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APARTMENT INVESTMENT AND MANAGEMENT COMPANY FORM 10-Q INDEX

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

Commission File Number 1-13232

Apartment Investment and Management Company
(Exact name of registrant as specified in its charter)

(303) 757-8101
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý    No o

The number of shares of Class A Common Stock outstanding as of July 31, 2003: 94,090,189

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
FORM 10-Q
INDEX

1

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

See notes to consolidated financial statements.

2

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

(Unaudited)

See notes to consolidated financial statements.

3

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

See notes to consolidated financial statements.

4

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2003

(Unaudited)

NOTE 1—Organization

        Apartment Investment and Management Company ("Aimco"), a Maryland corporation incorporated on January 10, 1994, owns a majority of the ownership interests in AIMCO Properties, L.P. (the "Aimco Operating Partnership") through its wholly owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP, Inc. Aimco held approximately an 89% interest in the common partnership units and equivalents of the Aimco Operating Partnership as of June 30, 2003. AIMCO-GP, Inc. is the sole general partner of the Aimco Operating Partnership. Except where the context otherwise requires, "Company" refers to Aimco, the Aimco Operating Partnership and Aimco's consolidated corporate subsidiaries and consolidated real estate partnerships.

        As of June 30, 2003, the Company:

•

owned a controlling equity interest in 182,566 units in 713 properties (individually a "property" and collectively the "properties") (which the Company refers to as "consolidated");



•

owned a non-controlling equity interest in 69,961 units in 477 properties (which the Company refers to as "unconsolidated"), of which 61,494 units were also managed by the Company; and



•

provided services or managed, for third party owners, 53,576 units in 537 properties, primarily pursuant to long-term agreements (including 41,625 units in 433 properties that are asset managed only, and not property managed).

        At June 30, 2003, 94,043,915 shares of Aimco's Class A Common Stock ("Common Stock") were outstanding. Interests in the Aimco Operating Partnership that are held by limited partners other than the Company are referred to as "OP Units." Holders of common OP Units may redeem such units for cash or, at the Company's option, Common Stock. At June 30, 2003, the Aimco Operating Partnership had 11,976,165 common OP Units and equivalents outstanding. At June 30, 2003, a combined total of 106,020,080 shares of Common Stock and common OP Units and equivalents were outstanding.

NOTE 2—Basis of Presentation

        The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

        The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

        For further information, refer to the statements and notes thereto included in Aimco's Annual Report on Form 10-K for the year ended December 31, 2002. Certain 2002 financial statement amounts have been reclassified to conform to the 2003 presentation, including certain intercompany eliminations and the treatment of discontinued operations.

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        The accompanying consolidated financial statements include the accounts of Aimco, the Aimco Operating Partnership, majority owned corporate subsidiaries and consolidated real estate partnerships. 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 limited partner in a limited partnership or a member in a limited liability company. All significant intercompany balances and transactions have been eliminated in consolidation. The assets of consolidated real estate partnerships owned or controlled by Aimco or the Aimco Operating Partnership generally are not available to pay creditors of Aimco or the Aimco Operating Partnership, however, pursuant to the revolving credit facility and term loans, Aimco has pledged as collateral, equity interests in certain consolidated real estate partnerships.

        Interests held in consolidated real estate partnerships by limited partners other than the Company are reflected as minority interest in consolidated real estate partnerships. Minority interest in consolidated real estate partnerships represents the minority partners' share of the underlying net assets of the Company's consolidated real estate partnerships. When these consolidated real estate partnerships make cash distributions in excess of net income, the Company, as the majority partner, records a charge equal to the minority partners' excess of distributions over net income, even though the Company does not suffer any economic effect, cost or risk. This charge is classified in the consolidated statements of income as distributions to minority partners in excess of income. For the three and six months ended June 30, 2003, such charges were $4.2 million and $9.6 million, respectively, compared to charges of $12.6 million and $11.0 million for the three and six months ended June 30, 2002, respectively. Losses are allocated to minority partners until such time as such losses exceed the minority partners' basis, in which case, the Company recognizes 100% of the losses in operating earnings when the partnership is in a deficit equity position, even though the Company does not suffer any economic effect, cost or risk. With regard to such consolidated real estate partnerships, approximately $0.5 million and $1.7 million in depreciation related losses were charged to minority interest in consolidated real estate partnerships for the three and six months ended June 30, 2003, respectively, and none and $0.7 million in losses were charged to minority interest in consolidated real estate partnerships for the three and six months ended June 30, 2002, respectively.

NOTE 3—Notes Receivable Primarily From Unconsolidated Real Estate Partnerships

        The following table summarizes the Company's notes receivable primarily from unconsolidated real estate partnerships at June 30, 2003 and 2002 (in thousands):

        The Company recognizes interest income earned from its investments in notes receivable when the collectibility of such amounts is both probable and estimable. The notes receivable were either extended by the Company and are carried at the face amount plus accrued interest ("par value notes") or were made by predecessors whose positions have been acquired at a discount ("discounted notes").

