UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
Commission File Number:
(formerly AIMCO Properties, L.P.)
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol(s) |
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Name of Each Exchange on Which Registered |
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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.
Apartment Income REIT Corp.: |
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Apartment Income REIT, L.P.: |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Apartment Income REIT Corp.: |
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Apartment Income REIT, L.P.: |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Apartment Income REIT Corp.:
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
Apartment Income REIT, L.P.:
Large accelerated filer |
☐ |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Apartment Income REIT Corp.: |
☐ |
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Apartment Income REIT, L.P.: |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Apartment Income REIT Corp.: Yes |
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Apartment Income REIT, L.P.: Yes |
The number of shares of Apartment Income REIT Corp. Class A Common Stock outstanding as of July 30, 2021:
EXPLANATORY NOTE
On December 15, 2020, Apartment Investment and Management Company (“Aimco”) completed the separation of its business into two, separate and distinct, publicly traded companies, Apartment Income REIT Corp. (“AIR”) and Aimco (the “Separation”).
Notwithstanding the legal form of the Separation, for accounting and financial reporting purposes, Aimco is presented as being spun-off from AIR (as it relates to Aimco subsequent to the Separation, the “Spinnee”). This presentation is in accordance with generally accepted accounting principles in the United States, and is due primarily to the relative significance of AIR’s business, as measured in terms of revenue, net income, assets, and other relevant indicators, as compared to Aimco before the Separation. Therefore, AIR is considered the divesting entity and treated as the accounting spinnor, and Aimco is presented as the predecessor (“AIR’s Predecessor”) for AIR’s financial statements. Unless otherwise stated, financial results prior to the Separation on December 15, 2020, include the financial results of AIR’s Predecessor.
On July 7, 2021, the operating partnership of AIR ("AIR Operating Partnership) changed its name from "Aimco Properties, L.P." to “Apartment Income REIT, L.P.”
This filing combines the quarterly reports on Form 10-Q for the quarterly period ended June 30, 2021, of AIR, the AIR Operating Partnership, and their consolidated subsidiaries. The AIR Operating Partnership’s condensed consolidated financial statements include the accounts of the AIR Operating Partnership and its consolidated subsidiaries. Except as the context otherwise requires, “we,” “us,” or “our” refer to AIR, the AIR Operating Partnership, and their consolidated subsidiaries, collectively.
AIR, a Maryland corporation, is a self-administered and self-managed real estate investment trust. AIR, through wholly-owned subsidiaries, is the general and special limited partner of the AIR Operating Partnership. As of June 30, 2021, AIR owned approximately 93.2% of the legal interest in the common partnership units of the AIR Operating Partnership and 95.0% of the economic interest in the AIR Operating Partnership. The remaining 6.8% legal interest is owned by third-party limited partners. As the sole general partner of the AIR Operating Partnership, AIR has exclusive control of the AIR Operating Partnership’s day-to-day management.
The AIR Operating Partnership holds all of AIR’s assets and manages the daily operations of AIR’s business. Pursuant to the AIR Operating Partnership agreement, AIR is required to contribute to the AIR Operating Partnership all proceeds from the offerings of its securities. In exchange for the contribution of such proceeds, AIR receives additional interests in the AIR Operating Partnership with similar terms (e.g., if AIR contributes proceeds of a stock offering, AIR receives partnership units with terms substantially similar to the stock issued by AIR).
We believe combining the periodic reports of AIR and the AIR Operating Partnership into this single report provides the following benefits:
We operate AIR and the AIR Operating Partnership as one enterprise, the management of AIR directs the management and operations of the AIR Operating Partnership, and the members of the Board of Directors of AIR are identical to those of the AIR Operating Partnership’s general partner.
We believe it is important to understand the few differences between AIR and the AIR Operating Partnership in the context of how AIR and the AIR Operating Partnership operate as a consolidated company. AIR has no assets or liabilities other than its investment in the AIR Operating Partnership, which is held directly and indirectly through certain intermediate holding companies (in which all of the common stock is owned by AIR). Also, AIR is a corporation that issues publicly traded equity from time to time, whereas the AIR Operating Partnership is a partnership that has no publicly traded equity. Except for the net proceeds from stock offerings by AIR, which are contributed to the AIR Operating Partnership in exchange for additional limited partnership interests (of a similar type and in an amount equal to the shares of stock sold in the offering), the AIR Operating Partnership generates all remaining capital required by its business. These sources include the AIR Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of debt and equity securities, including additional partnership units, and proceeds received from the sale of apartment communities.
Equity, partners’ capital, and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of AIR and those of the AIR Operating Partnership. Interests in the AIR Operating Partnership held by entities other than
1
AIR, which we refer to as OP Units, are classified within partners’ capital in the AIR Operating Partnership’s financial statements and as noncontrolling interests in AIR’s financial statements.
To help investors understand the differences between AIR and the AIR Operating Partnership, this report provides: separate condensed consolidated financial statements for AIR and the AIR Operating Partnership; a single set of condensed consolidated notes to such financial statements that includes separate discussions of each entity’s stockholders’ equity or partners’ capital, and earnings per share or earnings per unit, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity, where appropriate.
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for AIR and the AIR Operating Partnership in order to establish that the requisite certifications have been made and that AIR and the AIR Operating Partnership are both compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.
2
APARTMENT INCOME REIT CORP.
APARTMENT INCOME REIT, L.P.
TABLE OF CONTENTS
FORM 10-Q
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Page |
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ITEM 1. |
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4 |
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5 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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9 |
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Apartment Income REIT, L.P.: |
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11 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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13 |
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15 |
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16 |
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ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
28 |
ITEM 3. |
43 |
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ITEM 4. |
43 |
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ITEM 1A. |
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ITEM 2. |
45 |
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ITEM 6. |
46 |
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47 |
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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June 30, |
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December 31, |
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2021 |
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2020 |
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ASSETS |
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Buildings and improvements |
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$ |
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$ |
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Land |
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Total real estate |
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Accumulated depreciation |
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Net real estate |
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Cash and cash equivalents |
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Restricted cash |
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Notes receivable from Aimco |
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Leased real estate assets |
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Goodwill |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Non-recourse property debt, net |
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$ |
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$ |
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Term loans, net |
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Revolving credit facility borrowings |
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Total indebtedness |
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Accrued liabilities and other |
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Total liabilities |
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Preferred noncontrolling interests in AIR Operating Partnership |
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Equity: |
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Perpetual preferred stock |
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Common Stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Distributions in excess of earnings |
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Total AIR equity |
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Noncontrolling interests in consolidated real estate partnerships |
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Common noncontrolling interests in AIR Operating Partnership |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
4
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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REVENUES |
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Rental and other property revenues |
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$ |
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$ |
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$ |
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Other revenues |
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Total revenues |
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OPERATING EXPENSES |
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Property operating expenses |
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Depreciation and amortization |
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General and administrative expenses |
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Other expenses, net |
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Total operating expenses |
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Interest income |
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Interest expense |
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Gain on derecognition of leased properties and dispositions of real estate |
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Mezzanine investment income, net |
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Income (loss) from continuing operations before income tax (expense) benefit and discontinued operations |
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Income tax (expense) benefit |
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Income (loss) from continuing operations |
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Income from discontinued operations, net of tax |
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Net income (loss) |
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Noncontrolling interests: |
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Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships |
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Net income attributable to preferred noncontrolling interests in AIR Operating Partnership |
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Net (income) loss attributable to common noncontrolling interests in AIR Operating Partnership |
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Net (income) loss attributable to noncontrolling interests |
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Net income (loss) attributable to AIR |
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Net income attributable to AIR preferred stockholders |
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Net income attributable to participating securities |
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Net income (loss) attributable to AIR common stockholders |
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$ |
( |
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$ |
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$ |
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$ |
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Earnings (loss) per common share – basic and diluted |
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Income (loss) from continuing operations attributable to AIR per common share |
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$ |
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$ |
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$ |
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Income from discontinued operations attributable to AIR per common share |
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Net income (loss) attributable to AIR per common share – basic and diluted |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding – basic |
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Weighted-average common shares outstanding – diluted |
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See notes to condensed consolidated financial statements.
5
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
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Unrealized losses on available for sale debt securities |
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Comprehensive income (loss) |
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Comprehensive (income) loss attributable to noncontrolling interests |
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Comprehensive income (loss) attributable to AIR |
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$ |
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$ |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
6
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended June 30, 2021 and 2020
(In thousands)
(Unaudited)
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Preferred Stock |
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Common Stock |
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Accumulated |
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Noncontrolling |
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Common |
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Shares |
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Amount |
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Shares |
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Amount |
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Additional |
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Other |
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Distributions |
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Total AIR's Predecessor |
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Consolidated |
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AIR |
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Total |
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Balances at March 31, 2020 |
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— |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Redemption of AIR Operating Partnership units |
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— |
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— |
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— |
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— |
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Amortization of share-based compensation cost |
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— |
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— |
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— |
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— |
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— |
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Effect of changes in ownership of consolidated entities |
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— |
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— |
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— |
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Change in accumulated other comprehensive income (loss) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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Common Stock dividends |
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— |
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— |
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— |
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— |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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Other, net |
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— |
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— |
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— |
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Balances at June 30, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Balances at March 31, 2021 |
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$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||||
Issuance of Common Stock, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||||
Redemption of AIR Operating Partnership units |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||||||
Amortization of share-based compensation cost |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||||
Effect of changes in ownership of consolidated entities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
||
Contribution from noncontrolling interest in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Change in accumulated other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Common Stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Balances at June 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
See notes to condensed consolidated financial statements.
7
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Six Months Ended June 30, 2021 and 2020
(In thousands)
(Unaudited)
|
|
Preferred Stock |
|
|
Common Stock |
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
Noncontrolling |
|
|
Common |
|
|
|
|
|||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional |
|
|
Other |
|
|
Distributions |
|
|
Total AIR's Predecessor |
|
|
Consolidated |
|
|
AIR |
|
|
Total |
|
|||||||||||
Balances at December 31, 2019 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Repurchases of Common Stock |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Redemption of AIR Operating Partnership units |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
||||
Amortization of share-based compensation cost |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||||
Effect of changes in ownership of consolidated entities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Cumulative effect of a change in accounting principle |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Change in accumulated other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common Stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
||||
Balances at June 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balances at December 31, 2020 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||||
Issuance of Common Stock, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||||
Redemption of AIR Operating Partnership units |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|||
Amortization of share-based compensation cost |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||||
Effect of changes in ownership of consolidated entities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
||
Contribution from noncontrolling interest in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Change in accumulated other comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Common Stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Preferred Stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Balances at June 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
See notes to condensed consolidated financial statements.
8
APARTMENT INCOME REIT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
Six Months Ended June 30, |
|
|||||
|
2021 |
|
|
2020 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
||
Net income (loss) |
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Gain on derecognition of leased properties and dispositions of real estate |
|
( |
) |
|
|
( |
) |
Income tax expense (benefit) |
|
|
|
|
( |
) |
|
Other non-cash adjustments, net |
|
|
|
|
|
||
Discontinued operations: |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Income tax benefit |
|
|
|
|
( |
) |
|
Other non-cash adjustments, net |
|
|
|
|
|
||
Net changes in operating assets and operating liabilities |
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
||
Purchases of real estate and deposits related to purchases of real estate |
|
( |
) |
|
|
( |
) |
Capital expenditures |
|
( |
) |
|
|
( |
) |
Proceeds from dispositions of real estate |
|
|
|
|
|
||
Purchases of corporate assets |
|
( |
) |
|
|
( |
) |
Maturation of debt investments |
|
|
|
|
|
||
Other investing activities |
|
( |
) |
|
|
|
|
Discontinued operations: |
|
|
|
|
|
||
Purchases of real estate and deposits related to purchases of real estate |
|
|
|
|
( |
) |
|
Capital expenditures |
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
||
Proceeds from non-recourse property debt of continuing operations |
|
|
|
|
|
||
Principal repayments on non-recourse property debt of continuing operations |
|
( |
) |
|
|
( |
) |
Proceeds from term loans |
|
|
|
|
|
||
Repayment of term loan |
|
( |
) |
|
|
|
|
Net borrowings on (repayments of) revolving credit facility |
|
|
|
|
( |
) |
|
Payment of debt issuance costs |
|
( |
) |
|
|
( |
) |
Payment of debt extinguishment costs |
|
( |
) |
|
|
( |
) |
Repurchases of Common Stock |
|
|
|
|
( |
) |
|
Proceeds from issuance of Common Stock, net |
|
|
|
|
|
||
Payment of dividends to holders of Common Stock |
|
( |
) |
|
|
( |
) |
Payment of dividends to holders of Preferred Stock |
|
( |
) |
|
|
— |
|
Payment of distributions to noncontrolling interests |
|
( |
) |
|
|
( |
) |
Redemptions of noncontrolling interests in the AIR Operating Partnership |
|
( |
) |
|
|
( |
) |
Contribution from noncontrolling interests in consolidated real estate partnerships |
|
|
|
|
|
||
Principal repayments on non-recourse property debt of discontinued operations |
|
|
|
|
( |
) |
|
Other financing activities |
|
|
|
|
( |
) |
|
Net cash provided by financing activities |
|
|
|
|
|
||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
|
|
|
|
||
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF DISCONTINUED OPERATIONS |
|
|
|
|
|
||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF CONTINUING OPERATIONS |
|
|
|
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
|
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD |
$ |
|
|
$ |
|
See notes to condensed consolidated financial statements.
9
APARTMENT INCOME REIT, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
ASSETS |
|
|
|
|
|
|
||
Buildings and improvements |
|
$ |
|
|
$ |
|
||
Land |
|
|
|
|
|
|
||
Total real estate |
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Net real estate |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Notes receivable from Aimco |
|
|
|
|
|
|
||
Leased real estate assets |
|
|
|
|
|
— |
|
|
Goodwill |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
||
Non-recourse property debt, net |
|
$ |
|
|
$ |
|
||
Term loans, net |
|
|
|
|
|
|
||
Revolving credit facility borrowings |
|
|
|
|
|
|
||
Total indebtedness |
|
|
|
|
|
|
||
Accrued liabilities and other |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Redeemable preferred units |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Partners’ capital: |
|
|
|
|
|
|
||
Preferred units |
|
|
|
|
|
|
||
General Partner and Special Limited Partner |
|
|
|
|
|
|
||
Limited Partners |
|
|
|
|
|
|
||
Partners’ capital attributable to the AIR Operating Partnership |
|
|
|
|
|
|
||
Noncontrolling interests in consolidated real estate partnerships |
|
|
( |
) |
|
|
( |
) |
Total partners’ capital |
|
|
|
|
|
|
||
Total liabilities and partners’ capital |
|
$ |
|
|
$ |
|
See notes to condensed consolidated financial statements.
10
APARTMENT INCOME REIT, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental and other property revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Property operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expenses, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on derecognition of leased properties and dispositions of real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mezzanine investment income, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from continuing operations before income tax (expense) benefit and discontinued operations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Income tax (expense) benefit |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Income (loss) from continuing operations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Income from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Net income (loss) attributable to the AIR Operating Partnership |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net income attributable to the AIR Operating Partnership’s preferred unitholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income attributable to participating securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income (loss) attributable to the AIR Operating Partnership’s common unitholders |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per common unit – basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from continuing operations attributable to the AIR Operating Partnership per common unit |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Income from discontinued operations attributable to the AIR Operating Partnership per common unit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to the AIR Operating Partnership per common unit – basic and diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common units outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common units outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
11
APARTMENT INCOME REIT, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net income (loss) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Unrealized losses on available for sale debt securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Comprehensive (income) loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Comprehensive income (loss) attributable to the AIR Operating Partnership |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
See notes to condensed consolidated financial statements.
12
APARTMENT INCOME REIT, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Three Months Ended June 30, 2021 and 2020
(In thousands)
(Unaudited)
|
|
Preferred Units |
|
|
General Partner |
|
|
Limited Partners |
|
|
Partners’ Capital |
|
|
Noncontrolling |
|
|
Total Partners’ |
|
||||||
Balances at March 31, 2020 |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Redemption of AIR Operating Partnership units |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Amortization of share-based compensation cost |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Effect of changes in ownership of consolidated entities |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
||
Change in accumulated other comprehensive income (loss) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Distributions to common unitholders |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions paid to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Balances at June 30, 2020 |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances at March 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Issuance of common partnership units to AIR, net |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Redemption of AIR Operating Partnership units |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Amortization of share-based compensation cost |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Effect of changes in ownership of consolidated entities |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Contribution from noncontrolling interest in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Change in accumulated other comprehensive income (loss) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions to common unitholders |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions to preferred unitholders |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
— |
|
|
|
( |
) |
|
|
230 |
|
|
|
( |
) |
|
|
|
|
|
|
||
Balances at June 30, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
See notes to condensed consolidated financial statements.
13
APARTMENT INCOME REIT, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Six Months Ended June 30, 2021 and 2020
(In thousands)
(Unaudited)
|
|
Preferred Units |
|
|
General Partner |
|
|
Limited Partners |
|
|
Partners’ Capital |
|
|
Noncontrolling |
|
|
Total Partners’ |
|
||||||
Balances at December 31, 2019 |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Repurchases of common partnership units held by AIR's Predecessor |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Redemption of common partnership units |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Amortization of share-based compensation cost |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Effect of changes in ownership of consolidated entities |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
||
Cumulative effect of a change in accounting principle |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Change in accumulated other comprehensive income (loss) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Distributions to common unitholders |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Balances at June 30, 2020 |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances at December 31, 2020 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Issuance of common partnership units to AIR, net |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Redemption of AIR Operating Partnership units |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Amortization of share-based compensation cost |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Effect of changes in ownership of consolidated entities |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Contribution from noncontrolling interest in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Change in accumulated other comprehensive income (loss) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Distributions to common unitholders |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions to preferred unitholders |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balances at June 30, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
See notes to condensed consolidated financial statements.
