership’s common unitholders
</div></td>
<td> </td>
<td> </td>
<td align="right">0.11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.37</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.23</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net loss attributable to the Partnership’s common
unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.25</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.35</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.75</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.94</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2010 and 2009, the common unit equivalents that could potentially dilute
basic earnings per unit in future periods totaled 7.2 million and 9.9 million, respectively. These
securities, representing options to purchase shares of Aimco Class A Common Stock, have been
excluded from the earnings (loss) per unit computations for the three and nine months ended
September 30, 2010 and 2009, because their effect would have been anti-dilutive. Participating
securities, consisting of unvested restricted shares of Aimco Class A Common Stock and shares of
Aimco Class A Common Stock purchased pursuant to officer loans, receive dividends similar to shares
of Aimco Class A Common Stock and common OP Units and totaled 0.6 million and 0.9 million at
September 30, 2010 and 2009, respectively. The effect of participating
securities is reflected in basic and diluted earnings (loss) per unit computations for the
periods presented above using the two-class method of allocating distributed and undistributed
earnings.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Various classes of redeemable preferred OP Units are outstanding. Depending on the terms of
each class, these preferred OP Units are convertible into common OP Units or redeemable for cash
or, at our option, shares of Aimco Class A Common Stock, and are paid distributions varying from
1.84% to 9.5% per annum per unit, or equal to the dividends paid on Aimco Class A Common Stock
based on the conversion terms. As of September 30, 2010, a total of 3.1 million preferred OP Units
were outstanding with redemption values of $82.7 million and were potentially redeemable for
approximately 3.9 million shares of Aimco Class A Common Stock (based on the period end market
price), or cash at our option. We have a redemption policy that requires cash settlement of
redemption requests for the preferred OP Units, subject to limited exceptions. The potential
dilutive effect of these securities would have been antidilutive in the periods presented; however,
based on our cash redemption policy, they may also be excluded from future earnings (loss) per unit
computations in periods during which their effect is dilutive.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December 2009, we adopted the provisions of FASB Accounting Standards Update 2010-01,
<i>Accounting for Distributions to Shareholders with Components of Stock and Cash</i>, or ASU 2010-01,
which are codified in FASB ASC Topic 505. ASU 2010-01 requires that for distributions with
components of cash and stock, the portion distributed in stock should be accounted for
prospectively as a stock issuance with no retroactive adjustment to basic and diluted earnings per
share. In accordance with ASU 2010-01, we retrospectively revised the accounting treatment of our
special distribution paid in January 2009, resulting in a 1.6 million reduction in the number of
weighted average units outstanding and a $0.01 increase in the loss per unit attributed to the
Partnership’s common unitholders for the nine months ended September 30, 2009, as compared to the
amounts reported in our Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2009.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 7— Business Segments</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Based on a planned reduction in our transactional activities, during the three months ended
March 31, 2010, we reevaluated our reportable segments and determined our investment management
reporting unit no longer meets the requirements for a reportable segment. Additionally, to provide
more meaningful information regarding our real estate operations, we elected to disaggregate
information for the prior real estate segment. Following these changes, we have two reportable
segments: conventional real estate operations and affordable real estate operations. Our
conventional real estate operations consist of market-rate apartments with rents paid by the
resident and include 227 properties with 70,844 units. Our affordable real estate operations
consist of 251 properties with 29,097 units, with rents that are generally paid, in whole or part,
by a government agency.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our chief operating decision maker uses various generally accepted industry financial measures
to assess the performance of the business, including: property net operating income, which is
rental and other property revenues less direct property operating expenses, including real estate
taxes; Net Asset Value, which is the estimated fair value of our assets, net of debt; Pro forma
Funds From Operations, which is Funds From Operations excluding operating real estate impairment
losses and preferred unit redemption related gains or losses; Adjusted Funds From Operations, which
is Pro forma Funds From Operations less spending for Capital Replacements; same store property
operating results; Free Cash Flow, which is net operating income less spending for Capital
Replacements; Free Cash Flow internal rate of return; financial coverage ratios; and leverage as
shown on our balance sheet. The chief operating decision maker emphasizes net operating income as
a key measurement of segment profit or loss. Segment net operating income is generally defined as
segment revenues less direct segment operating expenses.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The following tables present the revenues, net operating income (loss) and income (loss) from
continuing operations of our conventional and affordable real estate operations segments for the
three and nine months ended September 30, 2010 and 2009 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Corporate and</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Conventional</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Affordable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amounts Not</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Real Estate</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Real Estate</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Allocated to</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Operations</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Operations (1)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Segments</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Three Months Ended September 30, 2010:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental and other property revenues (2)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">228,327</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">53,612</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">656</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">282,595</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management and tax credit revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,707</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9,707</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">228,327</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,363</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">292,302</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Property operating expenses (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">88,782</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,479</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,913</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">128,174</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management and tax credit expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,609</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,609</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">107,309</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">107,309</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for operating real estate impairment losses (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">287</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">287</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administrative expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,096</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,096</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other expenses, net
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,394</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,394</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total operating expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">88,782</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,479</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">140,608</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">254,869</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net operating income (loss)
</div></td>
<td> </td>
<td> </td>
<td align="right">139,545</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">28,133</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(130,245</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">37,433</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other items included in continuing operations
