APARTMENT INVESTMENT & MANAGEMENT CO - 10-Q Quarterly Report

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY FORM 10-Q INDEX

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO

Commission File Number 1-13232

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

Maryland (State or other jurisdiction of incorporation or organization)		84-1259577 (I.R.S. Employer Identification No.)
4582 South Ulster Street Parkway, Suite 1100 Denver, Colorado (Address of principal executive offices)		80237 (Zip Code)
(303) 757-8101 (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 30, 2004: 94,647,874,

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

FORM 10-Q

INDEX

		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	*Financial Statements*
	Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003	2
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2004 and 2003 (unaudited)	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
ITEM 2.	*Management's Discussion and Analysis of Financial Condition and Results of Operations*	16
ITEM 3.	*Quantitative and Qualitative Disclosures about Market Risk*	29
ITEM 4.	*Controls and Procedures*	29
	PART II. OTHER INFORMATION
ITEM 1.	*Legal Proceedings*	30
ITEM 2.	*Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities*	30
ITEM 4.	*Submission of Matters to a Vote of Security Holders*	31
ITEM 6.	*Exhibits and Reports on Form 8-K*	32
Signatures		33

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)

				June 30, 2004			December 31, 2003
				(Unaudited)
ASSETS
Real estate:
	Land			$	2,177,716		$	2,059,400
	Buildings and improvements				8,746,119			8,351,762

Total real estate					10,923,835			10,411,162
	Less accumulated depreciation				(1,976,291	)		(1,805,386	)

		Net real estate			8,947,544			8,605,776

Cash and cash equivalents					90,619			96,983
Restricted cash					285,586			243,174
Accounts receivable					58,703			66,943
Accounts receivable from affiliates					69,357			56,874
Deferred financing costs					74,159			72,830
Notes receivable from unconsolidated real estate partnerships					143,685			137,416
Notes receivable from non-affiliates					59,933			68,771
Investment in unconsolidated real estate partnerships					180,392			237,056
Other assets					343,924			283,634
Assets held for sale					105,289			243,905

			Total assets	$	10,359,191		$	10,113,362

LIABILITIES AND STOCKHOLDERS' EQUITY
Secured tax-exempt bond financing				$	1,229,367		$	1,199,360
Secured notes payable					4,541,102			4,331,104
Mandatorily redeemable preferred securities					15,019			113,619
Term loans					343,000			354,387
Credit facility					285,600			81,000

			Total indebtedness		6,414,088			6,079,470

Accounts payable					40,965			24,139
Accrued liabilities and other					407,384			392,866
Deferred income					31,245			25,856
Security deposits					40,615			40,490
Deferred income taxes payable					18,235			26,065
Liabilities related to assets held for sale					83,871			167,966

			Total liabilities		7,036,403			6,756,852

Minority interest in consolidated real estate partnerships					210,285			191,948
Minority interest in Aimco Operating Partnership					269,719			303,905
Stockholders' equity:
	Preferred Stock, perpetual				755,250			555,250
	Preferred Stock, convertible				200,000			299,992
	Class A Common Stock, $.01 par value, 436,962,738 and 444,962,738 shares authorized, 94,631,105 and 93,887,040 shares issued and outstanding, at June 30, 2004 and December 31, 2003, respectively				946			939
	Additional paid-in capital				3,069,095			3,053,312
	Unvested restricted stock				(21,018	)		(10,772	)
	Notes due on common stock purchases				(39,647	)		(40,046	)
	Distributions in excess of earnings				(1,121,842	)		(998,018	)

			Total stockholders' equity		2,842,784			2,860,657

			Total liabilities and stockholders' equity	$	10,359,191		$	10,113,362

See notes to consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)

			For the Three Months Ended June 30,						For the Six Months Ended June 30,
			2004			2003			2004			2003
REVENUES:
Rental and other property revenues			$	361,001		$	353,898		$	715,066		$	699,641
Property management revenues, primarily from affiliates				9,371			9,607			17,627			18,846
Activity fees and asset management revenues, primarily from affiliates				9,820			3,111			18,088			8,899