14
APARTMENT INCOME REIT, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
Six Months Ended June 30, |
|
|||||
|
2021 |
|
|
2020 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
||
Net income (loss) |
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Gain on derecognition of leased properties and dispositions of real estate |
|
( |
) |
|
|
( |
) |
Income tax expense (benefit) |
|
|
|
|
( |
) |
|
Other non-cash adjustments, net |
|
|
|
|
|
||
Discontinued operations: |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Income tax benefit |
|
|
|
|
( |
) |
|
Other non-cash adjustments, net |
|
|
|
|
|
||
Net changes in operating assets and operating liabilities |
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
||
Purchases of real estate and deposits related to purchases of real estate |
|
( |
) |
|
|
( |
) |
Capital expenditures |
|
( |
) |
|
|
( |
) |
Proceeds from dispositions of real estate |
|
|
|
|
|
||
Purchases of corporate assets |
|
( |
) |
|
|
( |
) |
Maturation of debt investments |
|
|
|
|
|
||
Other investing activities |
|
( |
) |
|
|
|
|
Discontinued operations: |
|
|
|
|
|
||
Purchases of real estate and deposits related to purchases of real estate |
|
|
|
|
( |
) |
|
Capital expenditures |
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
||
Proceeds from non-recourse property debt of continuing operations |
|
|
|
|
|
||
Principal repayments on non-recourse property debt of continuing operations |
|
( |
) |
|
|
( |
) |
Proceeds from term loans |
|
|
|
|
|
||
Repayment of term loan |
|
( |
) |
|
|
|
|
Net borrowings on (repayments of) revolving credit facility |
|
|
|
|
( |
) |
|
Payment of debt issuance costs |
|
( |
) |
|
|
( |
) |
Payment of debt extinguishment costs |
|
( |
) |
|
|
( |
) |
Repurchases of common partnership units held by General Partner and Special Limited Partner |
|
|
|
|
( |
) |
|
Proceeds from issuance of common partnership units to AIR, net |
|
|
|
|
|
||
Payment of distributions to General Partner and Special Limited Partner |
|
( |
) |
|
|
( |
) |
Payment of distributions to Limited Partners |
|
( |
) |
|
|
( |
) |
Payment of distributions to preferred units |
|
( |
) |
|
|
( |
) |
Payment of distributions to noncontrolling interests |
|
( |
) |
|
|
( |
) |
Redemption of common and preferred units |
|
( |
) |
|
|
( |
) |
Contributions from noncontrolling interests in consolidated real estate partnerships |
|
|
|
|
|
||
Principal repayments on non-recourse property debt of discontinued operations |
|
|
|
|
( |
) |
|
Other financing activities |
|
|
|
|
( |
) |
|
Net cash provided by financing activities |
|
|
|
|
|
||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
|
|
|
|
||
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF DISCONTINUED OPERATIONS |
|
|
|
|
|
||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF CONTINUING OPERATIONS |
|
|
|
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
|
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD |
$ |
|
|
$ |
|
See notes to condensed consolidated financial statements.
15
APARTMENT INCOME REIT CORP.
APARTMENT INCOME REIT, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Note 1 — Basis of Presentation and Organization
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of Apartment Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating Partnership”) and their consolidated subsidiaries. On July 7, 2021, AIR Operating Partnership changed its name from "AIMCO Properties, L.P." to "Apartment Income REIT, L.P." The AIR Operating Partnership’s condensed consolidated financial statements include the accounts of the AIR Operating Partnership and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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 of a limited liability company. Interests in the AIR Operating Partnership that are held by limited partners other than AIR are reflected in AIR’s accompanying condensed consolidated balance sheets as noncontrolling interests in the AIR Operating Partnership. Interests in partnerships consolidated by the AIR Operating Partnership that are held by third parties are reflected in AIR’s accompanying condensed consolidated balance sheets as noncontrolling interests in consolidated real estate partnerships.
Except as the context otherwise requires, “we,” “our,” and “us” refer to AIR, the AIR Operating Partnership, and their consolidated subsidiaries, collectively.
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 generally accepted accounting principles in the U.S. (“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 six months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
The condensed consolidated balance sheets of AIR, the AIR Operating Partnership, and their consolidated subsidiaries as of December 31, 2020, have been derived from their respective audited financial statements at that date, but do 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 AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020. Except where indicated, the footnotes refer to AIR, the AIR Operating Partnership and their consolidated subsidiaries, collectively.
The Separation
On December 15, 2020, Apartment Investment and Management Company (“Aimco”) completed the separation of its business into two, separate and distinct, publicly traded companies, AIR and Aimco (the “Separation”).
Notwithstanding the legal form of the Separation, for accounting and financial reporting purposes, Aimco is presented as being spun-off from AIR (as it relates to Aimco subsequent to the Separation, the “Spinnee”). This presentation is in accordance with GAAP, and is due primarily to the relative significance of AIR’s business, as measured in terms of revenues, net income, assets, and other relevant indicators, as compared to Aimco before the Separation. Therefore, AIR is considered the divesting entity and treated as the accounting spinnor, and Aimco is presented as the predecessor (“AIR’s Predecessor”) for AIR’s financial statements. Unless otherwise stated, financial results prior to the Separation on December 15, 2020 include the financial results of AIR’s Predecessor.
The financial results and cash flows attributable to the apartment communities retained by Aimco in the Separation are presented as discontinued operations. Unless otherwise noted, all disclosures in the notes accompanying the condensed consolidated financial statements reflect only continuing operations. Please see Note 9 for further details regarding our discontinued operations.
16
Organization and Business
AIR is a self-administered and self-managed real estate investment trust (“REIT”). AIR owns, through its wholly-owned subsidiaries, all of the common equity, the general partner interest, and special limited partner interest in AIR Operating Partnership, a Delaware limited partnership originally incorporated on May 16, 1994. AIR Operating Partnership conducts all of the business of AIR, which is focused on the ownership of stabilized multi-family properties located in top markets including eight important geographic concentrations: Boston; Philadelphia; Greater Washington D.C.; Miami; Denver; the San Francisco Bay Area; Los Angeles; and San Diego.
We own and operate a portfolio of apartment communities, diversified by both geography and price point, in 12 states and the District of Columbia. As of June 30, 2021, our portfolio included
Interests in the AIR Operating Partnership that are held by limited partners other than AIR are referred to as OP Units. OP Units include common partnership units, which we refer to as common OP Units, as well as preferred partnership units, which we refer to as preferred OP Units. As of June 30, 2021, after elimination of units held by consolidated subsidiaries, the AIR Operating Partnership had
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation
We consolidate a variable interest entity (“VIE”), in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.
Redeemable Preferred OP Units
As described in Note 5, the preferred OP Units may be redeemed at the holder’s option and are therefore presented within temporary equity in AIR’s condensed consolidated balance sheets and within temporary capital in the AIR Operating Partnership’s condensed consolidated balance sheets.
Balance at December 31, 2020 |
|
$ |
|
|
Preferred distributions |
|
|
( |
) |
Redemption of preferred units |
|
|
( |
) |
Net income |
|
|
|
|
Balance at June 30, 2021 |
|
$ |
|
Revenue from Leases
The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and tenants primarily for utility reimbursements.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Fixed lease income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Straight-line rent write-off (1) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total lease income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
17
As of June 30, 2021, we leased
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.
Reclassifications and Revisions
Recent Accounting Pronouncements
On August 5, 2020, the Financial Accounting Standards Board issued an Accounting Standards Update that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, and affects the diluted earnings per share calculation for instruments that may be settled in cash or shares, which is effective for us on January 1, 2022. Adoption of the standards requires changes to be made retrospectively. Our preferred OP Units are subject to the new standard, which will require us to include our preferred OP Units in the calculation of dilutive securities. We are in the process of evaluating the impact of this standard and do not anticipate the adoption will have a material impact to our consolidated financial statements.
Note 3 — Significant Transactions
Apartment Community Acquisition
On
Number of apartment homes |
|
|
|
Purchase price |
$ |
|
|
Capitalized transaction costs (1) |
|
|
|
Total consideration |
$ |
|
|
Consideration allocated to land |
$ |
|
|
Consideration allocated to building and improvements |
|
|
|
Consideration allocated to intangible assets (2) |
|
|
|
Consideration allocated to below-market lease liabilities (3) |
|
( |
) |
Total consideration |
$ |
|
New Credit Facility
On April 14, 2021, we obtained a $
The revolving credit facility currently bears interest at a
Proceeds from the term loans were used to extend the maturity of our previous $
18
The term loans mature on the following schedule:
As of June 30, 2021, we had $
Equity Issuance
On April 23, 2021, we issued and sold
July Term Loan
Subsequent to June 30, 2021, on July 15, 2021, we secured a new $
Note 4 — Commitments and Contingencies
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.
For claims arising from matters that occurred prior to the Separation, Aimco is responsible for the first $
Environmental
Various federal, state and local laws subject apartment community owners or operators to liability for management and the costs of removal or remediation of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Such laws often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with investigation and remediation actions. Moreover, private plaintiffs may potentially make claims for investigation and remediation costs they incur or for personal injury, disease, disability or other infirmities related to the alleged presence of hazardous materials. In addition to potential environmental liabilities or costs associated with our current apartment communities, we may also be responsible for such liabilities or costs associated with communities we acquire or manage in the future or apartment communities we no longer own or operate.
We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations (“AROs”), as defined by GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or apartment community casualty, we believe that the fair value of our AROs cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. AROs that are reasonably estimable as of June 30, 2021, are immaterial to our condensed consolidated financial statements.
Note 5 — Earnings and Dividends per Share and Unit
AIR and the AIR Operating Partnership calculate basic earnings (loss) per common share and basic earnings (loss) per common unit based on the weighted-average number of shares of Common Stock and common partnership units outstanding. We calculate diluted
19
earnings (loss) per share and diluted earnings (loss) per unit taking into consideration dilutive common stock and common partnership unit equivalents and dilutive convertible securities outstanding during the period.
Our common stock and common partnership unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in AIR’s issuance of additional shares and the AIR Operating Partnership’s issuance to AIR of additional common partnership units equal to the number of shares purchased under the options. These equivalents also include unvested total shareholder return (“TSR”) restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of Common Stock and common partnership units outstanding equal to the number of the shares that vest. Common partnership unit equivalents also include unvested long-term incentive partnership units. We include in the denominator securities with dilutive effect in calculating diluted earnings (loss) per share and per unit during these periods.
Our restricted stock awards that are subject to time-based vesting receive non-forfeitable dividends similar to shares of Common Stock and common partnership units prior to vesting, and our TSR long-term incentive partnership units receive non-forfeitable distributions based on specified percentages of the distributions paid to common partnership units prior to vesting and conversion. The unvested restricted shares and units related to these awards are participating securities. We include the effect of participating securities in basic and diluted earnings (loss) per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method.
In our condensed consolidated statements of operations, noncontrolling interest in consolidated real estate partnerships is related to both continuing and discontinued operations. For purposes of our earnings (loss) per share calculation, we have appropriately allocated the noncontrolling interest in consolidated real estate partnerships for the three and six months ended June 30, 2020. Please see Note 9 for detail of noncontrolling interest in consolidated real estate partnerships associated with discontinued operations.
Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings (loss) per share and per unit are as follows (in thousands, except per share and per unit data):
|
Three Months Ended June 30, 2021 |
|
|
Six Months Ended June 30, 2021 |
|
||||||||||||||||||
|
Income (Numerator) |
|
|
Shares (Denominator) |
|
|
Per Share Amount |
|
|
Income (Numerator) |
|
|
Shares (Denominator) |
|
|
Per Share Amount |
|
||||||
Basic earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) attributable to AIR common stockholders |
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
$ |
|
||||
Diluted earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) attributable to AIR common stockholders |
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-dilutive share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
|
Six Months Ended June 30, 2020 |
|
||||||||||||||||||
|
Income (Numerator) |
|
|
Shares (Denominator) |
|
|
Per Share Amount |
|
|
Income (Numerator) |
|
|
Shares (Denominator) |
|
|
Per Share Amount |
|
||||||
Basic earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from continuing operations attributable to AIR |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Income from discontinued operations attributable to AIR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income attributable to AIR common stockholders |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Diluted earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) attributable to AIR common stockholders |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-dilutive share equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 |
|
|
Six Months Ended June 30, 2021 |
|
||||||||||||||||||
|
Income (Numerator) |
|
|
Units (Denominator) |
|
|
Per Unit Amount |
|
|
Income (Numerator) |
|
|
Units (Denominator) |
|
|
Per Unit Amount |
|
||||||
Basic earnings (loss) per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) attributable to the AIR Operating Partnership's common unitholders |
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
$ |
|
||||
Diluted earnings (loss) per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Effect of dilutive securities |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||||
Net income (loss) attributable to the AIR Operating Partnership's common unitholders |
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-dilutive partnership unit equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
Three Months Ended June 30, 2020 |
|
|
Six Months Ended June 30, 2020 |
|
||||||||||||||||||
|
Income (Numerator) |
|
|
Units (Denominator) |
|
|
Per Unit Amount |
|
|
Income (Numerator) |
|
|
Units (Denominator) |
|
|
Per Unit Amount |
|
||||||
Basic earnings (loss) per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from continuing operations attributable to the AIR Operating Partnership |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Income from discontinued operations attributable to the AIR Operating Partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income attributable to the AIR Operating Partnership's common unitholders |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Diluted earnings (loss) per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) attributable to the AIR Operating Partnership's common unitholders |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-dilutive partnership unit equivalents outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The AIR Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holders’ option. The AIR Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of June 30, 2021, these preferred OP Units were potentially redeemable for approximately
Dividends and distributions paid per share of Common Stock and per common unit were as follows:
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Dividends and distributions paid |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Note 6 — Fair Value Measurements
Recurring Fair Value Measurements
We measured at fair value on a recurring basis our investments in the securitization trust that held certain of our property debt, which we classified as available for sale (“AFS”) debt securities. These investments were presented within other assets in the condensed consolidated balance sheets. We held several positions in the securitization trust that paid interest and we also held the first loss position in the securitization trust, which accrued interest over the term of the investment. These investments were acquired at a discount to face value and accreted to the $
Our investments in AFS debt securities were classified within Level 2 of the GAAP fair value hierarchy. We estimated the fair value of these investments using an income and market approach with primarily observable inputs, including yields and other information regarding similar types of investments, and adjusted for certain unobservable inputs specific to these investments. The fair value of the positions that paid interest typically moved in an inverse relationship with movements in interest rates. The fair value of the first loss position was primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.
During 2020, we paid an upfront premium of $
We measure at fair value on a recurring basis our interest rate option, which is presented in other assets in our condensed consolidated balance sheets. Our interest rate option is classified within Level 2 of the GAAP fair value hierarchy, and we estimate its fair value using pricing models that rely on observable market information, including contractual terms, market prices, and interest rate yield curves.
21
The fair value adjustment is included in earnings in other expense, net, in our condensed consolidated statements of operations. Changes in fair value are reflected as a non-cash transaction in adjustments to arrive at cash flows from operations, and the upfront premium is reflected in other financing in our condensed consolidated statements of cash flows.
The following table summarizes fair value for our AFS debt securities and our interest rate option (in thousands):
|
As of June 30, 2021 |
|
|
As of December 31, 2020 |
|
||||||||||||||||||||||||||
|
Total Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||||
AFS debt securities |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Interest rate option |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Nonrecurring Fair Value Measurements
As of June 30, 2021, assets measured at fair value on a nonrecurring basis in our condensed consolidated balance sheets consist of one apartment community acquisition. We allocated the cost of the apartment community acquired based on the relative fair value of the assets acquired and liabilities assumed. The fair value of assets and liabilities was determined using valuation techniques that rely on Level 2 and Level 3 inputs within the GAAP fair value hierarchy. As of June 30, 2021, the fair value of the real estate asset measured on a nonrecurring basis was $
As of December 31, 2020, assets measured at fair value on a nonrecurring basis in our condensed consolidated balance sheets consist of a real estate asset that was written down to its estimated fair value for impairment purposes during the year ended December 31, 2020. Our estimate of fair value was determined using valuations performed by third-party specialists, as well as various estimates and assumptions, the most significant being market rental rates, operating expense assumptions, and capitalization rate. These unobservable inputs are classified as Level 3 within the GAAP fair value hierarchy. As of December 31, 2020, the fair value of the real estate asset measured on a nonrecurring basis was $
Financial Assets and Liabilities Not Measured at Fair Value
We believe that the carrying value of the consolidated amounts of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximated their fair value as of June 30, 2021, and December 31, 2020, due to their relatively short-term nature and high probability of realization. The carrying amounts of notes receivable from Aimco, the term loans, and the revolving credit facility borrowings also approximated their estimated fair value as of June 30, 2021, and December 31, 2020. We estimate the fair value of our non-recourse property debt using an income and market approach, including comparison of the contractual terms to observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, collateral quality, and loan to value ratios on similarly encumbered apartment communities within our portfolio. We classify the fair value of our non-recourse property debt within Level 2 of the GAAP fair value hierarchy based on the significance of certain of the unobservable inputs used to estimate its fair value.
The following table summarizes carrying value and fair value for our non-recourse property debt, excluding debt issuance costs (in thousands):
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As of June 30, 2021 |
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As of December 31, 2020 |
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Carrying Value |
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Fair Value |
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Carrying Value |
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Fair Value |
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||||
Non-recourse property debt |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Note 7 — Variable Interest Entities
Consolidated Entities
AIR consolidates the AIR Operating Partnership, a variable interest entity (“VIE”) of which AIR is the primary beneficiary. AIR, through the AIR Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Substantially all of the assets and liabilities of AIR are that of the AIR Operating Partnership.
The AIR Operating Partnership consolidates (i) five VIEs that own interest in one or more apartment communities and are typically structured to generate a return for their partners through the operation and ultimate sale of the communities and (ii) five VIEs related to lessor entities that own interest in the properties leased to Aimco. The assets and liabilities of the VIEs associated with the leased properties consists of our net investment in the leases. The AIR Operating Partnership is the primary beneficiary in the limited
22
partnerships in which it is the sole decision maker and has a substantial economic interest.
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June 30, 2021 |
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December 31, 2020 |
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VIEs with interests in apartment communities |
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Apartment communities owned by VIEs |
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Apartment homes in communities owned by VIEs |
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Assets of the AIR Operating Partnership’s consolidated VIEs must first be used to settle the liabilities of such consolidated VIEs. These consolidated VIEs’ creditors do not have recourse to the general credit of the AIR Operating Partnership. Assets and liabilities of VIEs, excluding those of the AIR Operating Partnership, are summarized in the table below (in thousands):
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June 30, 2021 |
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December 31, 2020 |
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ASSETS: |
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Net real estate |
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$ |
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$ |
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Cash and cash equivalents |
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Restricted cash |
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Other assets |
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LIABILITIES: |
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Non-recourse property debt secured by AIR communities, net |
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$ |
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$ |
|
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Accrued liabilities and other |
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Unconsolidated Entities
Note 8 — Business Segments
We have
Our CODM uses proportionate property net operating income to assess the operating performance of our communities. Proportionate property net operating income reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues in accordance with GAAP.