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(85,398</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(85,398</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Income (loss) from continuing operations</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">139,545</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28,133</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(215,643</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(47,965</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Three Months Ended September 30, 2009:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental and other property revenues (2)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">227,917</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46,040</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,115</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">275,072</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management and tax credit revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,325</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,325</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">227,917</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">46,040</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,440</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">285,397</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Property operating expenses (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">92,969</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,143</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">133,224</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management and tax credit expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,213</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,213</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">110,290</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">110,290</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for operating real estate impairment losses (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">66</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">66</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administrative expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,772</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,772</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other expenses, net
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,637</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,637</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total operating expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">92,969</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,112</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">152,121</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">268,202</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net operating income (loss)
</div></td>
<td> </td>
<td> </td>
<td align="right">134,948</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,928</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(140,681</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">17,195</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other items included in continuing operations
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(71,949</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(71,949</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Income (loss) from continuing operations</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">134,948</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,928</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(212,630</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(54,754</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Corporate and</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Conventional</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Affordable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amounts Not</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Real Estate</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Real Estate</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Allocated to</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Operations</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Operations (1)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Segments</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Nine Months Ended September 30, 2010:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental and other property revenues (2)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">683,257</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">159,668</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,695</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">845,620</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management and tax credit revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,560</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,560</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">683,257</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">159,668</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,255</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">869,180</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Property operating expenses (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">272,135</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">78,649</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45,080</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">395,864</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management and tax credit expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,979</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,979</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">322,393</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">322,393</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for operating real estate impairment losses (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">287</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">287</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administrative expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,015</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">39,015</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other expenses, net
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,097</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,097</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total operating expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">272,135</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">78,649</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">419,851</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">770,635</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net operating income (loss)
</div></td>
<td> </td>
<td> </td>
<td align="right">411,122</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81,019</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(393,596</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">98,545</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other items included in continuing operations
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(221,847</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(221,847</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Income (loss) from continuing operations</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">411,122</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">81,019</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(615,443</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(123,302</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Nine Months Ended September 30, 2009:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental and other property revenues (2)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">682,488</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">140,793</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,098</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">827,379</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management and tax credit revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,469</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,469</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Total revenues
</div></td>
<td> </td>
<td> </td>
<td align="right">682,488</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">140,793</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36,567</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">859,848</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Property operating expenses (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">273,841</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68,676</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">48,504</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">391,021</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management and tax credit expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,719</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,719</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">321,661</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">321,661</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for operating real estate impairment
losses (2)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,635</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,635</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administrative expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">43,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">43,612</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other expenses, net
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,453</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,453</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total operating expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">273,841</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">68,676</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">440,584</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">783,101</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net operating income (loss)
</div></td>
<td> </td>
<td> </td>
<td align="right">408,647</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">72,117</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(404,017</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">76,747</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other items included in continuing operations
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(212,178</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(212,178</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Income (loss) from continuing operations</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">408,647</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">72,117</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(616,195</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(135,431</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify">Net operating income amounts from our affordable real estate operations for 2010 are not
comparable to the 2009 amounts due to our adoption during 2010 of revised accounting guidance
regarding consolidation of variable interest entities (see Note 2).
