Summary of Significant Accounting Policies

6 Months Ended

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):

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

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):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
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 (1)		—		—		—		(2,850	)
Total lease income	$	176,221	$	181,334	$	350,648	$	367,065

(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.