As of June 30, 2021, our Same Store segment included
23
The following tables present the total revenues, property operating expenses, proportionate property net operating income (loss), and income (loss) from continuing operations before income tax benefit (expense) of our segments on a proportionate basis, excluding amounts related to communities sold or communities included in discontinued operations (in thousands):
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Same Store |
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Other |
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Proportionate |
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Corporate and |
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Consolidated |
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Three months ended June 30, 2021: |
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Total revenues |
$ |
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$ |
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$ |
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$ |
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$ |
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Property operating expenses |
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Other operating expenses not allocated to segments (3) |
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Total operating expenses |
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Proportionate property net operating income (loss) |
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( |
) |
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||||
Other items included in income before income tax benefit (expense) (4) |
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( |
) |
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( |
) |
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Income (loss) from continuing operations before income tax benefit (expense) |
$ |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
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Same |
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Other |
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Proportionate |
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Corporate and |
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Consolidated |
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Six months ended June 30, 2021: |
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Total revenues |
$ |
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$ |
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$ |
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$ |
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$ |
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Property operating expenses |
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Other operating expenses not allocated to segments (3) |
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Total operating expenses |
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Proportionate property net operating income (loss) |
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( |
) |
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||||
Other items included in income before income tax benefit (expense) (4) |
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|||||
Income (loss) from continuing operations before income tax benefit (expense) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
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Same Store |
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Other |
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Proportionate |
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Corporate and |
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Consolidated |
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Three months ended June 30, 2020: |
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|||||
Total revenues |
$ |
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$ |
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$ |
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$ |
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$ |
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|||||
Property operating expenses |
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Other operating expenses not allocated to segments (3) |
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Total operating expenses |
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Proportionate property net operating income (loss) |
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( |
) |
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Other items included in income before income tax benefit (expense) (4) |
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Income (loss) from continuing operations before income tax benefit (expense) |
$ |
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$ |
|
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$ |
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|
$ |
( |
) |
|
$ |
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Same |
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Other |
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Proportionate |
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Corporate and |
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Consolidated |
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|||||
Six months ended June 30, 2020: |
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|||||
Total revenues |
$ |
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$ |
|
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$ |
|
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$ |
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$ |
|
|||||
Property operating expenses |
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Other operating expenses not allocated to segments (3) |
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Total operating expenses |
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Proportionate property net operating income (loss) |
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( |
) |
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||||
Other items included in income before income tax benefit (expense) (4) |
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( |
) |
|
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( |
) |
|||
Income (loss) from continuing operations before income tax benefit (expense) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
24
The assets of our segments and the consolidated assets not allocated to our segments were as follows (in thousands):
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
Same Store |
$ |
|
|
$ |
|
||
Other Real Estate |
|
|
|
|
|
||
Corporate and other assets (1) |
|
|
|
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|
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Total consolidated assets |
$ |
|
|
$ |
|
(1) Includes the assets not allocated to our segments including: (i) corporate assets; (ii) our notes receivable from Aimco; (iii) our mezzanine loan investment; and (iv) assets of apartment communities which were leased to Aimco, sold, or classified as held for sale as of June 30, 2021.
Capital additions related to our segments were as follows (in thousands):
|
Six Months Ended June 30, |
|
|||||
|
2021 |
|
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2020 |
|
||
Same Store |
$ |
|
|
$ |
|
||
Other Real Estate |
|
|
|
|
|
||
Total capital additions |
$ |
|
|
$ |
|
25
Note 9 – Discontinued Operations
The financial results attributable to apartment communities retained by the Spinnee for the prior year comparative period have been classified as discontinued operations within the condensed consolidated financial statements.
Summarized results of discontinued operations are shown below (in thousands):
|
|
Three Months Ended |
|
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Six Months Ended |
|
||
|
|
June 30, 2020 |
|
|
June 30, 2020 |
|
||
REVENUES |
|
|
|
|
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|
||
Rental and other property revenues |
|
$ |
|
|
$ |
|
||
|
|
|
|
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|
||
OPERATING EXPENSES |
|
|
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|
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|
||
Property operating expenses |
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|
||
Depreciation and amortization |
|
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|
||
Other expenses, net |
|
|
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|
||
Total operating expenses |
|
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|
||
|
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|
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|
||
Interest income |
|
|
|
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|
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
Income from unconsolidated real estate partnerships |
|
|
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|
||
Income before income tax benefit |
|
|
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|
||
Income tax benefit |
|
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|
||
Income from discontinued operations, net of tax |
|
|
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|
||
Net loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
|
|
|
|
||
Net income from discontinued operations attributable to Spinnee |
|
$ |
|
|
$ |
|
We entered into various separation and transition services agreements with the Spinnee that provide for a framework of our relationship with the Spinnee after the Separation, including: (i) a separation agreement setting forth the mechanics of the Separation, the key provisions relating to the Separation of our assets and liabilities from those of the Spinnee, and certain organizational matters and conditions; (ii) an employee matters agreement to allocate liabilities and responsibilities relating to employment matters, teammate compensation, and benefits plans and programs, and other related matters; (iii) Property Management Agreements pursuant to which we provide property management and related services at a majority of the properties owned or leased by the Spinnee in exchange for a fee based on an agreed percentage of revenue collected; (iv) Master Services Agreement pursuant to which we provide the Spinnee with customary administrative and support services on an ongoing basis in exchange for payment for the fully-burdened costs (including internal allocated costs); and (v) a Master Leasing Agreement pursuant to which the Spinnee may enter into leases with us pursuant to which the Spinnee, at its option, may redevelop, develop, or lease-up apartment communities. The Property Management Agreement, the Master Services Agreement, and the Master Leasing Agreement may be terminated in accordance with the respective agreements.
During the three and six months ended June 30, 2021, we recognized revenue of $
The Master Leasing Agreement governs any future leasing arrangements between us and the Spinnee. The initial term of the Master Leasing Agreement is
26
Through June 30, 2021, we have leased
The initial term of each of the leases range from
2021 (remaining) |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease receivable (1) (2) |
|
$ |
|
|
Add: Unguaranteed residual value |
|
|
|
|
Less: Discount |
|
|
( |
) |
Total leased real estate assets |
|
$ |
|
In connection with the Separation, we acquired $
As of June 30, 2021, we have a receivable from Aimco in the amount of approximately $
27
ITEM 2. MANAGEMENT’S 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 Quarterly Report on Form 10-Q contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding: the ongoing relationship between AIR and Aimco (the “Separate Entities”) following the Separation; the payment of dividends and distributions in the future; the impact of the COVID-19 pandemic, including our ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding consumer demand, growth in revenue and strength of other performance metrics and models; the effect of acquisitions and dispositions; expectations regarding sales of our apartment communities and the use of proceeds thereof; the availability and cost of corporate debt; our ability to comply with debt covenants, including financial coverage ratios; risks related to the provision of property management services to Aimco and our ability to collect property management related fees; and risks related to the inability to fully collect the notes receivable due from Aimco.
These forward-looking statements are based on management’s judgment as of this date, which is subject to risks and uncertainties. Risks and uncertainties that could cause actual results to differ materially from our expectations include, but are not limited to: the effects of the coronavirus pandemic on AIR’s business and on the global and U.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described herein, and the impact on entities in which AIR holds a partial interest, and the impact of governmental lockdowns on AIR’s residents, commercial tenants, and operations; real estate and operating 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 amount, location and quality of competitive new housing supply; the timing and effects of acquisitions and dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIR’s ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by Aimco; the relationship between the Separate Entities after the Separation; the ability and willingness of the Separate Entities and their subsidiaries to meet and/or perform their obligations under any contractual arrangements that are entered into among the parties in connection with the Separation and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve some or all the benefits that we expect to achieve from the Separation; and such other risks and uncertainties described from time to time in filings by the Separate Entities with the Securities and Exchange Commission (“SEC”).
In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”) and depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership.
Readers should carefully review AIR’s financial statements and the notes thereto, as well as the section entitled “Risk Factors” described in Item 1A of AIR’s and AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020, and subsequent documents we file from time to time with the SEC. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
As used herein and except as the context otherwise requires, “we,” “our,” and “us” refer to Apartment Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating Partnership”) and their consolidated subsidiaries, collectively.
Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States (“GAAP”). These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading and include: NAREIT Funds from Operations, Pro forma Funds from Operations, and the measures used to compute our leverage ratios.
28
Executive Overview
AIR provides investors with a simple and transparent way to invest in the multi-family sector with public market liquidity, the safety of a diversified portfolio of apartment communities with low financial leverage, best-in-class operations, and sector low general and administrative costs.
Our principal financial objective is to be a low-cost and efficient way to invest in U.S. multi-family real estate. Many of our investors focus on multiples of Funds From Operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), referred to herein as “NAREIT FFO.” These investors also focus on NAREIT FFO, as adjusted for non-cash, unusual or non-recurring items. We refer to this metric as Pro forma Funds From Operations (“Pro forma FFO”) and use it as a secondary measure of operational performance.
Our business is organized around four areas of strategic focus: operational excellence; portfolio management; balance sheet; and team and culture. The results from the execution of our business plan are further described in the sections that follow.
The Separation
For financial reporting purposes, GAAP requires that Aimco is presented as the predecessor (“AIR’s Predecessor”) for AIR’s financial statements. As a result, unless otherwise stated, financial results prior to the Separation on December 15, 2020 include the financial results of AIR’s Predecessor. The financial results prior to the Separation attributable to the apartment communities retained by Aimco are presented as discontinued operations and are excluded from our property net operating income ("NOI").
Operational Excellence
We own and operate a portfolio of stabilized apartment communities, diversified by both geography and price point. As of June 30, 2021, our portfolio included 96 apartment communities with 26,422 apartment homes in which we held an average ownership of approximately 93%.
Same Store highlights for the second quarter include:
Same Store Markets
Market conditions and leasing results in the second quarter exceeded our expectations at the beginning of the year. We continue to emphasize margin and long-term NOI growth over short-term revenue growth. This approach contributed to sequential revenue growth of 80 basis points from the first to second quarter, and more importantly positioned the business for continued acceleration through the second half of the year and into 2022.
Weighted-average signed lease changes have now trended upwards for 10 consecutive months with July new lease rates up 9.5% through July 27, 2021.
Year-to-date, we have transacted 11,700 leases with a weighted-average rate increase of 70 basis points compared to the prior lease. We have signed an additional 4,000 leases with average rate increases of 8.6%. These 15,700 leases represent approximately 80% of our anticipated full year leasing activity and have weighted-average rent increases of 2.7%. We anticipate another 3,700 leases to be signed with blended rent changes in the range of 6%-8%, and a full year blended rate increase of approximately 3%.
In addition to accelerating market rents, leasing pace has also exceeded expectations, with second quarter leasing volume 65% ahead of 2020 and 10% above our previous high in the second quarter of 2019. ADO remained stable in the second quarter despite significant increases in frictional vacancy due to the number of lease expirations in peak season. While occupancy remained stable, our leased percent, which is the percent of total apartment homes currently leased, improved from 90.7% to 93.1% during the second quarter. As of July 27, 2021, our leased percentage is now 95%; 800 basis points ahead of the same day last year and 400 basis points ahead of 2019.
29
Portfolio Management
Our portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points, averaging “B/B+” in quality, and is also diversified across several of the largest markets in the United States. We measure the quality of apartment communities in our portfolio based on average rents of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance data and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of local market average; as “B” quality apartment communities those earning rents between 90% and 125% of local market average; as “C+” quality apartment communities those earning rents greater than $1,100 per month, but lower than 90% of local market average; and as “C” quality apartment communities those earning rents less than $1,100 per month and lower than 90% of local market average. We classify as “B/B+” quality a portfolio that on average earns rents between 100% and 125% of local market average rents. Although some companies and analysts within the multi-family real estate industry use apartment community quality ratings of “A,” “B,” and “C,” some of which are tied to local market rent averages, the metrics used to classify apartment community quality as well as the period for which local market rents are calculated may vary from company to company. Accordingly, our rating system for measuring apartment community quality is neither broadly nor consistently used in the multi-family real estate industry.
The following table summarizes information about our portfolio relative to the market for the three months ended June 30, 2021:
Average revenue per apartment home (1) |
|
$2,215 |
Percentage A (average revenue per apartment home $2,832) |
|
44% |
Percentage B (average revenue per apartment home $1,982) |
|
34% |
Percentage C+ (average revenue per apartment home $1,760) |
|
22% |
(1) Represents average monthly rental and other property revenues (excluding resident reimbursement of utility cost) divided by the number of occupied apartment homes as of the end of the period.
Our average monthly revenue per apartment home was $2,215 for the three months ended June 30, 2021, representing a decrease of approximately 3% compared to the same period in 2020.
As of June 30, 2021, we leased four properties to Aimco for development and redevelopment with an initial value of $467.0 million and quarterly cash lease income of $6.6 million. AIR has the option to purchase the improved assets at a discount to their fair value, when property operations are stabilized, currently expected between January 1, 2024 and January 1, 2025. Additionally, during the second quarter we leased one vacant land parcel to Aimco, with an initial value of $12.8 million, quarterly cash lease income of approximately $0.1 million, and expected stabilization in 2025.
We also expect to improve the quality of our portfolio by allocating investment capital to enhance rent growth and increase long-term capital values through routine investments in property upgrades (such as upgrading kitchens, bathrooms and other interior design aspects) and through portfolio design, emphasizing land value as well as location and submarket.
As part of our portfolio strategy, we seek to sell communities with lower expected free cash flow internal rates of return and reinvest the proceeds from such sales in accretive uses such as capital enhancements, share repurchases, and selective acquisitions of stabilized communities with projected free cash flow internal rates of return higher than expected from the communities being sold. When the cost of capital is favorable, we will look to grow through the acquisition of stabilized apartment communities that we believe we can operate better than their previous owners. Through this disciplined approach to capital allocation, we expect to increase the quality and expected growth rate of our portfolio.
Acquisitions and Dispositions
On June 17, 2021, we acquired City Center on 7th, a 700-apartment home community located in Pembroke Pines, Florida for $223 million. The acquisition was temporarily funded through borrowings on our revolving credit facility pending the completion of paired trade transactions later in 2021.
We expect an NOI cap rate of 4.2% during our first year of ownership. An additional 160 basis points of growth is expected as we invest approximately $10 million in capital enhancements and implement fully our best-in-class operating platform. Since acquisition 45 days ago, we've signed 27 new leases with rate increases averaging 21.5%, while increasing occupancy by 70 basis points to 97.1%.
We did not dispose of any apartment communities during the three months ended June 30, 2021.
30
Balance Sheet
Components of Leverage
We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage, primarily long-dated debt; and we build financial flexibility by maintaining ample unused and available credit; holding properties with substantial value unencumbered by property debt; maintaining an investment grade rating; and using partners’ capital when it enhances financial returns or reduces investment risk.
Our leverage includes our share of long-term, non-recourse property debt encumbering our apartment communities, together with outstanding borrowings under our revolving credit facility, our term loans, and our preferred equity. We have notes receivable from Aimco with an aggregate principal amount of $534 million. The notes will mature on January 31, 2024, and are secured by a pool of properties owned by Aimco. We consider the notes a reduction of leverage as we expect proceeds to be used to repay current amounts outstanding.
We entered 2021 with approximately $3.2 billion of net leverage. We anticipate ending 2021 with net leverage of approximately $2.5 billion. The April equity offering and 2021 property sales are expected to reduce leverage by $920 million. This decline is somewhat offset by borrowings to fund capital projects and the City Center acquisition at a loan to value of approximately 25%.
Please see the Liquidity and Capital Resources section for additional information regarding our leverage.
Equity Issuance
As previously announced in April 2021, we sold 7.825 million shares of our Class A Common Stock in a private placement to a large global real estate-focused investment firm for a cash purchase price of $342 million, net of fees. Proceeds raised were used to repay $318.4 million of property debt with a weighted-average interest rate of 4.6%, which resulted in an approximate 0.9x reduction in Net Leverage to Adjusted EBITDAre. Prepayment penalties incurred in connection with the debt repayment totaled $33.8 million. The economic cost of these prepayment penalties is expected to be substantially recovered through lower future interest expense.
Financing Activities
On April 14, 2021, we closed a new $1.4 billion credit facility, providing four-to-five-year money at a current all-in cost of 1.6%. The facility is comprised of a $600 million revolving credit facility and $800 million of variable rate term loans. Proceeds were used to extend the maturity of our previous $350 million term loan, repay $213 million of property debt, and reduce borrowings on our revolving credit facility. The term loans were structured to maintain our balanced maturity ladder, and to also maximize flexibility through the ability to prepay freely and extend the maturity date of shorter duration loans.
On Track Leverage Reduction
We target Net Leverage to Adjusted EBITDAre below 6.0x, with a current target of 5.5x by year-end. Our leverage ratios for the three months ended June 30, 2021 are presented below:
|
|
Annualized Current Quarter |
Proportionate Debt to Adjusted EBITDAre |
|
7.1x |
Net Leverage to Adjusted EBITDAre |
|
7.3x |
Please see the Leverage Ratios subsection of the Non-GAAP Measures section for further information about the calculation of our leverage ratios.
Liquidity
We use our revolving credit facility for working capital and other short-term purposes and to secure letters of credit. As of June 30, 2021, our share of cash and restricted cash was $66.6 million and we had the capacity to borrow up to $248.9 million, under our revolving
31
credit facility, bringing total liquidity to $315.5 million. Pro forma for the closing of the July term loan, our liquidity increased to $665.5 million.
We manage our financial flexibility by maintaining an investment grade rating and holding communities that are unencumbered by property debt. AIR has been rated BBB by Standard & Poor’s. As of June 30, 2021, we held unencumbered communities with property debt with an estimated fair market value of approximately $4.2 billion; an increase of 50% from December 31, 2020. We anticipate seeking an investment grade credit rating from Moody’s. In assigning ratings, Moody’s places significant emphasis on the amount of non-recourse property debt as a percentage of the undepreciated book value of a company’s assets. To achieve Moody’s required thresholds, we estimate that a Moody’s investment grade rating will require property debt to approximate $1.8 billion. At June 30, 2021 our share of property debt is $2.6 billion.
Dividend
On July 27, 2021, our Board of Directors increased our quarterly cash dividend from $0.43 to $0.44 per share of AIR Common Stock. This amount is payable on August 27, 2021, to stockholders of record on August 13, 2021.