</div></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>
<div style="text-align: justify">Our chief operating decision maker assesses the performance of our conventional and
affordable real estate operations using, among other measures, net operating income,
excluding property management revenues and certain property management expenses, casualty
gains and losses, depreciation and amortization and provision for operating real estate
impairment losses. Accordingly, we do not allocate these amounts to our segments.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The assets of our reportable segments are as follows (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Conventional
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,898,194</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,032,988</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Affordable
</div></td>
<td> </td>
<td> </td>
<td align="right">1,188,134</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,130,089</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate and other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">547,057</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">759,062</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total consolidated assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,633,385</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,922,139</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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IDEA: Earnings (Loss) per Unit

2.2.0.7falseEarnings (Loss) per Unit0206 - Disclosure - Earnings (Loss) per Unittruefalsefalsefalse1USDfalsefalseUSDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0$20us-gaap_EarningsPerUnitAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsetruefalsefalsefalsefalsefalsefalse1falsefalsefalsefalse00falsefalsefalsexbrli:stringItemTypestringNo definition available.false31us-gaap_EarningsPerShareTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabelfalse1falsefalsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 6 — Earnings (Loss) per Unit</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We calculate earnings (loss) per unit based on the weighted average number of common OP Units,
participating securities, common OP unit equivalents and dilutive convertible securities
outstanding during the period. We consider both common OP Units and High Performance Units, which
have identical rights to distributions and undistributed earnings, to be common units for purposes
of the earnings (loss) per unit data presented below. The following table illustrates the
calculation of basic and diluted earnings (loss) per unit for the three and nine months ended
September 30, 2010 and 2009 (in thousands, except per unit):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Numerator:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from continuing operations
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(47,965</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(54,754</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(123,302</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(135,431</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from continuing operations attributable to
noncontrolling interests
</div></td>
<td> </td>
<td> </td>
<td align="right">16,511</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,095</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,695</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,412</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to the Partnership’s preferred
unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(13,492</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(14,731</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39,918</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(42,189</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to participating securities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Loss from continuing operations attributable
to the Partnership’s common unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(44,948</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(56,390</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(139,525</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(144,208</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,699</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">45,404</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">68,532</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">86,289</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations attributable to
noncontrolling interests
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,298</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(32,349</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(21,900</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(58,077</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Income from discontinued operations attributable to
the Partnership’s common unitholders
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">14,401</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">13,055</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46,632</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">28,212</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(28,266</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,350</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(54,770</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(49,142</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss (income) attributable to noncontrolling interests
</div></td>
<td> </td>
<td> </td>
<td align="right">11,213</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(19,254</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1,795</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(24,665</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to the Partnership’s preferred
unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(13,492</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(14,731</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39,918</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(42,189</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to participating securities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net loss attributable to the Partnership’s
common unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(30,547</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(43,335</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(92,893</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(115,996</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Denominator:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Denominator for basic earnings per unit — weighted
average number of common units outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">124,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">124,376</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">124,601</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">122,790</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Effect of dilutive securities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive potential common units
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Denominator for diluted earnings per unit
</div></td>
<td> </td>
<td> </td>
<td align="right">124,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">124,376</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">124,601</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">122,790</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Earnings (loss) per common unit:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic and diluted earnings (loss) per common unit:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from continuing operations attributable to the
Partnership’s common unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.36</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.45</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1.12</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1.17</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations attributable to
the Partnership’s common unitholders
</div></td>
<td> </td>
<td> </td>
<td align="right">0.11</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.10</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.37</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">0.23</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net loss attributable to the Partnership’s common
unitholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.25</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.35</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.75</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.94</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2010 and 2009, the common unit equivalents that could potentially dilute
basic earnings per unit in future periods totaled 7.2 million and 9.9 million, respectively. These
securities, representing options to purchase shares of Aimco Class A Common Stock, have been
excluded from the earnings (loss) per unit computations for the three and nine months ended
September 30, 2010 and 2009, because their effect would have been anti-dilutive. Participating
securities, consisting of unvested restricted shares of Aimco Class A Common Stock and shares of
Aimco Class A Common Stock purchased pursuant to officer loans, receive dividends similar to shares
of Aimco Class A Common Stock and common OP Units and totaled 0.6 million and 0.9 million at
September 30, 2010 and 2009, respectively. The effect of participating
securities is reflected in basic and diluted earnings (loss) per unit computations for the
periods presented above using the two-class method of allocating distributed and undistributed
earnings.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Various classes of redeemable preferred OP Units are outstanding. Depending on the terms of
each class, these preferred OP Units are convertible into common OP Units or redeemable for cash
or, at our option, shares of Aimco Class A Common Stock, and are paid distributions varying from
1.84% to 9.5% per annum per unit, or equal to the dividends paid on Aimco Class A Common Stock
based on the conversion terms. As of September 30, 2010, a total of 3.1 million preferred OP Units
were outstanding with redemption values of $82.7 million and were potentially redeemable for
approximately 3.9 million shares of Aimco Class A Common Stock (based on the period end market
price), or cash at our option. We have a redemption policy that requires cash settlement of
redemption requests for the preferred OP Units, subject to limited exceptions. The potential
dilutive effect of these securities would have been antidilutive in the periods presented; however,
based on our cash redemption policy, they may also be excluded from future earnings (loss) per unit
computations in periods during which their effect is dilutive.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December 2009, we adopted the provisions of FASB Accounting Standards Update 2010-01,
<i>Accounting for Distributions to Shareholders with Components of Stock and Cash</i>, or ASU 2010-01,
which are codified in FASB ASC Topic 505. ASU 2010-01 requires that for distributions with
components of cash and stock, the portion distributed in stock should be accounted for
prospectively as a stock issuance with no retroactive adjustment to basic and diluted earnings per
share. In accordance with ASU 2010-01, we retrospectively revised the accounting treatment of our
special distribution paid in January 2009, resulting in a 1.6 million reduction in the number of
weighted average units outstanding and a $0.01 increase in the loss per unit attributed to the
Partnership’s common unitholders for the nine months ended September 30, 2009, as compared to the
amounts reported in our Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2009.
</div>
</div>
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IDEA: Commitments and Contingencies

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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 5 — Commitments and Contingencies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Commitments</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with our redevelopment activities, we have commitments of approximately $0.3
million related to construction projects that are expected to be completed during 2010.