        As of June 30, 2003 and 2002, the Company held, primarily through its consolidated corporate subsidiaries, $91.0 million and $160.5 million, respectively, of par value notes receivable from unconsolidated real estate partnerships, including accrued interest, for which the Company believes the collectibility of such amounts is both probable and estimable. As such, interest income from par value notes for the three and six months ended June 30, 2003 totaled $3.2 million and $7.0 million, respectively, and for the three and six months ended June 30, 2002 totaled $8.8 million and $16.9 million, respectively.

        As of June 30, 2003 and 2002, the Company held discounted notes, including accrued interest, with a carrying value of $89.0 million and $133.3 million, respectively. The total face value plus accrued interest of these notes was $163.3 million and $275.6 million at June 30, 2003 and 2002, respectively.

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        The discounted notes are accounted for under the cost recovery method, which results in the discounted notes being carried at the acquisition amount, less subsequent cash collections, until such time as collectibility of principal and interest is probable and the timing and amounts are estimable. Based upon closed or pending transactions (which include sales, refinancings, foreclosures and rights offerings), the Company has determined that certain notes are collectible for amounts greater than their carrying value. Accordingly, the Company is recognizing accretion income, on a prospective basis over the estimated remaining life of the loans, equal to the difference between the carrying value of the discounted notes and the estimated collectible value. For the three and six months ended June 30, 2003, the Company recognized accretion income of approximately $1.5 million ($0.01 per basic and diluted share) and $2.5 million ($0.02 per basic share and diluted share), respectively, and for the three and six months ended June 30, 2002, the Company recognized accretion income of approximately $11.1 million ($0.12 per basic share and $0.11 per diluted share) and $15.5 million ($0.17 per basic and diluted share), respectively. The notes receivable generally are realizable through collection of cash or obtaining ownership of the property or of an additional equity interest in the partnership owning the property.

        Included in the above notes receivable balances, as of June 30, 2003 and 2002, are $60.1 million and $65.5 million, respectively, in notes that were secured by interests in real estate or interests in real estate partnerships. The Company earns interest on these notes receivable at various annual interest rates ranging between 5.5% and 12.0% and averaging 8.5%.

        The activity in the allowance for loan losses in total for both par value and discounted notes for the six months ended June 30, 2003, is as follows (in thousands):

        The Company will continue to monitor the collectibility or impairment of each note on a periodic basis, and changes in the allowance may occur due to changes in the market environment that affect operating cash flows.

NOTE 4—Commitments and Contingencies

Commitments

        In connection with the March 2002 acquisition of Casden Properties Inc. ("Casden") which included the merger of Casden into Aimco, and the merger of a subsidiary of Aimco into another real estate investment trust ("REIT") affiliated with Casden (collectively, the "Casden Merger") the Company has the following commitments to:

•

purchase two properties currently under development upon satisfactory completion and attainment of 60% occupancy as follows:



•

Park La Brea



•

Phase 2—comprised of a total of 521 units for a minimum consideration of approximately $163 million, expected to close in late 2003 or early 2004;



•

Phase 3—comprised of a total of 610 units for a minimum consideration of approximately $199 million, expected to close in late 2004 or early 2005; and



•

Westwood—comprised of a total of 350 units for a minimum consideration of approximately $201 million, for which construction has not yet commenced.



•

provide a stand-by facility of $70 million in debt financing associated with the development of Park La Brea and Westwood (as of June 30, 2003, no funds have been drawn on this stand-by facility);



•

invest up to $50 million for a 20% limited liability company interest in Casden Properties, LLC. As of June 30, 2003, the Company had invested $20.1 million. Casden Properties, LLC acts as general contractor for the entity that is developing Park La Brea and Westwood. In addition, Casden Properties, LLC intends to pursue new development opportunities in Southern California and other markets. Aimco will have an

7

option, but not an obligation, to purchase at completion all multifamily rental projects developed by Casden Properties, LLC; and

•

pay $2.5 million per quarter for five years (up to an aggregate amount of $50 million) to Casden Development Company, LLC as a retainer on account for redevelopment services on the Company's assets (as of June 30, 2003, $12.5 million has been paid).

Legal

        In addition to the matters described below, the Company is a party to various legal actions and administrative proceedings arising in the ordinary course of business, some of which are covered by liability insurance, and none of which are expected to have a material adverse effect on the Company's consolidated financial condition or results of operations taken as a whole.

        Limited Partnerships

        In connection with the Company's acquisitions of interests in real estate partnerships, it is sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the limited partners of such real estate partnerships or violations of the relevant partnership agreements.

        The Company may incur costs in connection with the d