Team and Culture
Our team and culture are keys to our success. Our intentional focus on a collaborative and productive culture based on respect for others and personal responsibility is reinforced by a preference for promotion from within. We focus on succession planning and talent development to produce a strong, stable team that is the enduring foundation of our success. We offer benefits reinforcing our value of caring for each other, including an opportunity to manage one’s life through flexible work schedules and “dress for your day,” paid time for parental leave, profit sharing, retirement plans for all, financial support for our teammates who are becoming United States citizens, and a bonus structure at all levels of the organization. Consistent with the duration of our other leave policies, we also pay full compensation and benefits for teammates who are actively deployed by the United States military.
A critical element of our culture is a relentless focus on efficiency. We continuously seek to reduce costs through the use of additional automation and continued technological investment. We expect this focus will enable our general and administrative expenses to be lower, as a percentage of gross asset value, than our peers.
Our focus on our team and our culture is recognized externally, as well. Out of hundreds of participating companies in 2021, AIR was one of only six recognized as a “Top Workplace” in Colorado for each of the past nine years, and was one of only two real estate companies to receive a BEST award from the Association for Talent Development in recognition of our company-wide success in talent development, marking its third consecutive year receiving this award, and received for the first time the "Top Workplaces 2021" honor from the Washington Post.
Results of Operations
Because our operating results depend primarily on income from our apartment communities, the supply of and demand for apartments influences our operating results. Additionally, the level of expenses required to operate and maintain our apartment communities and the pace and price at which we acquire and dispose of our apartment communities affects our operating results.
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 included in Item 1.
Financial Highlights
Net income (loss) from continuing operations attributable to common stockholders per common share, on a dilutive basis, decreased $0.42 for the three months ended June 30, 2021, due primarily to prepayment penalties incurred as a result of the early payment of property debt and the write-off of deferred financing costs associated with our previous credit facility, partially offset by an increase in interest income as further described below. Net income (loss) from continuing operations attributable to common stockholders per common share, on a dilutive basis, increased $0.11 for the six months ended June 30, 2021, due primarily to a gain on derecognition of leased properties and higher interest income, offset partially by increased prepayment penalties.
Pro forma FFO per share was $0.52 and $1.02, respectively, for the three and six months ended June 30, 2021.
Residential Rent Collection Update
We measure residential rent collection as the amount of payments received as a percentage of all residential amounts owed. In the second quarter, we recognized 97.9% of all residential revenue owed during the quarter, treating the balance of 2.1% as bad debt. Of
32
the 97.9% of residential revenue recognized, as of quarter-end, we collected in cash all but 120 basis points, with 96.7% of the residential rents collected. Year-to-date we have recognized 97.9% of all residential revenue and collected 97.6% of billed rents.
As of June 30, 2021, our proportionate share of gross residential accounts receivable was $12.7 million. After consideration of tenant security deposits and reserves for uncollectible amounts, our net exposure is $1.1 million. Most of this balance is expected to be collected during the third quarter of 2021. Of our uncollected accounts receivable, 73% relate to California residents.
The state of California has recently expanded the SB-91 rent relief program, to allow for 100% of past due rents to be paid by state funding (vs. 80% previously). As of June 30, 2021, we had received $0.7 million in payments under these programs. We remain cautiously optimistic that this program will allow us to recover rent that was uncollected in 2020 or 2021. We expect bad debt expense to decline as emergency ordinances are lifted that suspended legal action to collect past due rents.
Commercial rental income comprised 2.7% of second quarter revenue. In the second half of 2021, we expect an increased contribution from commercial tenants as their businesses re-open and rent payments resume.
Detailed Results of Operations for the Three and Six Months Ended June 30, 2021, Compared to 2020
Net income (loss) from continuing operations decreased by $59.8 million and increased by $24.4 million during the three and six months ended June 30, 2021, respectively, compared to 2020, as more fully described below.
Property Operations
We have two segments: Same Store and Other Real Estate. Our Same Store segment includes communities that: (i) are owned and managed by AIR and (ii) had reached a stabilized level of operations. Our Other Real Estate segment includes communities that do not meet the criteria to be classified as Same Store.
As of June 30, 2021, our Same Store segment included 92 apartment communities with 25,427 apartment homes and our Other Real Estate segment included four apartment communities with 995 apartment homes.
Proportionate Property Net Operating Income (Non-GAAP)
Our proportionate share of financial information includes our share of unconsolidated real estate partnerships and excludes the noncontrolling interest partners' share of consolidated real estate partnerships. We believe proportionate information benefits the users of our financial information by providing the amount of revenues, expenses, assets, liabilities, and other items attributable to our stockholders. Other companies may calculate their proportionate information differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the non-GAAP proportionate financial information should not be considered in isolation or as a substitute for information included in our financial statements as reported under GAAP.
We use proportionate property NOI to assess the operating performance of our communities, which excludes the results of properties retained by Aimco in connection with the Separation, which are included in discontinued operations. Proportionate property NOI is a non-GAAP measure that reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. Accordingly, the results of operations of our segments discussed below are presented on a proportionate ("Ownership-Effected") basis. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues in accordance with GAAP. In September 2020, we formed a joint venture with a passive institutional investor to own a portfolio of 12 multi-family communities in California. In order for both periods to be comparable, we have presented, in addition to the actual historical changes in results of operations of our segments, the property operating results as if the California joint venture had closed at the beginning of the earliest period presented.
We do not include offsite costs associated with property management, casualty gains or losses, or the results of apartment communities sold, held for sale, or retained by Aimco in the Separation, which are included in discontinued operations, reported in consolidated amounts, in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below.
Please see Note 8 to the condensed consolidated financial statements in Item 1 for further discussion regarding our segments, including a reconciliation of these proportionate amounts to consolidated rental and other property revenues and property operating expenses.
33
|
Three Months Ended June 30, |
|
|
Historical Change |
|
|
Ownership-Effected |
|
|||||||||||||||
(in thousands) |
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
||||||
Rental and other property revenues, before utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Same Store |
$ |
154,154 |
|
|
$ |
170,392 |
|
|
$ |
(16,238 |
) |
|
|
(9.5 |
%) |
|
$ |
(2,978 |
) |
|
|
(1.9 |
%) |
Other Real Estate |
|
2,395 |
|
|
|
1,515 |
|
|
|
880 |
|
|
|
58.1 |
% |
|
|
880 |
|
|
|
58.1 |
% |
Total |
|
156,549 |
|
|
|
171,907 |
|
|
|
(15,358 |
) |
|
|
(8.9 |
%) |
|
|
(2,098 |
) |
|
|
(1.3 |
%) |
Property operating expenses, net of utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Same Store |
|
45,133 |
|
|
|
46,398 |
|
|
|
(1,265 |
) |
|
|
(2.7 |
%) |
|
|
2,146 |
|
|
|
5.0 |
% |
Other Real Estate |
|
1,355 |
|
|
|
1,144 |
|
|
|
211 |
|
|
|
18.4 |
% |
|
|
211 |
|
|
|
18.4 |
% |
Total |
|
46,488 |
|
|
|
47,542 |
|
|
|
(1,054 |
) |
|
|
(2.2 |
%) |
|
|
2,357 |
|
|
|
5.3 |
% |
Proportionate property net operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Same Store |
|
109,021 |
|
|
|
123,994 |
|
|
|
(14,973 |
) |
|
|
(12.1 |
%) |
|
|
(5,124 |
) |
|
|
(4.5 |
%) |
Other Real Estate |
|
1,040 |
|
|
|
371 |
|
|
|
669 |
|
|
|
180.3 |
% |
|
|
669 |
|
|
|
180.3 |
% |
Total |
$ |
110,061 |
|
|
$ |
124,365 |
|
|
$ |
(14,304 |
) |
|
|
(11.5 |
%) |
|
$ |
(4,455 |
) |
|
|
(3.9 |
%) |
For the three months ended June 30, 2021, compared to 2020, after giving effect to the sale of partial interest in certain Same Store communities in the California joint venture, our Same Store proportionate property NOI decreased by $5.1 million, or 4.5%. This decrease was attributable primarily to a $3.0 million, or 1.9%, decrease in rental and other property revenues due to a 230 basis point decrease in residential rental rates.
The decrease in proportionate property NOI was also attributable to an increase of $2.1 million, or 5.0%, in Same Store property operating expenses. Controllable operating expenses, which we define as property expenses less taxes, insurance, and utility expenses, were up $0.6 million, or 2.8%, compared to the three months ended June 30, 2020, while real estate taxes and insurance costs increased by $0.8 million and $0.6 million, respectively.
Other Real Estate proportionate property NOI for the three months ended June 30, 2021, compared to 2020, increased by $0.7 million.
|
Six Months Ended June 30, |
|
|
Historical Change |
|
|
Ownership-Effected |
|
|||||||||||||||
(in thousands) |
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
||||||
Rental and other property revenues, before utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Same Store |
$ |
307,151 |
|
|
$ |
347,148 |
|
|
$ |
(39,997 |
) |
|
|
(11.5 |
%) |
|
$ |
(12,870 |
) |
|
|
(4.0 |
%) |
Other Real Estate |
|
4,106 |
|
|
|
3,230 |
|
|
|
876 |
|
|
|
27.1 |
% |
|
|
876 |
|
|
|
27.1 |
% |
Total |
|
311,257 |
|
|
|
350,378 |
|
|
|
(39,121 |
) |
|
|
(11.2 |
%) |
|
|
(11,994 |
) |
|
|
(3.7 |
%) |
Property operating expenses, net of utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Same Store |
|
89,082 |
|
|
|
92,383 |
|
|
|
(3,301 |
) |
|
|
(3.6 |
%) |
|
|
3,413 |
|
|
|
4.0 |
% |
Other Real Estate |
|
2,570 |
|
|
|
2,301 |
|
|
|
269 |
|
|
|
11.7 |
% |
|
|
269 |
|
|
|
11.7 |
% |
Total |
|
91,652 |
|
|
|
94,684 |
|
|
|
(3,032 |
) |
|
|
(3.2 |
%) |
|
|
3,682 |
|
|
|
4.2 |
% |
Proportionate property net operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Same Store |
|
218,069 |
|
|
|
254,765 |
|
|
|
(36,696 |
) |
|
|
(14.4 |
%) |
|
|
(16,283 |
) |
|
|
(6.9 |
%) |
Other Real Estate |
|
1,536 |
|
|
|
929 |
|
|
|
607 |
|
|
|
65.3 |
% |
|
|
607 |
|
|
|
65.3 |
% |
Total |
$ |
219,605 |
|
|
$ |
255,694 |
|
|
$ |
(36,089 |
) |
|
|
(14.1 |
%) |
|
$ |
(15,676 |
) |
|
|
(6.7 |
%) |
For the six months ended June 30, 2021, compared to 2020, after giving effect to the sale of partial interest in certain Same Store communities in the California joint venture, our Same Store proportionate property NOI decreased by $16.3 million, or 6.9%. This decrease was attributable primarily to a $12.9 million, or 4.0%, decrease in rental and other property revenues due to a 210 basis point decrease in residential rental rates, a 110 basis point increase in bad debt, and a 60 basis point decrease in ADO.
The decrease in proportionate property NOI was also attributable to an increase of $3.4 million, or 4.0%, in Same Store property operating expenses. Controllable operating expenses were up $0.7 million, or 1.8%, compared to the six months ended June 30, 2020, while real estate taxes and insurance costs increased by $1.7 million and $0.9 million, respectively.
Other Real Estate proportionate property NOI for the six months ended June 30, 2021, compared to 2020, increased by $0.6 million.
Non-Segment Real Estate Operations
Operating income amounts not attributed to our segments include revenues and offsite costs associated with property management, casualty losses, write-off of straight-line rent receivables, and the results of apartment communities sold or held for sale, reported in consolidated amounts, which we do not allocate to our segments for purposes of evaluating segment performance.
34
For the three months ended June 30, 2021, compared to 2020, non-segment real estate operations were relatively flat.
For the six months ended June 30, 2021, compared to 2020, non-segment real estate operations increased by $5.9 million, or 31.0%, due primarily to:
Depreciation and Amortization
For the three and six months ended June 30, 2021, compared to 2020, depreciation and amortization expense was relatively flat.
General and Administrative Expenses
For the three and six months ended June 30, 2021, compared to 2020, general and administrative expenses decreased by $2.3 million, or 31.0%, and $5.4 million, or 36.0%, respectively, due primarily to lower personnel costs and structural changes made to reflect AIR’s more focused business model.
Other expenses, net
Other expenses, net, includes costs associated with our risk management activities, partnership administration expenses, and certain non-recurring items. For the three months ended June 30, 2021, compared to 2020, other expenses, net decreased $1.6 million, or 39.5%, due primarily to unrealized losses on an interest rate derivative recognized in the prior year.
For the six months ended June 30, 2021 compared to 2020, other expenses, net was relatively flat.
Interest Income
For the three and six months ended June 30, 2021, compared to 2020, interest income increased by $13.4 million and $25.4 million, respectively. Interest income for the three and six months ended June 30, 2021 includes $6.9 million and $13.9 million, respectively, of income associated from our notes receivable from Aimco, and $6.5 million and $12.9 million, respectively, of interest income associated with the four properties and one land parcel leased to Aimco.
Interest Expense
For the three months ended June 30, 2021, compared to 2020, interest expense increased by $26.6 million, or 60.1%, due primarily to $37.2 million of prepayment penalties incurred from the early payment of property debt and the write-off of deferred financing costs associated with our previous revolving credit facility and a decrease in capitalized interest related to redevelopment and development communities, offset partially by lower interest expense on property-level debt following refinancing and debt payoff activity.
For the six months ended June 30, 2021, compared to 2020, interest expense increased by $26.8 million, or 33.1%, due primarily to $38.2 million of prepayment penalties incurred from the early payment of property debt and the write-off of deferred financing costs associated with our previous revolving credit facility, a decrease in capitalized interest related to redevelopment and development communities and an increase in expense related to our term loans, offset partially by lower interest expense on property-level debt following refinancing and debt payoff activity.
Through June 30, 2021, we had repaid $535.0 million of property debt with a weighted-average interest rate of 4.25%.
Gain on Derecognition of Leased Properties and Dispositions of Real Estate
During the three and six months ended June 30, 2021, we recognized $3.4 million and $87.1 million, respectively, of gain associated with the derecognition of the net book value of the five properties leased to Aimco for redevelopment and development.
35
Mezzanine Investment Income, Net
In connection with the Separation, Aimco was allocated economic ownership of the mezzanine loan investment and option to acquire a 30% equity interest in the partnership. Subsequent to the Separation, all risks and rewards of ownership are Aimco’s, but legal transfer is not complete. During the three and six months ended June 30, 2020, we recognized $6.9 million and $13.7 million, respectively, of income in connection with the mezzanine loan. For the three and six months ended June 30, 2021, the mezzanine investment income was offset by an expense to recognize the requirement that this income be contributed to Aimco.
Income Tax (Expense) Benefit
Certain of our operations, including property management, are conducted through taxable REIT subsidiaries (“TRS entities”).
Our income tax (expense) benefit calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities for which the tax consequences have been realized or will be realized in future periods. Income taxes related to these items, as well as changes in valuation allowance, are included in income tax (expense) benefit in our condensed consolidated statements of operations.
For the three months ended June 30, 2021, compared to 2020, we recognized income tax benefit of $2.0 million, compared to $0.8 million during the same period in 2020.
For the six months ended June 30, 2021, we recognized income tax expense of $1.0 million, compared to an income tax benefit of $2.1 million during the same period in 2020.
Income from Discontinued Operations, net
For the three and six months ended June 30, 2020, apartment communities that were included in discontinued operations generated net income of $3.1 million and $7.2 million, respectively.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions. We believe that the critical accounting policies that involve our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements relate to capitalized costs and the impairment of long-lived assets.
Our critical accounting policies are described in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020.
In addition to the Critical Accounting Policies and Estimates described in the Annual Report on Form 10-K, we believe the sales-type lease arrangements entered into in 2021 require significant judgment.
We have entered into leases of existing properties and a land parcel with Aimco for redevelopment and development, which are generally accounted for as sales-type leases in accordance with ASC 842. The terms of such leases range from 10 to 25 years. We are required to estimate the fair value of the leased property for the purposes of lease classification and, for sales-type leases, the rate implicit in the lease. We estimate the fair value of our properties using various estimates and assumptions, the most significant being the capitalization rate. As of June 30, 2021, we have assets recorded reflecting our net investment in such leased properties totaling $479 million. Our net investment includes the present value of lease payments not yet received, the present value of the guaranteed amount of the underlying asset’s residual value at the end of the lease term, and the present value of the unguaranteed amount of the underlying asset’s residual value at the end of the lease term. The present value is determined based on the rate implicit in the lease. The residual value is based on the current estimated fair value of the leased property, adjusted for annual depreciation and cost of inflation. Over the respective lease term, we expect our net investment to be recovered as lease payments are made by Aimco.
Other than stated above, there have been no other significant changes in our critical accounting policies from those reported in our Form 10-K and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented.
Non-GAAP Measures
Certain key financial indicators we use in managing our business and in evaluating our financial condition and operating performance are non-GAAP measures. Key non-GAAP measures we use are defined and described below, and for those non-GAAP measures used
36
or disclosed within this quarterly report, we provide reconciliations of the non-GAAP measures to the most comparable financial measure computed in accordance with GAAP.
NAREIT Funds From Operations and Pro forma Funds From Operations
NAREIT FFO is a non-GAAP measure that we believe, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate assets generally appreciate over time or maintain residual value to a much greater extent than do other depreciable assets such as machinery, computers, or other personal property. NAREIT defines FFO as net income (loss) computed in accordance with GAAP, excluding: (i) depreciation and amortization related to real estate; (ii) gains and losses from sales and impairment of depreciable assets and land used in our primary business; and (iii) income taxes directly associated with a gain or loss on the sale of real estate, and including (iv) our share of the FFO of unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine NAREIT FFO. We calculate NAREIT FFO attributable to AIR common stockholders (diluted) by subtracting dividends on preferred stock and preferred units and amounts allocated from NAREIT FFO to participating securities.
In addition to NAREIT FFO, we use Pro forma FFO to measure short-term performance. Pro forma FFO represents NAREIT FFO as defined above, excluding the results of operations of properties retained by Aimco in the Separation and certain amounts that are unique or occur infrequently.