Additionally, we enter into certain commitments for future purchases of goods and services in
connection with the operations of our properties. Those commitments generally have terms of one
year or less and reflect expenditure levels comparable to our historical expenditures.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have committed to fund an additional $4.0 million in loans on certain properties in West
Harlem in New York City. In certain circumstances, the obligor under these notes has the ability
to put properties to us, which would result in a cash payment between $30.6 million and $97.7
million and the assumption of $118.6 million in property debt. The ability to exercise the put and
the amount of cash payment required upon exercise is dependent upon the achievement of specified
thresholds by the current owner of the properties.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2009, Aimco
entered into an agreement that allows the holder of some of its Series A Community
Reinvestment Act Preferred Stock, or CRA Preferred Stock, to require Aimco to repurchase a portion
of the CRA Preferred Stock at a 30% discount to the liquidation preference. In accordance with this
repurchase agreement, in May 2010, Aimco repurchased 20 shares, or $10.0 million in liquidation
preference, of CRA Preferred Stock for $7.0 million. Concurrent with this
redemption, we repurchased from Aimco an equivalent number of our Series A Community
Reinvestment Act Perpetual Preferred Units, or CRA Preferred Units. We reflected the $3.0 million
excess of the carrying value over the repurchase price, offset by $0.2 million of issuance costs
previously recorded as a reduction of partners’ capital, as a reduction of net income attributable
to preferred unitholders for the nine months ended September 30, 2010.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2010, Aimco had a remaining potential obligation under this agreement to
repurchase up to $20.0 million in liquidation preference of its CRA Preferred Stock. If required,
these additional repurchases will be for up to $10.0 million in liquidation preference in May 2011
and 2012. Upon any repurchases required of Aimco under this agreement, we will repurchase from
Aimco an equivalent number of our CRA Preferred Units. Based on the holder’s ability to require
Aimco to repurchase these amounts and our obligation to purchase from Aimco a corresponding number
of our CRA Preferred Units, the $20.0 million in liquidation preference of CRA Preferred Units, or
the maximum redemption value of such preferred units, is classified within temporary capital in our
consolidated balance sheet at September 30, 2010.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Tax Credit Arrangements</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are required to manage certain consolidated real estate partnerships in compliance with
various laws, regulations and contractual provisions that apply to our historic and low-income
housing tax credit syndication arrangements. In some instances, noncompliance with applicable
requirements could result in projected tax benefits not being realized and require a refund or
reduction of investor capital contributions, which are reported as deferred income in our
consolidated balance sheet, until such time as our obligation to deliver tax benefits is relieved.
The remaining compliance periods for our tax credit syndication arrangements range from less than
one year to 15 years. We do not anticipate that any material refunds or reductions of investor
capital contributions will be required in connection with these arrangements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b><i>Legal Matters</i></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition to the matters described below, we are a party to various legal actions and
administrative proceedings arising in the ordinary course of business, some of which are covered by
our general liability insurance program, and none of which we expect to have a material adverse
effect on our consolidated financial condition, results of operations or cash flows.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>Limited Partnerships</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with our acquisitions of interests in real estate partnerships, we are sometimes
subject to legal actions, including allegations that such activities may involve breaches of
fiduciary duties to the partners of such real estate partnerships or violations of the relevant
partnership agreements. We may incur costs in connection with the defense or settlement of such
litigation. We believe that we comply with our fiduciary obligations and relevant partnership
agreements. Although the outcome of any litigation is uncertain, we do not expect any such legal
actions to have a material adverse effect on our consolidated financial condition, results of
operations or cash flows.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><b>Environmental</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Various Federal, state and local laws subject property owners or operators to liability for
management, and the costs of removal or remediation, of certain hazardous substances present on a
property, including lead-based paint. Such laws often impose liability without regard to whether
the owner or operator knew of, or was responsible for, the release or presence of the hazardous
substances. The presence of, or the failure to manage or remedy properly, hazardous substances may
adversely affect occupancy at affected apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with investigation and remediation actions
brought by government agencies, and potential fines or penalties imposed by such agencies in
connection therewith, 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, remediation or disposal of hazardous substances through a
licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of
hazardous 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 facility. In
connection with the ownership, operation and management of properties, we could potentially be
liable for environmental liabilities or costs associated with our properties or properties we
acquire or manage in the future.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have determined that our legal obligations to remove or remediate hazardous substances may
be conditional asset retirement obligations, as defined in GAAP. Except in limited circumstances
where the asset retirement activities are expected to be performed in connection with a planned
construction project or property casualty, we believe that the fair value of our asset retirement
obligations cannot be reasonably estimated due to significant uncertainties in the timing and
manner of settlement of those obligations. Asset retirement obligations that are reasonably
estimable as of September 30, 2010, are immaterial to our consolidated financial condition, results
of operations and cash flows.
</div>
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