	Total revenues			380,192			366,616			750,781			727,386

EXPENSES:
Property operating expenses				167,704			150,880			330,684			300,120
Property management expenses				1,989			1,925			4,331			4,042
Activity and asset management expenses				4,716			1,972			7,027			3,807
Depreciation and amortization				93,216			87,645			182,900			171,878
General and administrative expenses				18,407			7,566			37,039			17,301
Other income, net				(589	)		(3,579	)		(1,786	)		(7,202	)

	Total expenses			285,443			246,409			560,195			489,946

Operating income				94,749			120,207			190,586			237,440
Interest income				7,533			7,067			15,006			13,142
Provision for losses on notes receivable				(1,180	)		(791	)		(1,101	)		(1,488	)
Interest expense				(96,372	)		(91,174	)		(189,411	)		(180,014	)
Deficit distributions to minority partners				(2,650	)		(3,633	)		(7,088	)		(9,101	)
Equity in losses of unconsolidated real estate partnerships				(1,038	)		(3,132	)		(2,472	)		(4,814	)
Impairment loss on investment in unconsolidated real estate partnerships				(1,881	)		—			(1,733	)		—
Gain on dispositions of real estate related to unconsolidated entities and other				2,097			839			2,080			756

Income before minority interests, discontinued operations and cumulative effect of change in accounting principle				1,258			29,383			5,867			55,921
Minority interests:
	Minority interest in consolidated real estate partnerships			3,650			(1,579	)		4,659			(2,648	)
	Minority interest in Aimco Operating Partnership, preferred			(1,971	)		(2,604	)		(3,940	)		(5,225	)
	Minority interest in Aimco Operating Partnership, common			2,163			(164	)		4,404			(251	)

		Total minority interests		3,842			(4,347	)		5,123			(8,124	)

Income from continuing operations				5,100			25,036			10,990			47,797
Income from discontinued operations, net				8,886			34,194			20,981			33,256

Income before cumulative effect of change in accounting principle				13,986			59,230			31,971			81,053
Cumulative effect of change in accounting principle				—			—			(3,957	)		—

Net income				13,986			59,230			28,014			81,053
Net income attributable to preferred stockholders				21,773			24,961			41,640			47,102

Net income (loss) attributable to common stockholders			$	(7,787	)	$	34,269		$	(13,626	)	$	33,951

Earnings (loss) per common share—basic:
	Income (loss) from continuing operations (net of preferred dividends)		$	(0.18	)	$	0.00		$	(0.33	)	$	0.01
	Income from discontinued operations			0.10			0.37			0.22			0.36
	Cumulative effect of change in accounting principle			—			—			(0.04	)		—

	Net income (loss) attributable to common stockholders		$	(0.08	)	$	0.37		$	(0.15	)	$	0.37

Earnings (loss) per common share—diluted:
	Income (loss) from continuing operations (net of preferred dividends)		$	(0.18	)	$	0.00		$	(0.33	)	$	0.01
	Income from discontinued operations			0.10			0.37			0.22			0.36
	Cumulative effect of change in accounting principle			—			—			(0.04	)		—

	Net income (loss) attributable to common stockholders		$	(0.08	)	$	0.37		$	(0.15	)	$	0.37

Weighted average common shares outstanding				93,065			92,747			92,938			92,720

Weighted average common shares and equivalents outstanding				93,065			92,832			92,938			92,809

Dividends declared per common share			$	0.60		$	0.82		$	1.20		$	1.64

See notes to consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

					For the Six Months Ended June 30,
					2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$	28,014		$	81,053