In computing Pro forma FFO, we made the following adjustments to NAREIT FFO:
NAREIT FFO and Pro forma FFO should not be considered alternatives to net income determined in accordance with GAAP, as indications of our performance. Although we use these non-GAAP measures for comparability in assessing our performance compared to other REITs, not all REITs compute these same measures and those who do may not compute them in the same manner. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other REITs.
37
NAREIT FFO and Pro forma FFO are calculated as follows (in thousands, except per share data):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||
|
|
2021 |
|
|
2021 |
|
||
Net income (loss) attributable to AIR common stockholders |
|
$ |
(18,030 |
) |
|
$ |
65,166 |
|
Adjustments: |
|
|
|
|
|
|
||
Real estate depreciation and amortization, net of noncontrolling partners’ interest |
|
|
69,588 |
|
|
|
139,083 |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
|
(3,353 |
) |
|
|
(87,385 |
) |
Income tax adjustments related to gain on dispositions and other tax-related items |
|
|
(1,528 |
) |
|
|
272 |
|
Common noncontrolling interests in AIR OP’s share of above Adjustments |
|
|
(3,217 |
) |
|
|
(2,573 |
) |
Amounts allocable to participating securities |
|
|
(7 |
) |
|
|
— |
|
NAREIT FFO attributable to AIR common stockholders |
|
$ |
43,453 |
|
|
$ |
114,563 |
|
Adjustments, all net of common noncontrolling interests in AIR Operating Partnership and participating securities: |
|
|
|
|
|
|
||
Separation costs |
|
|
285 |
|
|
|
2,342 |
|
Prepayment penalties |
|
|
36,047 |
|
|
|
36,990 |
|
Non-cash straight-line rent |
|
|
635 |
|
|
|
1,270 |
|
Incremental cash received from leased properties |
|
|
140 |
|
|
|
294 |
|
Pro forma FFO |
|
$ |
80,560 |
|
|
$ |
155,459 |
|
|
|
|
|
|
|
|
||
Weighted-average common shares outstanding – basic |
|
|
154,608 |
|
|
|
151,609 |
|
Dilutive common share equivalents |
|
|
504 |
|
|
|
474 |
|
Pro forma shares and dilutive share equivalents used to calculate Pro forma FFO per share |
|
|
155,112 |
|
|
|
152,083 |
|
|
|
|
|
|
|
|
||
Net income (loss) attributable to AIR per common share – basic and diluted |
|
$ |
(0.12 |
) |
|
$ |
0.43 |
|
NAREIT FFO per share – diluted |
|
$ |
0.28 |
|
|
$ |
0.75 |
|
Pro forma FFO per share – diluted |
|
$ |
0.52 |
|
|
$ |
1.02 |
|
Please see the Results of Operations section for discussion of the factors affecting our Pro forma FFO for 2021.
The AIR Operating Partnership does not separately compute or report NAREIT FFO or Pro forma FFO. However, based on AIR’s method for allocation of such amounts to noncontrolling interests in the AIR Operating Partnership, as well as limited differences between the amounts of net income attributable to AIR’s common stockholders and the AIR Operating Partnership’s unitholders during the periods presented, NAREIT FFO and Pro forma FFO amounts on a per unit basis for the AIR Operating Partnership would be expected to be substantially the same as the corresponding per share amounts for AIR.
Leverage Ratios
As discussed under the Balance Sheet heading, we target Net Leverage to Adjusted EBITDAre below 6.0x. We also focus on Proportionate Debt to Adjusted EBITDAre. We believe these ratios, which are based in part on non-GAAP financial information, are commonly used by investors and analysts to assess the relative financial risk associated with balance sheets of companies within the same industry, and they are believed to be similar to measures used by rating agencies to assess entity credit quality.
Proportionate Debt, as used in our leverage ratios, is a non-GAAP measure and includes our share of the long-term, non-recourse property debt, outstanding borrowings under our revolving credit facility, and our term loans. Proportionate Debt excludes unamortized debt issuance costs because these amounts represent cash expended in earlier periods and do not reduce our contractual obligations. We reduce our recorded debt by the amounts of cash and restricted cash on-hand (which are primarily restricted under the terms of our property debt agreements), excluding tenant security deposits included in restricted cash, assuming the remaining amounts of cash and restricted cash would be used to reduce our outstanding leverage. We further reduce our recorded debt by our notes receivable from Aimco, the proceeds from which we expect will be used to pay down property debt.
We believe Proportionate Debt is useful to investors as it is a measure of our net exposure to debt obligations. Proportionate Debt, as used in our leverage ratios, is calculated as set forth in the table below.
Preferred equity represents the redemption amounts for AIR’s Preferred Stock and the AIR Operating Partnership’s Preferred Partnership Units and, although perpetual in nature, are another component of our overall leverage.
38
The reconciliation of total indebtedness to Proportionate Debt and Preferred Equity, as used in our leverage ratios, is as follows (in thousands):
|
|
June 30, 2021 |
|
|
Total indebtedness |
|
$ |
4,208,661 |
|
Adjustments: |
|
|
|
|
Debt issuance costs related to non-recourse property debt and term loans |
|
|
18,115 |
|
Proportionate share adjustments related to debt obligations |
|
|
(478,232 |
) |
Cash and restricted cash |
|
|
(80,701 |
) |
Tenant security deposits included in restricted cash |
|
|
9,823 |
|
Proportionate share adjustments related to cash and restricted cash |
|
|
4,305 |
|
Notes receivable from Aimco |
|
|
(534,127 |
) |
Proportionate Debt |
|
$ |
3,147,844 |
|
Perpetual preferred stock |
|
|
2,000 |
|
Preferred noncontrolling interests in AIR Operating Partnership |
|
|
79,375 |
|
Net Leverage |
|
$ |
3,229,219 |
|
We calculated Adjusted EBITDAre used in our leverage ratios based on annualized current quarter amounts. EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are useful to investors, creditors and rating agencies as a supplemental measure of our ability to incur and service debt because they are recognized measures of performance by the real estate industry and facilitate comparison of credit strength between AIR and other companies. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income as determined in accordance with GAAP as indicators of liquidity. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts. NAREIT defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, which we have further adjusted for:
EBITDAre is defined by NAREIT and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted to exclude the effect of the following items for the reasons set forth below:
39
The reconciliation of net income to EBITDAre and Adjusted EBITDAre, as used in our leverage ratios, is as follows (in thousands):
|
|
Three Months Ended |
|
|
|
|
June 30, 2021 |
|
|
Net loss |
|
$ |
(19,687 |
) |
Adjustments: |
|
|
|
|
Interest expense |
|
|
70,807 |
|
Income tax benefit |
|
|
(2,035 |
) |
Depreciation and amortization |
|
|
75,791 |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
|
(3,353 |
) |
EBITDAre |
|
$ |
121,523 |
|
Net loss from continuing operations attributable to noncontrolling interests in consolidated real estate partnerships |
|
|
2,397 |
|
EBITDAre adjustments attributable to noncontrolling interests |
|
|
(9,200 |
) |
Interest income on securitization investment and notes receivable from Aimco |
|
|
(9,215 |
) |
Pro forma FFO adjustments, net (1) |
|
|
4,822 |
|
Adjusted EBITDAre |
|
$ |
110,327 |
|
Annualized Adjusted EBITDAre |
|
$ |
441,308 |
|
Liquidity and Capital Resources
Liquidity
Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flows from operations. Additional sources are proceeds from dispositions of apartment communities, proceeds from refinancing existing property debt, borrowings under new property debt, borrowings under our $1.4 billion credit facility, proceeds from our notes receivable from Aimco, and proceeds from equity offerings.
As of June 30, 2021, our available liquidity was $319.8 million, which consisted of:
Pro forma for the closing of the July term loan, our liquidity increased to $669.8 million.
Additional liquidity may also be provided through property debt financing at properties unencumbered by debt and proceeds from our notes receivable from Aimco. As of June 30, 2021, we held unencumbered communities with property debt with an estimated fair market value of approximately $4.2 billion, an increase of 50% from December 31, 2020.
Uses for liquidity include normal operating activities, payments of principal and interest on outstanding property debt, capital expenditures, dividends paid to stockholders, distributions paid to noncontrolling interest partners, and acquisitions of apartment communities. 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 meet our short-term liquidity needs, we have additional means, such as short-term borrowing availability and proceeds from apartment community sales and refinancings. We may use our revolving credit facility for working capital and other short-term purposes, such as funding investments on an interim basis. We expect to meet our long-term liquidity requirements, including apartment community acquisitions, through primarily non-recourse, long-term borrowings, the issuance of equity securities (including OP Units), the sale of apartment communities, and cash generated from operations. Additionally, we expect to meet our liquidity requirements associated with our debt maturities.
40
Leverage and Capital Resources
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 and financing is readily available. Any adverse changes in the lending environment could negatively affect our liquidity. We believe we have mitigated much of this exposure by reducing our short and intermediate-term maturity risk through refinancing such loans with long-dated debt. However, if financing options become unavailable for our future debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending or proceeds from apartment community dispositions.
Historically, our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt. As of June 30, 2021, approximately 67.9% of our total leverage consisted of property-level, non-recourse, long-dated, amortizing debt. As of June 30, 2021, approximately 99.4% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates, and inflation. The weighted-average remaining term to maturity of our property-level debt was 8.9 years. On average, 1.7% of our unpaid principal balances will mature each year from 2021 through 2023.
The following table summarizes the payments due under our debt commitments, excluding debt issuance costs, as of June 30, 2021 (in thousands):
|
|
Total |
|
|
Remaining 2021 |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
More than Five |
|
|||||
Non-recourse property debt (1) |
|
$ |
3,079,576 |
|
|
$ |
26,576 |
|
|
$ |
269,697 |
|
|
$ |
464,957 |
|
|
$ |
2,318,346 |
|
Revolving credit facility borrowings (2) |
|
|
347,200 |
|
|
|
— |
|
|
|
— |
|
|
|
347,200 |
|
|
|
— |
|
Term loans (3) |
|
|
800,000 |
|
|
|
— |
|
|
|
— |
|
|
|
600,000 |
|
|
|
200,000 |
|
Total |
|
$ |
4,226,776 |
|
|
$ |
26,576 |
|
|
$ |
269,697 |
|
|
$ |
1,412,157 |
|
|
$ |
2,518,346 |
|
As of June 30, 2021, our preferred equity, which includes outstanding preferred OP Units and outstanding perpetual preferred stock, represented approximately 2.1% of our total leverage. Preferred OP Units are redeemable at the holder’s option and our preferred stock is redeemable by AIR on or after December 15, 2025. For illustrative purposes, we compute the weighted-average maturity of our preferred OP Units assuming a 10-year maturity and our preferred stock assuming it is called at the expiration of the no-call period.
The combination of non-recourse property-level debt, borrowings under our revolving credit facility, our term loans, our preferred OP Units, and our redeemable noncontrolling interests in a consolidated real estate partnership comprise our total leverage. The weighted-average remaining term to maturity for our total leverage was 7.6 years as of June 30, 2021.
Under our revolving credit facility we have agreed to maintain certain financial covenants, as well as other covenants customary for similar credit arrangements. The financial covenants we are required to maintain include a Maximum Leverage ratio of no greater than 0.60 to 1.00; a Fixed Charge Coverage Ratio of greater than 1.5x, a Maximum Secured Indebtedness to Total Assets ratio of no greater than 0.45 to 1.00 through March 31, 2023, and 0.40 to 1.00 thereafter, and a Maximum Unsecured Leverage ratio no greater than 0.60 to 1.00. We were in compliance with these covenants as of June 30, 2021 and expect to remain in compliance during the next 12 months.
We like the discipline of financing a portion of our real estate investments through the use of fixed-rate, amortizing, non-recourse property debt, as the amortization gradually reduces our leverage and reduces our refunding risk, and the fixed-rate provides a hedge against increases in interest rates, and the non-recourse feature avoids entity risk.
Changes in Cash, Cash Equivalents, and Restricted Cash
The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash due to operating, investing and financing activities, which are presented in our condensed consolidated statements of cash flows in Item 1 of this report.
Operating Activities
For the six months ended June 30, 2021, net cash provided by operating activities was $93.8 million. Our operating cash flow is affected primarily by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment communities. Cash provided by operating activities for the six months ended June 30, 2021, decreased by $90.6 million compared to the same period in 2020. The decrease was due primarily to lower contribution from our apartment communities, which were negatively impacted by lower residential rental rates and increased bad debt expense, offset partially by higher ADO, increased late fees and a recovery in commercial rents.
41
Investing Activities
For the six months ended June 30, 2021, our net cash used in investing activities of $199.5 million consisted primarily of purchases of real estate and capital expenditures, offset partially by the maturation of debt investments.
Capital additions totaled $61.6 million and $167.7 million during the six months ended June 30, 2021 and 2020, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.
We categorize capital spending for communities in our portfolio broadly into four primary categories:
We exclude the amounts of capital spending related to apartment communities sold or classified as held for sale at the end of the period from the foregoing measures. We have also excluded from these measures indirect capitalized costs, which are not yet allocated to communities with capital additions, and their related capital spending categories.
A summary of the capital spending for these categories, along with a reconciliation of the total for these categories to the capital expenditures reported in the accompanying condensed consolidated statements of cash flows, are presented below (in thousands):
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Capital replacements |
|
$ |
15,645 |
|
|
$ |
15,203 |
|
Capital improvements |
|
|
3,904 |
|
|
|
3,717 |
|
Capital enhancements |
|
|
37,641 |
|
|
|
13,661 |
|
Other capital expenditures |
|
|
4,457 |
|
|
|
135,091 |
|
Total capital additions |
|
$ |
61,647 |
|
|
$ |
167,672 |
|
Plus: additions related to apartment communities sold |
|
|
— |
|
|
|
1,631 |
|
Consolidated capital additions |
|
$ |
61,647 |
|
|
$ |
169,303 |
|
Plus: net change in accrued capital spending from continuing operations |
|
|
14,822 |
|
|
|
2,324 |
|
Total capital expenditures from continuing operations per |
|
$ |
76,469 |
|
|
$ |
171,627 |
|
For the six months ended June 30, 2021 and 2020, we capitalized $1.1 million and $3.7 million of interest costs, respectively, and $7.9 million and $9.3 million of other direct and indirect costs, respectively.
Other capital expenditures decreased by $130.6 million for the six months ended June 30, 2021, compared to 2020, due primarily to increased spend incurred in 2020 related to the redevelopment and development of properties that have subsequently been leased to Aimco effective January 1, 2021.
Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2021 decreased by $127.6 million compared to 2020. The change was due primarily to proceeds from the April closing of the credit facility and the issuance of Common Stock in a private
42
placement for $342.2 million, net of fees, offset partially higher principal repayments on non-recourse debt and the repayment of our previous term loan.
Equity and Partners’ Capital Transactions
The following table presents the AIR Operating Partnership’s distribution activity (including distributions paid to AIR) during the six months ended June 30, 2021 (in thousands):
Cash distributions paid by the AIR Operating Partnership to common unitholders (1) |
|
$ |
138,912 |
|
Cash distributions paid by the AIR Operating Partnership to preferred unitholders |
|
|
3,300 |
|
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships |
|
|
4,836 |
|
Total cash distributions paid by the AIR Operating Partnership |
|
$ |
147,048 |
|
The following table presents AIR’s dividend and distribution activity during the six months ended June 30, 2021 (in thousands):
Cash dividends paid by AIR to common stockholders |
|
$ |
131,654 |
|
Cash distributions paid to AIR preferred stockholders |
|
|
93 |
|
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships |
|
|
4,836 |
|
Cash distributions paid to holders of OP Units |
|
|
10,465 |
|
Total cash dividends and distributions paid by AIR |
|
$ |
147,048 |
|
Future Capital Needs
We expect to fund any future acquisitions and other capital spending principally with proceeds from apartment community sales, short-term borrowings, debt and equity financing, and operating cash flows. We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for 2021 and beyond.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2021, on a consolidated basis, we had approximately $14.5 million of variable-rate property-level debt outstanding in addition to our $800.0 million term loans and $347.2 million of variable-rate borrowings under our revolving credit facility. We estimate that a change in 30-day LIBOR of 100 basis points with constant credit risk spreads would reduce or increase interest expense by approximately $3.6 million and $11.6 million, respectively, on an annual basis.
As of June 30, 2021, we had approximately $80.7 million of cash and cash equivalents and restricted cash, a portion of which bears interest at variable rates, which may offset somewhat a change in rates on our variable-rate debt discussed above.
ITEM 4. CONTROLS AND PROCEDURES
AIR
Disclosure Controls and Procedures
AIR’s management, with the participation of AIR’s chief executive officer and chief financial officer, has evaluated the effectiveness of AIR’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, AIR’s chief executive officer and chief financial officer have concluded that, as of the end of such period, AIR’s disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There has been no change in AIR’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the second quarter of 2021 that has materially affected, or is reasonably likely to materially affect, AIR’s internal control over financial reporting.
43
The AIR Operating Partnership
Disclosure Controls and Procedures
The AIR Operating Partnership’s management, with the participation of the chief executive officer and chief financial officer of AIR, who are the equivalent of the AIR Operating Partnership’s chief executive officer and chief financial officer, respectively, has evaluated the effectiveness of the AIR Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange) as of the end of the period covered by this report. Based on such evaluation, the chief executive officer and chief financial officer of AIR have concluded that, as of the end of such period, the AIR Operating Partnership’s disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There has been no change in the AIR Operating Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the second quarter of 2021 that has materially affected, or is reasonably likely to materially affect, the AIR Operating Partnership’s internal control over financial reporting.
44
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
As of the date of this report, there have been no material changes from the risk factors in AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
AIR
Unregistered Sales of Equity Securities
From time to time, we may issue shares of Common Stock in exchange for OP Units, defined under The AIR Operating Partnership heading below. Such shares are issued based on an exchange ratio of one share for each common OP Unit. We may also issue shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended June 30, 2021, we issued 43,363 shares of Common Stock in exchange for OP Units or limited partnership interests in consolidated real estate partnerships.
On April 23, 2021, we issued and sold 7.825 million shares of our Class A Common Stock for $43.77 per share in a private placement for a cash purchase price of $342.2 million, net of fees. These shares were issued in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
The AIR Operating Partnership
Unregistered Sales of Equity Securities
The AIR Operating Partnership did not issue any unregistered OP Units during the three months ended June 30, 2021.
Repurchases of Equity Securities
The AIR Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one year, limited partners other than AIR have the right to redeem their common OP Units for cash or, at our election, shares of AIR Common Stock on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended June 30, 2021, approximately 43,363 common OP Units were redeemed in exchange for Common Stock.
On April 23, 2021, the AIR Operating Partnership issued an aggregate of 7.825 million shares of OP Units to AIR.
The following table summarizes the AIR Operating Partnership’s repurchases, or redemptions in exchange for cash, of common OP Units.
Fiscal period |
|
Total Number |
|
|
Average |
|
|
Total Number of Units |
|
Maximum Number of |
||
April 1, 2021 ‒ April 30, 2021 |
|
|
2,669 |
|
|
$ |
43.66 |
|
|
N/A |
|
N/A |
May 1, 2021 ‒ May 31, 2021 |
|
|
3,821 |
|
|
$ |
44.81 |
|
|
N/A |
|
N/A |
June 1, 2021 ‒ June 30, 2021 |
|
|
2,272 |
|
|
$ |
45.64 |
|
|
N/A |
|
N/A |
Total |
|
|
8,762 |
|
|
$ |
44.68 |
|
|
|
|
|
Dividend and Distribution Payments
As a REIT, AIR is required to distribute annually to holders of its Common Stock at least 90% of its “real estate investment trust taxable income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income. Our credit agreement includes customary covenants, including a restriction on dividends and distributions and other restricted payments, but permits dividends and distributions during any four consecutive fiscal quarters in an aggregate amount of up to 95% of AIR’s FFO for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain AIR’s REIT status.
45
ITEM 6. EXHIBITS
The following exhibits are filed with this report:
EXHIBIT NO. |
|
DESCRIPTION |
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101 |
|
The following materials from AIR’s and the AIR Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of comprehensive income (loss); (iv) condensed consolidated statements of equity and partners’ capital; (v) condensed consolidated statements of cash flows; and (vi) notes to condensed consolidated financial statements. |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
46
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
APARTMENT INCOME REIT CORP. |
|
|
|
|
|
By: |
/s/ Paul Beldin |
|
|
Paul Beldin |
|
|
Executive Vice President and Chief Financial Officer |
|
|
(duly authorized officer and principal financial officer) |
|
|
|
|
APARTMENT INCOME REIT, L.P. |
|
|
|
|
|
By: |
AIR-GP, Inc., its General Partner |
|
|
|
|
By: |
/s/ Paul Beldin |
|
|
Paul Beldin |
|
|
Executive Vice President and Chief Financial Officer |
|
|
(duly authorized officer and principal financial officer) |
|
|
|
Date: August 5, 2021
47
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Terry Considine, certify that:
Date: August 5, 2021
|
/s/ Terry Considine |
|
Terry Considine |
|
Director and Chief Executive Officer |
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Paul Beldin, certify that:
Date: August 5, 2021
|
/s/ Paul Beldin |
|
Paul Beldin |
|
Executive Vice President and Chief |
|
Financial Officer |
Exhibit 31.3
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Terry Considine, certify that:
Date: August 5, 2021
|
/s/ Terry Considine |
|
Terry Considine |
|
Director and Chief Executive Officer |
Exhibit 31.4
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Paul Beldin, certify that:
Date: August 5, 2021
|
/s/ Paul Beldin |
|
Paul Beldin |
|
Executive Vice President and Chief Financial Officer |
Exhibit 32.1
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 Apartment Income REIT Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I 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 Company.
/s/ Terry Considine |
|
Terry Considine |
|
Director and Chief Executive Officer |
|
August 5, 2021 |
|
/s/ Paul Beldin |
|
Paul Beldin |
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Executive Vice President and Chief Financial Officer |
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August 5, 2021 |
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Exhibit 32.2
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 Apartment Income REIT, L.P. (the “Partnership”) on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I 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 |
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Terry Considine |
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Director and Chief Executive Officer |
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August 5, 2021 |
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/s/ Paul Beldin |
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Paul Beldin |
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Executive Vice President and Chief Financial Officer |
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August 5, 2021 |
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Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - $ / shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
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Statement Of Financial Position [Abstract] | ||
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized (in shares) | 1,021,175,000 | 1,021,175,000 |
Common Stock, shares issued (in shares) | 156,856,952 | 148,861,036 |
Common Stock, shares outstanding (in shares) | 156,856,952 | 148,861,036 |
Condensed Consolidated Statements of Comprehensive Income (Loss)(Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
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Net income (loss) | $ (19,687) | $ 43,204 | $ 69,428 | $ 52,181 |
Unrealized losses on available for sale debt securities | (1,180) | (355) | (3,251) | (415) |
Comprehensive income (loss) | (20,867) | 42,849 | 66,177 | 51,766 |
Comprehensive (income) loss attributable to noncontrolling interests | 1,819 | (3,926) | (3,854) | (6,177) |
Comprehensive income (loss) attributable to AIR | (19,048) | 38,923 | 62,323 | 45,589 |
Apartment Income REIT, L.P [Member] | ||||
Net income (loss) | (19,687) | 43,204 | 69,428 | 52,181 |
Unrealized losses on available for sale debt securities | (1,180) | (355) | (3,251) | (415) |
Comprehensive income (loss) | (20,867) | 42,849 | 66,177 | 51,766 |
Comprehensive (income) loss attributable to noncontrolling interests | 2,397 | 17 | 2,632 | (1) |
Comprehensive income (loss) attributable to AIR | $ (18,470) | $ 42,866 | $ 68,809 | $ 51,765 |
Condensed Consolidated Statements of Partners' Capital - USD ($) $ in Thousands |
Total |
Apartment Income REIT, L.P [Member] |
Apartment Income REIT, L.P [Member]
Cumulative Effect, Period of Adoption, Adjustment
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Apartment Income REIT, L.P [Member]
Preferred Units [Member]
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Apartment Income REIT, L.P [Member]
General Partner and Special Limited Partner [Member]
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Apartment Income REIT, L.P [Member]
General Partner and Special Limited Partner [Member]
Cumulative Effect, Period of Adoption, Adjustment
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Apartment Income REIT, L.P [Member]
Limited Partners [Member]
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Apartment Income REIT, L.P [Member]
Partners Capital Attributable To The Partnership [Member]
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Apartment Income REIT, L.P [Member]
Partners Capital Attributable To The Partnership [Member]
Cumulative Effect, Period of Adoption, Adjustment
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Apartment Income REIT, L.P [Member]
Noncontrolling Interest in Consolidated Real Estate Partnerships
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Balances at Dec. 31, 2019 | $ 1,860,795 | $ (277) | $ 1,780,649 | $ (277) | $ 83,442 | $ 1,864,091 | $ (277) | $ (3,296) | ||
Increase (Decrease) in Partners' Capital [Roll Forward] | ||||||||||
Repurchases of common partnership units | (10,004) | (10,004) | (10,004) | |||||||
Redemption of AIR Operating Partnership units | $ 1,255 | |||||||||
Redemption of common partnership units | (1,255) | 5,137 | (6,392) | (1,255) | ||||||
Amortization of share-based compensation cost | 5,111 | 3,009 | 2,102 | 5,111 | ||||||
Effect of changes in ownership of consolidated entities | (4,348) | 4,312 | (36) | 36 | ||||||
Change in accumulated other comprehensive income (loss) | (415) | (415) | (388) | (27) | (415) | |||||
Net income (loss) | 48,677 | 48,677 | 45,977 | 2,475 | 48,452 | 225 | ||||
Distributions to common unitholders | (128,357) | (121,859) | (6,498) | (128,357) | ||||||
Distributions to noncontrolling interests | (6,606) | (108) | (108) | |||||||
Other, net | 69 | 116 | 116 | (47) | ||||||
Balances at Jun. 30, 2020 | 1,774,236 | 1,698,012 | 79,414 | 1,777,426 | (3,190) | |||||
Balances at Mar. 31, 2020 | 1,795,548 | 1,717,455 | 81,502 | 1,798,957 | (3,409) | |||||
Increase (Decrease) in Partners' Capital [Roll Forward] | ||||||||||
Redemption of AIR Operating Partnership units | (286) | (286) | 5,137 | (5,423) | (286) | |||||
Amortization of share-based compensation cost | 2,131 | 1,080 | 1,051 | 2,131 | ||||||
Effect of changes in ownership of consolidated entities | (3,579) | 3,543 | (36) | 36 | ||||||
Change in accumulated other comprehensive income (loss) | (355) | (355) | (332) | (23) | (355) | |||||
Net income (loss) | 41,469 | 41,469 | 39,255 | 2,107 | 41,362 | 107 | ||||
Distributions to common unitholders | (64,377) | (61,034) | (3,343) | (64,377) | ||||||
Distributions to noncontrolling interests | (3,378) | (35) | (35) | |||||||
Other, net | 141 | 30 | 30 | 111 | ||||||
Balances at Jun. 30, 2020 | 1,774,236 | 1,698,012 | 79,414 | 1,777,426 | (3,190) | |||||
Balances at Dec. 31, 2020 | 1,308,093 | $ 2,000 | 1,304,851 | 63,185 | 1,370,036 | (61,943) | ||||
Increase (Decrease) in Partners' Capital [Roll Forward] | ||||||||||
Issuance of common partnership units to AIR | 342,163 | 342,163 | 342,163 | |||||||
Redemption of AIR Operating Partnership units | (3,552) | (3,552) | 1,957 | (5,509) | (3,552) | |||||
Amortization of share-based compensation cost | 4,527 | 2,544 | 1,983 | 4,527 | ||||||
Effect of changes in ownership of consolidated entities | (4,423) | 4,423 | ||||||||
Contribution from noncontrolling interest in consolidated real estate partnerships | 1,998 | 1,998 | 1,998 | |||||||
Change in accumulated other comprehensive income (loss) | (3,251) | (3,251) | (3,039) | (212) | (3,251) | |||||
Net income (loss) | 66,221 | 66,221 | 65,362 | 3,491 | 68,853 | (2,632) | ||||
Distributions to common unitholders | (138,479) | (131,276) | (7,203) | (138,479) | ||||||
Distributions paid to preferred unitholders | (93) | (93) | 0 | (93) | ||||||
Distributions to noncontrolling interests | (12,037) | (4,834) | (4,834) | |||||||
Other, net | (1,037) | (1,147) | 230 | (917) | (120) | |||||
Balances at Jun. 30, 2021 | 1,571,756 | 2,000 | 1,576,899 | 60,388 | 1,639,287 | (67,531) | ||||
Balances at Mar. 31, 2021 | 1,322,096 | 2,000 | 1,320,903 | 63,812 | 1,386,715 | (64,619) | ||||
Increase (Decrease) in Partners' Capital [Roll Forward] | ||||||||||
Issuance of common partnership units to AIR | 342,163 | 342,163 | 342,163 | |||||||
Redemption of AIR Operating Partnership units | (329) | (329) | 1,957 | (2,286) | (329) | |||||
Amortization of share-based compensation cost | 1,889 | 629 | 1,260 | 1,889 | ||||||
Effect of changes in ownership of consolidated entities | 0 | (1,833) | 1,833 | 0 | ||||||
Contribution from noncontrolling interest in consolidated real estate partnerships | 1,998 | 1,998 | 1,998 | |||||||
Change in accumulated other comprehensive income (loss) | (1,180) | (1,180) | (1,100) | (80) | (1,180) | |||||
Net income (loss) | 21,290 | (21,290) | (17,948) | (945) | (18,893) | (2,397) | ||||
Distributions to common unitholders | (70,854) | (67,418) | (3,436) | (70,854) | ||||||
Distributions paid to preferred unitholders | (43) | (43) | (43) | |||||||
Distributions to noncontrolling interests | $ (6,868) | (3,432) | (3,432) | |||||||
Other, net | 738 | (411) | (181) | 919 | ||||||
Balances at Jun. 30, 2021 | $ 1,571,756 | $ 2,000 | $ 1,576,899 | $ 60,388 | $ 1,639,287 | $ (67,531) |
Basis of Presentation and Organization |
6 Months Ended |
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Jun. 30, 2021 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Basis of Presentation and Organization | Note 1 — Basis of Presentation and Organization Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of Apartment Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating Partnership”) and their consolidated subsidiaries. On July 7, 2021, AIR Operating Partnership changed its name from "AIMCO Properties, L.P." to "Apartment Income REIT, L.P." The AIR Operating Partnership’s condensed consolidated financial statements include the accounts of the AIR Operating Partnership and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 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 of a limited liability company. Interests in the AIR Operating Partnership that are held by limited partners other than AIR are reflected in AIR’s accompanying condensed consolidated balance sheets as noncontrolling interests in the AIR Operating Partnership. Interests in partnerships consolidated by the AIR Operating Partnership that are held by third parties are reflected in AIR’s accompanying condensed consolidated balance sheets as noncontrolling interests in consolidated real estate partnerships. Except as the context otherwise requires, “we,” “our,” and “us” refer to AIR, the AIR Operating Partnership, and their consolidated subsidiaries, collectively. 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 generally accepted accounting principles in the U.S. (“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 six months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The condensed consolidated balance sheets of AIR, the AIR Operating Partnership, and their consolidated subsidiaries as of December 31, 2020, have been derived from their respective audited financial statements at that date, but do 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 AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2020. Except where indicated, the footnotes refer to AIR, the AIR Operating Partnership and their consolidated subsidiaries, collectively. The Separation On December 15, 2020, Apartment Investment and Management Company (“Aimco”) completed the separation of its business into two, separate and distinct, publicly traded companies, AIR and Aimco (the “Separation”). Notwithstanding the legal form of the Separation, for accounting and financial reporting purposes, Aimco is presented as being spun-off from AIR (as it relates to Aimco subsequent to the Separation, the “Spinnee”). This presentation is in accordance with GAAP, and is due primarily to the relative significance of AIR’s business, as measured in terms of revenues, net income, assets, and other relevant indicators, as compared to Aimco before the Separation. Therefore, AIR is considered the divesting entity and treated as the accounting spinnor, and Aimco is presented as the predecessor (“AIR’s Predecessor”) for AIR’s financial statements. Unless otherwise stated, financial results prior to the Separation on December 15, 2020 include the financial results of AIR’s Predecessor. The financial results and cash flows attributable to the apartment communities retained by Aimco in the Separation are presented as discontinued operations. Unless otherwise noted, all disclosures in the notes accompanying the condensed consolidated financial statements reflect only continuing operations. Please see Note 9 for further details regarding our discontinued operations. Organization and Business AIR is a self-administered and self-managed real estate investment trust (“REIT”). AIR owns, through its wholly-owned subsidiaries, all of the common equity, the general partner interest, and special limited partner interest in AIR Operating Partnership, a Delaware limited partnership originally incorporated on May 16, 1994. AIR Operating Partnership conducts all of the business of AIR, which is focused on the ownership of stabilized multi-family properties located in top markets including eight important geographic concentrations: Boston; Philadelphia; Greater Washington D.C.; Miami; Denver; the San Francisco Bay Area; Los Angeles; and San Diego. We own and operate a portfolio of apartment communities, diversified by both geography and price point, in 12 states and the District of Columbia. As of June 30, 2021, our portfolio included 96 apartment communities with 26,422 apartment homes in which we held an average ownership of approximately 93%. We also have four properties and one vacant land parcel that we lease to Aimco for redevelopment and development. Interests in the AIR Operating Partnership that are held by limited partners other than AIR are referred to as OP Units. OP Units include common partnership units, which we refer to as common OP Units, as well as preferred partnership units, which we refer to as preferred OP Units. As of June 30, 2021, after elimination of units held by consolidated subsidiaries, the AIR Operating Partnership had 168,220,639 common OP Units outstanding. As of June 30, 2021, AIR owned 156,856,952 of the common OP Units of the AIR Operating Partnership and AIR had an equal number of shares of its Class A Common Stock outstanding, which we refer to as Common Stock. AIR’s ownership of the total common OP Units outstanding represents a 93.2% legal interest in the AIR Operating Partnership and a 95.0% economic interest. |
Summary of Significant Accounting Policies |
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Note 2 — Summary of Significant Accounting Policies Principles of Consolidation We consolidate a variable interest entity (“VIE”), in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Redeemable Preferred OP Units As described in Note 5, the preferred OP Units may be redeemed at the holder’s option and are therefore presented within temporary equity in AIR’s condensed consolidated balance sheets and within temporary capital in the AIR Operating Partnership’s condensed consolidated balance sheets. The following table presents a rollforward of the AIR Operating Partnership’s preferred OP Units (in thousands):
The AIR Operating Partnership has outstanding various classes of redeemable preferred OP Units. As of June 30, 2021 and December 31, 2020, the AIR Operating Partnership had 2,935,920 and 2,938,802 redeemable preferred OP Units, respectively, issued and outstanding. Distributions per annum range from 1.92% to 8.75% per class and $0.48 to $8.00 per unit. Revenue from Leases The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and tenants primarily for utility reimbursements. Our total lease income, included in continuing operations, was comprised of the following amounts for all operating leases (in thousands):
(1) We monitor the collectability of all unpaid rent amounts. The onset of COVID-19 and the anticipated economic slowdown resulted in a $2.9 million write-off of accrued straight-line rent during the six months ended June 30, 2020. As of June 30, 2021, we leased four properties and one vacant land parcel to Aimco for redevelopment and development. The leases are being accounted for as sales-type leases and are therefore excluded from the table above. Please see Note 9 for further discussion. 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. Reclassifications and Revisions As previously stated in Note 1, the financial results for the three and six months ended June 30, 2020, include the financial results of AIR’s Predecessor, and the financial results attributable to the apartment communities retained by Aimco in the Separation are presented as discontinued operations. Recent Accounting Pronouncements On August 5, 2020, the Financial Accounting Standards Board issued an Accounting Standards Update that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, and affects the diluted earnings per share calculation for instruments that may be settled in cash or shares, which is effective for us on January 1, 2022. Adoption of the standards requires changes to be made retrospectively. Our preferred OP Units are subject to the new standard, which will require us to include our preferred OP Units in the calculation of dilutive securities. We are in the process of evaluating the impact of this standard and do not anticipate the adoption will have a material impact to our consolidated financial statements. |
Significant Transactions |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
Significant Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Significant Transactions | Note 3 — Significant Transactions Apartment Community Acquisition On June 17, 2021, we acquired an apartment community located in Pembroke Pines, Florida. Summarized information regarding this acquisition is set forth in the table below (dollars in thousands):
(1) Capitalized transaction costs include a broker fee of $2.3 million paid to Aimco. (2) Intangible assets include in-place leases and leasing costs with a weighted-average term of less than one year. (3) Below-market leases have a weighted-average term of less than one year. New Credit Facility On April 14, 2021, we obtained a $1.4 billion unsecured credit facility (the "Credit Facility"), replacing the previous $950 million facility. The facility is comprised of a revolving credit facility of $600 million and variable rate term loans of $800 million. The revolving credit facility currently bears interest at a 30-day LIBOR plus 0.90% and allows for an additional one basis point margin reduction if certain environmental, social, and governance targets are achieved. The term of the revolving credit facility ends on April 14, 2025, with two six-month extension options. Proceeds from the term loans were used to extend the maturity of our previous $350 million term loan; to repay $213 million of property debt; and to reduce borrowings on our revolving credit facility. The term loans bear interest at a 30-day LIBOR plus 1.00%, with a LIBOR floor of 0.00%. The effective interest on outstanding borrowings on our term loans was 1.6%. The term loans mature on the following schedule: $150 million maturing on December 15, 2023, with two one-year extension options; $300 million maturing on December 15, 2024, with a one-year extension option; $150 million maturing on December 15, 2025; and $200 million maturing on April 14, 2026. As of June 30, 2021, we had $347.2 million of outstanding borrowings under our revolving credit facility and had capacity to borrow up to $248.9 million after consideration of undrawn letters of credit backed by the facility. The effective interest on our outstanding borrowings was 1.09% as of June 30, 2021. Equity Issuance On April 23, 2021, we issued and sold 7.825 million shares of our Class A Common Stock for $43.766 per share in a private placement to a large global real estate-focused investment firm and received cash proceeds of $342.2 million, net of fees. Proceeds raised were used to repay $318.4 million of property debt with a weighted-average interest rate of 4.6%. Prepayment penalties incurred in connection with the debt repayment totaled $33.8 million. July Term Loan Subsequent to June 30, 2021, on July 15, 2021, we secured a new $350.0 million term loan. The loan matures on July 14, 2022, includes a six month extension option, and currently bears interest at a 30-day LIBOR plus 0.95% with a 0.00% LIBOR floor. Proceeds from the loan were used to repay borrowings on our revolving credit facility. |
Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2021 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 4 — Commitments and Contingencies 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. For claims arising from matters that occurred prior to the Separation, Aimco is responsible for the first $17.5 million of cumulative legal and environmental liabilities incurred and the AIR Operating Partnership is responsible for any such liabilities in excess of $17.5 million. As of June, 30, 2021, we have a receivable from Aimco related to the indemnification of approximately $7 million. Environmental Various federal, state and local laws subject apartment community owners or operators to liability for management and the costs of removal or remediation of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Such laws often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with investigation and remediation actions. Moreover, private plaintiffs may potentially make claims for investigation and remediation costs they incur or for personal injury, disease, disability or other infirmities related to the alleged presence of hazardous materials. In addition to potential environmental liabilities or costs associated with our current apartment communities, we may also be responsible for such liabilities or costs associated with communities we acquire or manage in the future or apartment communities we no longer own or operate. We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations (“AROs”), as defined by GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or apartment community casualty, we believe that the fair value of our AROs cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. AROs that are reasonably estimable as of June 30, 2021, are immaterial to our condensed consolidated financial statements. |
Earnings and Dividends per Share and Unit |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings and Dividends per Share and Unit | Note 5 — Earnings and Dividends per Share and Unit AIR and the AIR Operating Partnership calculate basic earnings (loss) per common share and basic earnings (loss) per common unit based on the weighted-average number of shares of Common Stock and common partnership units outstanding. We calculate diluted earnings (loss) per share and diluted earnings (loss) per unit taking into consideration dilutive common stock and common partnership unit equivalents and dilutive convertible securities outstanding during the period. Our common stock and common partnership unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in AIR’s issuance of additional shares and the AIR Operating Partnership’s issuance to AIR of additional common partnership units equal to the number of shares purchased under the options. These equivalents also include unvested total shareholder return (“TSR”) restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of Common Stock and common partnership units outstanding equal to the number of the shares that vest. Common partnership unit equivalents also include unvested long-term incentive partnership units. We include in the denominator securities with dilutive effect in calculating diluted earnings (loss) per share and per unit during these periods. Our restricted stock awards that are subject to time-based vesting receive non-forfeitable dividends similar to shares of Common Stock and common partnership units prior to vesting, and our TSR long-term incentive partnership units receive non-forfeitable distributions based on specified percentages of the distributions paid to common partnership units prior to vesting and conversion. The unvested restricted shares and units related to these awards are participating securities. We include the effect of participating securities in basic and diluted earnings (loss) per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method. In our condensed consolidated statements of operations, noncontrolling interest in consolidated real estate partnerships is related to both continuing and discontinued operations. For purposes of our earnings (loss) per share calculation, we have appropriately allocated the noncontrolling interest in consolidated real estate partnerships for the three and six months ended June 30, 2020. Please see Note 9 for detail of noncontrolling interest in consolidated real estate partnerships associated with discontinued operations. Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings (loss) per share and per unit are as follows (in thousands, except per share and per unit data):
The AIR Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holders’ option. The AIR Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of June 30, 2021, these preferred OP Units were potentially redeemable for approximately 1.7 million shares of Common Stock (based on the period end market price) or cash. The AIR Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. Accordingly, we have excluded these securities from earnings per share and unit computations for the periods presented above. Dividends and distributions paid per share of Common Stock and per common unit were as follows:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Note 6 — Fair Value Measurements Recurring Fair Value Measurements We measured at fair value on a recurring basis our investments in the securitization trust that held certain of our property debt, which we classified as available for sale (“AFS”) debt securities. These investments were presented within other assets in the condensed consolidated balance sheets. We held several positions in the securitization trust that paid interest and we also held the first loss position in the securitization trust, which accrued interest over the term of the investment. These investments were acquired at a discount to face value and accreted to the $100.9 million face value of the investments through interest income using the effective interest method over the term of the investments. During the second quarter of 2021, these investments were settled in cash at the face value. Our amortized cost basis for these investments, which represented the original cost adjusted for interest accretion less interest payments received, was $97.1 million as of December 31, 2020. Our investments in AFS debt securities were classified within Level 2 of the GAAP fair value hierarchy. We estimated the fair value of these investments using an income and market approach with primarily observable inputs, including yields and other information regarding similar types of investments, and adjusted for certain unobservable inputs specific to these investments. The fair value of the positions that paid interest typically moved in an inverse relationship with movements in interest rates. The fair value of the first loss position was primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities. During 2020, we paid an upfront premium of $12.1 million for the option to enter into an interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against our refinancing interest rate risk and is intended to mitigate interest rate increases between now and 2024. We receive a cash settlement in the future if the prevailing interest rate is higher than the 1.68% strike price. The amount of future cash settlement is limited if the prevailing interest rate exceeds 2.78%. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement. In connection with the Separation, AIR assigned all of the risks and rewards of ownership to Aimco, with an offsetting and equal asset or liability recognized for the amount of gain or loss recognized. We measure at fair value on a recurring basis our interest rate option, which is presented in other assets in our condensed consolidated balance sheets. Our interest rate option is classified within Level 2 of the GAAP fair value hierarchy, and we estimate its fair value using pricing models that rely on observable market information, including contractual terms, market prices, and interest rate yield curves. The fair value adjustment is included in earnings in other expense, net, in our condensed consolidated statements of operations. Changes in fair value are reflected as a non-cash transaction in adjustments to arrive at cash flows from operations, and the upfront premium is reflected in other financing in our condensed consolidated statements of cash flows. The following table summarizes fair value for our AFS debt securities and our interest rate option (in thousands):
Nonrecurring Fair Value Measurements As of June 30, 2021, assets measured at fair value on a nonrecurring basis in our condensed consolidated balance sheets consist of one apartment community acquisition. We allocated the cost of the apartment community acquired based on the relative fair value of the assets acquired and liabilities assumed. The fair value of assets and liabilities was determined using valuation techniques that rely on Level 2 and Level 3 inputs within the GAAP fair value hierarchy. As of June 30, 2021, the fair value of the real estate asset measured on a nonrecurring basis was $225.5 million. As of December 31, 2020, assets measured at fair value on a nonrecurring basis in our condensed consolidated balance sheets consist of a real estate asset that was written down to its estimated fair value for impairment purposes during the year ended December 31, 2020. Our estimate of fair value was determined using valuations performed by third-party specialists, as well as various estimates and assumptions, the most significant being market rental rates, operating expense assumptions, and capitalization rate. These unobservable inputs are classified as Level 3 within the GAAP fair value hierarchy. As of December 31, 2020, the fair value of the real estate asset measured on a nonrecurring basis was $34.4 million. Financial Assets and Liabilities Not Measured at Fair Value We believe that the carrying value of the consolidated amounts of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximated their fair value as of June 30, 2021, and December 31, 2020, due to their relatively short-term nature and high probability of realization. The carrying amounts of notes receivable from Aimco, the term loans, and the revolving credit facility borrowings also approximated their estimated fair value as of June 30, 2021, and December 31, 2020. We estimate the fair value of our non-recourse property debt using an income and market approach, including comparison of the contractual terms to observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, collateral quality, and loan to value ratios on similarly encumbered apartment communities within our portfolio. We classify the fair value of our non-recourse property debt within Level 2 of the GAAP fair value hierarchy based on the significance of certain of the unobservable inputs used to estimate its fair value. The following table summarizes carrying value and fair value for our non-recourse property debt, excluding debt issuance costs (in thousands):
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Variable Interest Entities |
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Variable Interest Entities | Note 7 — Variable Interest Entities Consolidated Entities AIR consolidates the AIR Operating Partnership, a variable interest entity (“VIE”) of which AIR is the primary beneficiary. AIR, through the AIR Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Substantially all of the assets and liabilities of AIR are that of the AIR Operating Partnership. The AIR Operating Partnership consolidates (i) five VIEs that own interest in one or more apartment communities and are typically structured to generate a return for their partners through the operation and ultimate sale of the communities and (ii) five VIEs related to lessor entities that own interest in the properties leased to Aimco. The assets and liabilities of the VIEs associated with the leased properties consists of our net investment in the leases. The AIR Operating Partnership is the primary beneficiary in the limited partnerships in which it is the sole decision maker and has a substantial economic interest. The table below summarizes apartment community information regarding VIEs consolidated by the AIR Operating Partnership:
Assets of the AIR Operating Partnership’s consolidated VIEs must first be used to settle the liabilities of such consolidated VIEs. These consolidated VIEs’ creditors do not have recourse to the general credit of the AIR Operating Partnership. Assets and liabilities of VIEs, excluding those of the AIR Operating Partnership, are summarized in the table below (in thousands):
Unconsolidated Entities We have an interest in a partnership that owns Parkmerced Apartments, which meets the definition of a VIE. However, we are not the primary beneficiary and do not consolidate this partnership. In connection with the Separation, Aimco was allocated economic ownership of the $275.0 million mezzanine loan investment and option to acquire a 30% equity interest in the partnership. The investment accrues interest at 10% per annum with a five-year term and the right to extend for a second five-year term. Subsequent to the Separation, all risks and rewards of ownership are Aimco’s. As of June 30, 2021, and December 31, 2020, the investment balance of $322.4 million and $307.4 million, respectively, primarily consisting of notes receivable, is included in other assets in AIR’s condensed consolidated balance sheets, as legal transfer is not complete. Since AIR has legally assigned all risks and rewards of ownership to Aimco, there is an equal and offsetting liability included in accrued liabilities and other in AIR’s condensed consolidated balance sheets. Accordingly, there is no net effect on AIR’s shareholders’ equity. During the three and six months ended June 30, 2020, we recognized $6.9 million and $13.7 million, respectively, of income in connection with the mezzanine loan. The mezzanine investment income was entirely offset by an expense to recognize the requirement that this income be contributed to Aimco. |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments | Note 8 — Business Segments We have two segments: Same Store and Other Real Estate. Our Same Store segment includes communities that: (i) are owned and managed by AIR and (ii) had reached a stabilized level of operations. Our Other Real Estate segment includes communities that do not meet the criteria to be classified as Same Store. Communities included in discontinued operations are excluded from our evaluation of segment performance, as they are no longer included in information used by our chief operating decision maker (“CODM”). Our CODM uses proportionate property net operating income to assess the operating performance of our communities. Proportionate property net operating income reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues in accordance with GAAP. As of June 30, 2021, our Same Store segment included 92 apartment communities with 25,427 apartment homes, and our Other Real Estate segment included four apartment communities with 995 homes. The following tables present the total revenues, property operating expenses, proportionate property net operating income (loss), and income (loss) from continuing operations before income tax benefit (expense) of our segments on a proportionate basis, excluding amounts related to communities sold or communities included in discontinued operations (in thousands):
(1) Represents adjustments for the noncontrolling interests in consolidated real estate partnerships’ share of the results of consolidated communities in our segments, which are included in the related consolidated amounts but excluded from proportionate property net operating income for our segment evaluation. Also includes the reclassification of utility reimbursements from revenues to property operating expenses for the purpose of evaluating segment results. Utility reimbursements are included in rental and other property revenues in our condensed consolidated statements of operations prepared in accordance with GAAP. (2) Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any. Also includes property management revenues, which are not part of our segment performance measure and property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure. The write-off of straight-line rent receivables, recognized due to the impact of COVID-19 and the resulting economic impact on our commercial tenants, are included in consolidated rental and property revenues and are not included in our measurement of segment performance for the three months and six months ended June 30, 2020. (3) Includes depreciation and amortization, general and administrative expenses, and other operating expenses, which may include provision for real estate impairment loss and write-offs of deferred leasing commissions, which are not included in our measure of segment performance. (4) Includes gain on derecognition of leased properties and dispositions of real estate, interest income, including interest income related to the properties leased to Aimco, and interest expense. The assets of our segments and the consolidated assets not allocated to our segments were as follows (in thousands):
(1) Includes the assets not allocated to our segments including: (i) corporate assets; (ii) our notes receivable from Aimco; (iii) our mezzanine loan investment; and (iv) assets of apartment communities which were leased to Aimco, sold, or classified as held for sale as of June 30, 2021. Capital additions related to our segments were as follows (in thousands):
(1) For the six months ended June 30, 2021, Other Real Estate does not include capital additions related to properties leased to Aimco for redevelopment and development. |
Discontinued Operations |
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Discontinued Operations And Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Note 9 – Discontinued Operations The financial results attributable to apartment communities retained by the Spinnee for the prior year comparative period have been classified as discontinued operations within the condensed consolidated financial statements. Summarized results of discontinued operations are shown below (in thousands):
We entered into various separation and transition services agreements with the Spinnee that provide for a framework of our relationship with the Spinnee after the Separation, including: (i) a separation agreement setting forth the mechanics of the Separation, the key provisions relating to the Separation of our assets and liabilities from those of the Spinnee, and certain organizational matters and conditions; (ii) an employee matters agreement to allocate liabilities and responsibilities relating to employment matters, teammate compensation, and benefits plans and programs, and other related matters; (iii) Property Management Agreements pursuant to which we provide property management and related services at a majority of the properties owned or leased by the Spinnee in exchange for a fee based on an agreed percentage of revenue collected; (iv) Master Services Agreement pursuant to which we provide the Spinnee with customary administrative and support services on an ongoing basis in exchange for payment for the fully-burdened costs (including internal allocated costs); and (v) a Master Leasing Agreement pursuant to which the Spinnee may enter into leases with us pursuant to which the Spinnee, at its option, may redevelop, develop, or lease-up apartment communities. The Property Management Agreement, the Master Services Agreement, and the Master Leasing Agreement may be terminated in accordance with the respective agreements. During the three and six months ended June 30, 2021, we recognized revenue of $1.6 million and $3.3 million, respectively, from the Property Management Agreements and Master Services Agreement, all of which is reflected in other revenue in our condensed consolidated statement of operations. In addition, we recognized a reduction to general and administrative expense of $1.5 million and $2.9 million, respectively, from services provided under the Employee Matters Agreement. The Master Leasing Agreement governs any future leasing arrangements between us and the Spinnee. The initial term of the Master Leasing Agreement is 18 months, with automatic annual extensions (subject to each party’s right to terminate upon notice prior to the end of any such extension term). Each leased property has a separate lease agreement with specified terms. The initial annual rent for any leased property is based on a calculation derived from the then-current fair market value of the subject property and market net operating income cap rates, subject to certain adjustments, and is further subject to periodic escalation as set forth in the applicable lease, and the other terms thereof, including the initial term and extensions on an arm’s-length basis, as determined by and pursuant to the Master Leasing Agreement. The Spinnee has the right to terminate any such lease prior to the end of its term once the leased property is stabilized. In connection with an early termination, we have an option to pay the Spinnee an amount equal to the difference between the then-current fair market value of such property and the initial fair market value of such property at the time of the lease inception, at a small discount. If we do not exercise an option, the Spinnee will have the right to sell the property to a third party with us guaranteed to receive an amount equal to the fair market value of the property at the time of the lease inception, or the Spinnee may elect to purchase the property at a purchase price equal to the fair market value thereof at the time of lease inception (and may subsequently sell the property to a third party, subject to our right of first refusal during the first year following the Spinnee’s acquisition). Through June 30, 2021, we have leased four properties and one vacant land parcel to the Spinnee for redevelopment and development, four leases commencing on January 1, 2021, and one lease commencing on June 1, 2021. In accordance with ASC 842, these leases were accounted for as sales-type leases and we recorded a net investment in the leases, equal to the sum of the lease receivable and residual asset, discounted at the rate implicit to the leases. During the three and six months ended June 30, 2021, we recognized gains of $3.4 million and $87.1 million, respectively, which are equal to the difference in the net investment values and the carrying values of the underlying properties immediately prior to the commencement of each lease. During the three and six months ended June 30, 2021, we recognized income of $6.5 million and $12.9 million, respectively, on an effective interest basis at a constant rate of return over the term of the applicable leases, which is reflected in interest income in our condensed consolidated statement of operations. Cash income from the leasing agreements was $6.7 million and $13.3 million, respectively, during the three and six months ended June 30, 2021. The initial term of each of the leases range from 10 to 25 years. All of the lease payments are triple net basis to the tenant and we have rights in accordance with the individual lease agreements to protect the value of our leased properties. As of June 30, 2021, the aggregate minimum lease payments owed to us for each of the five succeeding years under the sales-type leases is as follows:
(1) As of June 30, 2021, this amount includes $250.8 million of guaranteed residual value and $608.4 million of remaining cash lease payments. (2) The total future minimum lease payments assume that no early termination option is elected after the leased property is stabilized, which is currently expected between January 1, 2024 and January 1, 2025. In connection with the Separation, we acquired $534 million in notes receivable pledged by a subsidiary of the Spinnee that has an interest in a portfolio of assets. Our notes receivable are subordinate to senior debt outstanding on the portfolio of assets. The notes receivable mature on January 31, 2024, and bear interest at a rate of 5.2% per annum, payable quarterly on January 1, April 1, July 1, and October 1, commencing on April 1, 2021. The notes receivable contain certain representations, warranties, covenants, and events of default and are secured by a pool of properties owned by Aimco. Notes receivable are reported in our condensed consolidated balance sheet at the outstanding principal balance. Interest receivable related to the unpaid principal is recorded separately from the outstanding balance in other assets in our condensed consolidated balance sheets. During the three and six months ended June 30, 2021, we recognized interest income of $6.9 million and $13.9 million, respectively, associated with the notes receivable, which is reflected in interest income in our condensed consolidated statement of operations. As of June 30, 2021, we have a receivable from Aimco in the amount of approximately $17 million, which is recognized in other assets, and a payable to Aimco in the amount of approximately $3 million, which is recognized in accrued liabilities and other in our condensed consolidated balance sheets. The amount receivable from Aimco primarily includes interest income from our notes receivable which was paid in July. |
Summary of Significant Accounting Policies (Policies) |
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Organization Consolidation And Presentation Of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation We consolidate a variable interest entity (“VIE”), in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. |
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Noncontrolling Interests in the Aimco Operating Partnership | Redeemable Preferred OP Units As described in Note 5, the preferred OP Units may be redeemed at the holder’s option and are therefore presented within temporary equity in AIR’s condensed consolidated balance sheets and within temporary capital in the AIR Operating Partnership’s condensed consolidated balance sheets. The following table presents a rollforward of the AIR Operating Partnership’s preferred OP Units (in thousands):
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Revenue from Leases | Revenue from Leases The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and tenants primarily for utility reimbursements. Our total lease income, included in continuing operations, was comprised of the following amounts for all operating leases (in thousands):
(1) We monitor the collectability of all unpaid rent amounts. The onset of COVID-19 and the anticipated economic slowdown resulted in a $2.9 million write-off of accrued straight-line rent during the six months ended June 30, 2020. As of June 30, 2021, we leased four properties and one vacant land parcel to Aimco for redevelopment and development. The leases are being accounted for as sales-type leases and are therefore excluded from the table above. Please see Note 9 for further discussion. |
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Use of Estimates | 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. |
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Reclassifications and Revisions | Reclassifications and Revisions As previously stated in Note 1, the financial results for the three and six months ended June 30, 2020, include the financial results of AIR’s Predecessor, and the financial results attributable to the apartment communities retained by Aimco in the Separation are presented as discontinued operations. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements On August 5, 2020, the Financial Accounting Standards Board issued an Accounting Standards Update that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, and affects the diluted earnings per share calculation for instruments that may be settled in cash or shares, which is effective for us on January 1, 2022. Adoption of the standards requires changes to be made retrospectively. Our preferred OP Units are subject to the new standard, which will require us to include our preferred OP Units in the calculation of dilutive securities. We are in the process of evaluating the impact of this standard and do not anticipate the adoption will have a material impact to our consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Organization Consolidation And Presentation Of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Preferred OP Units | The following table presents a rollforward of the AIR Operating Partnership’s preferred OP Units (in thousands):
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Lease Income for Operating Leases | Our total lease income, included in continuing operations, was comprised of the following amounts for all operating leases (in thousands):
(1)
We monitor the collectability of all unpaid rent amounts. The onset of COVID-19 and the anticipated economic slowdown resulted in a $2.9 million write-off of accrued straight-line rent during the six months ended June 30, 2020. |
Significant Transactions (Tables) |
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Apartment Community [Member] | Pembroke Pines, Florida [Member] | |||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Acquisition | Summarized information regarding this acquisition is set forth in the table below (dollars in thousands):
(1) Capitalized transaction costs include a broker fee of $2.3 million paid to Aimco. (2) Intangible assets include in-place leases and leasing costs with a weighted-average term of less than one year. (3)
Below-market leases have a weighted-average term of less than one year. |
Earnings and Dividends per Share and Unit (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliations of Numerator and Denominator in Calculations of Basic and Diluted Earnings (Loss) per Share and per Unit | Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings (loss) per share and per unit are as follows (in thousands, except per share and per unit data):
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Summary of Dividend and Distribution Paid per Unit | Dividends and distributions paid per share of Common Stock and per common unit were as follows:
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Value for AFS Debt Securities and Derivative Instrument | The following table summarizes fair value for our AFS debt securities and our interest rate option (in thousands):
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Summary of Carrying Value and Fair Value of Non-recourse Property Debt | The following table summarizes carrying value and fair value for our non-recourse property debt, excluding debt issuance costs (in thousands):
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Variable Interest Entities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization Consolidation And Presentation Of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Variable Interest Entities | The table below summarizes apartment community information regarding VIEs consolidated by the AIR Operating Partnership:
Assets of the AIR Operating Partnership’s consolidated VIEs must first be used to settle the liabilities of such consolidated VIEs. These consolidated VIEs’ creditors do not have recourse to the general credit of the AIR Operating Partnership. Assets and liabilities of VIEs, excluding those of the AIR Operating Partnership, are summarized in the table below (in thousands):
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Business Segments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Information for Reportable Segments | The following tables present the total revenues, property operating expenses, proportionate property net operating income (loss), and income (loss) from continuing operations before income tax benefit (expense) of our segments on a proportionate basis, excluding amounts related to communities sold or communities included in discontinued operations (in thousands):
(1) Represents adjustments for the noncontrolling interests in consolidated real estate partnerships’ share of the results of consolidated communities in our segments, which are included in the related consolidated amounts but excluded from proportionate property net operating income for our segment evaluation. Also includes the reclassification of utility reimbursements from revenues to property operating expenses for the purpose of evaluating segment results. Utility reimbursements are included in rental and other property revenues in our condensed consolidated statements of operations prepared in accordance with GAAP. (2) Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any. Also includes property management revenues, which are not part of our segment performance measure and property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure. The write-off of straight-line rent receivables, recognized due to the impact of COVID-19 and the resulting economic impact on our commercial tenants, are included in consolidated rental and property revenues and are not included in our measurement of segment performance for the three months and six months ended June 30, 2020. (3) Includes depreciation and amortization, general and administrative expenses, and other operating expenses, which may include provision for real estate impairment loss and write-offs of deferred leasing commissions, which are not included in our measure of segment performance. (4)
Includes gain on derecognition of leased properties and dispositions of real estate, interest income, including interest income related to the properties leased to Aimco, and interest expense. |
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Reconciliation of Assets from Segment to Consolidated | The assets of our segments and the consolidated assets not allocated to our segments were as follows (in thousands):
(1) Includes the assets not allocated to our segments including: (i) corporate assets; (ii) our notes receivable from Aimco; (iii) our mezzanine loan investment; and (iv) assets of apartment communities which were leased to Aimco, sold, or classified as held for sale as of June 30, 2021. |
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Capital Additions Related to Segments | Capital additions related to our segments were as follows (in thousands):
(1)
For the six months ended June 30, 2021, Other Real Estate does not include capital additions related to properties leased to Aimco for redevelopment and development. |
Discontinued Operations (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations And Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized Results of Discontinued Operations | Summarized results of discontinued operations are shown below (in thousands):
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Summary of Sales Type and Direct Financing Leases Receivable Maturity | The initial term of each of the leases range from 10 to 25 years. All of the lease payments are triple net basis to the tenant and we have rights in accordance with the individual lease agreements to protect the value of our leased properties. As of June 30, 2021, the aggregate minimum lease payments owed to us for each of the five succeeding years under the sales-type leases is as follows:
(1) As of June 30, 2021, this amount includes $250.8 million of guaranteed residual value and $608.4 million of remaining cash lease payments. (2)
The total future minimum lease payments assume that no early termination option is elected after the leased property is stabilized, which is currently expected between January 1, 2024 and January 1, 2025. |
Basis of Presentation and Organization (Details Textual) |
6 Months Ended |
---|---|
Jun. 30, 2021
Property1
Property
Land
ApartmentHome
shares
| |
Organization [Line Items] | |
Number of leased properties | Property1 | 4 |
Number of vacant land parcel | Land | 1 |
Partially Owned Properties [Member] | |
Organization [Line Items] | |
Number of apartment homes | Property | 96 |
Number of apartment homes in apartment communities | ApartmentHome | 26,422 |
Percentage of average ownership of portfolio | 93.00% |
AIR Operating Partnership [Member] | |
Organization [Line Items] | |
Common operating partnership units and equivalents outstanding | 168,220,639 |
Common operating partnership units and equivalents outstanding | 156,856,952 |
Percentage of the Aimco Operating Partnership's common partnership units and equivalents owned by Aimco | 93.20% |
Percentage of economic interest | 95.00% |
Summary of Significant Accounting Policies - Reconciliation of Preferred OP Units (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2021
USD ($)
| |
Increase (Decrease) in Temporary Equity [Roll Forward] | |
Balance at December 31, 2020 | $ 79,449 |
Balance at June 30, 2021 | 79,375 |
AIMCO PROPERTIES, L.P [Member] | |
Increase (Decrease) in Temporary Equity [Roll Forward] | |
Balance at December 31, 2020 | 79,449 |
Preferred distributions | (3,207) |
Redemption of preferred units | (74) |
Net income | 3,207 |
Balance at June 30, 2021 | $ 79,375 |
Summary of Significant Accounting Policies - Lease Income for Operating Leases (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Organization Consolidation And Presentation Of Financial Statements [Abstract] | ||||
Fixed lease income | $ 165,044 | $ 171,054 | $ 329,012 | $ 349,081 |
Variable lease income | 11,177 | 10,280 | 21,636 | 20,834 |
Straight-line rent write-off | 0 | 0 | 0 | (2,850) |
Total lease income | $ 176,221 | $ 181,334 | $ 350,648 | $ 367,065 |
Summary of Significant Accounting Policies - Lease Income for Operating Leases (Parenthetical) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Disaggregation Of Revenue [Line Items] | ||||
Write off of straight line rent receivables | $ 0 | $ 0 | $ 0 | $ 2,850 |
COVID Related Write-off [Member] | ||||
Disaggregation Of Revenue [Line Items] | ||||
Write off of straight line rent receivables | $ 2,900 |
Significant Transactions (Details) - Apartment Community [Member] $ in Thousands |
Jun. 17, 2021
USD ($)
ApartmentHome
|
---|---|
Business Acquisition [Line Items] | |
Capitalized transaction costs | $ 2,300 |
Pembroke Pines, Florida [Member] | |
Business Acquisition [Line Items] | |
Number of apartment homes | ApartmentHome | 700 |
Purchase price | $ 222,650 |
Capitalized transaction costs | 2,876 |
Total consideration | 225,526 |
Consideration allocated to land | 35,184 |
Consideration allocated to building and improvement | 186,823 |
Consideration allocated to intangible assets | 3,644 |
Consideration allocated to below-market lease liabilities | $ (125) |
Significant Transactions (Parenthetical) (Details) $ in Millions |
Jun. 17, 2021
USD ($)
|
---|---|
Apartment Community [Member] | |
Business Acquisition [Line Items] | |
Capitalized transaction costs | $ 2.3 |
Maximum [Member] | Below-market Leases [Member] | |
Business Acquisition [Line Items] | |
Weighted-average term | 1 year |
Maximum [Member] | In-place Leases and Leasing Costs | |
Business Acquisition [Line Items] | |
Weighted-average term | 1 year |
Commitments and Contingencies (Details Textual) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2021
USD ($)
| |
Long Term Purchase Commitment [Line Items] | |
Bearing environmental liabilities | $ 17.5 |
Amount receivable to indemnification | 7.0 |
Maximum [Member] | AIMCO Operating Partnership [Member] | |
Long Term Purchase Commitment [Line Items] | |
Bearing environmental liabilities | $ 17.5 |
Earnings and Dividends per Share and Unit (Details Textual) shares in Millions |
Jun. 30, 2021
shares
|
---|---|
Earnings Per Share [Abstract] | |
Number of shares potentially redeemable for (in shares) | 1.7 |
Earnings and Dividends per Share and Unit - Summary of Dividend and Distribution Paid per Unit (Details) - $ / shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Earnings Per Share [Abstract] | ||||
Dividends and distributions paid | $ 0.43 | $ 0.41 | $ 0.86 | $ 0.82 |
Fair Value Measurements - Summary of Fair Value for AFS Debt Securities and Derivative Instrument (Details) - Fair value recurring [Member] - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
AFS debt securities | $ 0 | $ 100,151 |
Interest rate option | 18,915 | 13,177 |
Level 1 [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
AFS debt securities | 0 | 0 |
Interest rate option | 0 | 0 |
Level 2 [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
AFS debt securities | 0 | 100,151 |
Interest rate option | 18,915 | 13,177 |
Level 3 [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
AFS debt securities | 0 | 0 |
Interest rate option | $ 0 | $ 0 |
Fair Value Measurements - Summary of Carrying Value and Fair Value of Non-recourse Property Debt (Details) - Non-recourse property debt [Member] - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Carrying Value [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Non-recourse property debt | $ 3,079,576 | $ 3,646,093 |
Fair Value [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
Non-recourse property debt | $ 3,212,327 | $ 3,730,621 |
Variable Interest Entities (Details) $ in Thousands |
Jun. 30, 2021
USD ($)
Property
Entity
Unit
|
Dec. 31, 2020
USD ($)
Property
Entity
Unit
|
---|---|---|
Net real estate | $ 4,748,088 | $ 5,013,359 |
Cash and cash equivalents | 59,401 | 44,214 |
Restricted cash | 21,300 | 29,266 |
Other assets | 555,189 | 576,026 |
Non-recourse property debt, net | 3,064,803 | 3,628,236 |
Accrued liabilities and other | $ 570,040 | $ 598,736 |
Variable Interest Entity, Primary Beneficiary [Member] | ||
VIEs with interests in apartment communities | Entity | 5 | 5 |
Number of owned and managed apartment communities in segments | Property | 16 | 16 |
Number of apartment homes in apartment communities | Unit | 5,369 | 5,369 |
Net real estate | $ 1,108,567 | $ 1,125,315 |
Cash and cash equivalents | 19,351 | 10,548 |
Restricted cash | 2,100 | 8,818 |
Other assets | 23,130 | 23,870 |
Non-recourse property debt, net | 1,234,788 | 1,278,318 |
Accrued liabilities and other | $ 32,731 | $ 34,038 |
Variable Interest Entities (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2020 |
|
Schedule Of Investment Income Reported Amounts By Category [Line Items] | |||||
Income connection with Mezzanine loan | $ 0 | $ 6,936 | $ 0 | $ 13,683 | |
Parkmerced Investment [Member] | |||||
Schedule Of Investment Income Reported Amounts By Category [Line Items] | |||||
Investment owned amount | $ 275,000 | $ 275,000 | |||
Equity method investment, interest rate percentage | 10.00% | 10.00% | |||
Equity method investment, term | 5 years | ||||
Equity method investment, right to extend term | 5 years | ||||
Mezzanine investment | $ 322,400 | $ 322,400 | $ 307,400 | ||
Option To Acquire Equity Interest In Partnership Percentage | 30.00% | ||||
Income connection with Mezzanine loan | $ 6,900 | $ 13,700 |
Business Segments - Reconciliation of Assets from Segment to Consolidated (Details) - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Total assets | $ 6,429,832 | $ 6,229,278 |
Corporate Non-Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Total assets | 1,509,241 | 1,441,616 |
Same Store [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Total assets | 4,591,399 | 4,664,291 |
Other Real Estate [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ 329,192 | $ 123,371 |
Business Segments - Capital Additions Related to Segments (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
Segment Reporting Information [Line Items] | ||
Capital additions | $ 61,647 | $ 167,672 |
Same Store [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Capital additions | 61,067 | 61,079 |
Other Real Estate [Member] | Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Capital additions | $ 580 | $ 106,593 |
Discontinued Operations - Summarized Results of Discontinued Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
OPERATING EXPENSES: | ||||
Income from discontinued operations, net of tax | $ 0 | $ 3,126 | $ 0 | $ 7,191 |
Discontinued Operations [Member] | ||||
REVENUES: | ||||
Rental and other property revenues | 37,165 | 75,674 | ||
OPERATING EXPENSES: | ||||
Property operating expenses | 13,415 | 26,736 | ||
Depreciation and amortization | 18,740 | 37,770 | ||
Other expenses, net | 127 | (325) | ||
Total operating expenses | 32,282 | 64,831 | ||
Interest income | 540 | 1,074 | ||
Interest expense | (4,563) | (9,093) | ||
Income from unconsolidated real estate partnerships | 170 | 352 | ||
Income before income tax benefit | 1,030 | 3,176 | ||
Income tax benefit | 2,096 | (4,015) | ||
Income from discontinued operations, net of tax | 3,126 | 7,191 | ||
Net loss attributable to noncontrolling interests in consolidated real estate partnerships | 116 | (219) | ||
Net income from discontinued operations attributable to Spinnee | $ 3,242 | $ 7,410 |
Discontinued Operations - Summary of Sales Type and Direct Financing Leases Receivable Maturity (Details) $ in Thousands |
Jun. 30, 2021
USD ($)
|
|||
---|---|---|---|---|
Discontinued Operations And Disposal Groups [Abstract] | ||||
2021 (remaining) | $ 12,799 | |||
2022 | 25,597 | |||
2023 | 25,597 | |||
2024 | 25,597 | |||
2025 | 25,708 | |||
Thereafter | 737,841 | |||
Total lease receivable (1) (2) | 853,139 | [1] | ||
Add: Unguaranteed residual value | 131,580 | |||
Less: Discount | (505,278) | |||
Total leased real estate assets | $ 479,441 | |||
|
Discontinued Operations - Summary of Sales Type and Direct Financing Leases Receivable Maturity (Parenthetical) (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2021
USD ($)
| |
Discontinued Operations And Disposal Groups [Abstract] | |
Sales-type lease, residual value of leased asset | $ 250.8 |
Sales type lease cash payments receivable | $ 608.4 |
Lessor, sales-type lease, option to terminate | The total future minimum lease payments assume that no early termination option is elected after the leased property is stabilized, which is currently expected between January 1, 2024 and January 1, 2025. |
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