	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				182,900			171,878
		Deficit distributions to minority partners				7,088			9,101
		Equity in losses of unconsolidated real estate partnerships				2,472			4,814
		Gain on dispositions of real estate related to unconsolidated entities and other				(2,080	)		(756	)
		Impairment loss on investment in unconsolidated real estate partnerships				1,733			—
		Cumulative effect of change in accounting principle				3,957			—
		Minority interest in Aimco Operating Partnership				(464	)		5,476
		Minority interest in consolidated real estate partnerships				(4,659	)		2,648
		Discontinued operations:
			Depreciation and amortization			2,444			16,460
			Recovery of deficit distributions to minority partners			(3,318	)		(500	)
			Gain on dispositions of real estate, net of minority partners' interest			(21,585	)		(44,542	)
			Impairment loss on real estate assets sold or held for sale			491			7,941
			Minority interest in consolidated real estate partnerships			(180	)		(28	)
			Minority interest in Aimco Operating Partnership			2,743			4,303
		Changes in operating assets and operating liabilities:
			Deferred income taxes			(7,830	)		(9,209	)
			Accounts receivable			(7,467	)		1,249
			Accounts payable, accrued liabilities and other			5,862			22,610
			Other assets			(31,051	)		(27,991	)
			Other			6,914			43,408

				Total adjustments		137,970			206,862

				Net cash provided by operating activities		165,984			287,915

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of real estate					(176,971	)		(5,000	)
	Capital expenditures					(102,930	)		(122,354	)
	Purchases of non-real estate assets					(20,083	)		(11,274	)
	Proceeds from dispositions of real estate					112,362			243,916
	Cash from newly consolidated properties					13,281			4,442
	Purchases of general and limited partnership interests and other assets					(35,232	)		(33,023	)
	Originations of notes receivable from unconsolidated real estate partnerships					(28,176	)		(20,631	)
	Proceeds from repayment of notes receivable					18,897			18,880
	Proceeds from sale of investments and other assets					—			3,281
	Cash paid in connection with merger/acquisition related costs					(935	)		(11,341	)
	Distributions received from investments in unconsolidated real estate partnerships					41,624			46,422

				Net cash (used in) provided by investing activities		(178,163	)		113,318

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from secured notes payable borrowings					154,788			266,999
	Principal repayments on secured notes payable					(181,682	)		(377,379	)
	Proceeds from tax-exempt bond financing					69,471			—
	Principal repayments on tax-exempt bond financing					(46,137	)		(12,689	)
	Net borrowings (paydowns) on term loans and revolving credit facility					193,213			(51,624	)
	Payment of loan costs					(8,507	)		(12,286	)
	Proceeds from issuance (redemption) of mandatorily redeemable preferred securities					(98,875	)		97,250
	Proceeds from issuance of Class A Common Stock, High Performance Units and exercise of options/warrants					1,294			2,004
	Proceeds from issuance of preferred stock					193,250			—
	Redemption of preferred stock					(99,926	)		(59,845	)
	Principal repayments received on notes due on Class A Common Stock purchases					1,189			3,846
	Repurchase of Class A Common Stock and redemption of OP Units					(13,088	)		(1,086	)
	Payment of Class A Common Stock dividends					(112,532	)		(152,425	)
	Contributions from minority interest					22,155			—
	Payment of distributions to minority interest					(44,107	)		(52,006	)
	Payment of preferred stock dividends					(39,306	)		(45,630	)

				Net cash used in financing activities		(8,800	)		(394,871	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS						(20,979	)		6,362
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD						96,983			95,413
NET CHANGE IN CASH AND CASH EQUIVALENTS INCLUDED WITHIN ASSETS HELD FOR SALE FROM BEGINNING TO END OF PERIOD						14,615			(80	)

CASH AND CASH EQUIVALENTS AT END OF PERIOD					$	90,619		$	101,695

See notes to consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)

NOTE 1—Organization

Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. We are a self-administered and self-managed real estate investment trust, or REIT, engaged in the acquisition, ownership, management and redevelopment of apartment properties. As of June 30, 2004, we owned or managed 1,578 apartment properties containing 278,011 apartment units located in 47 states, the District of Columbia and Puerto Rico. We serve approximately one million residents per year.

As of June 30, 2004, we:

•: owned an equity interest in and consolidated 174,760 units in 698 properties (which we refer to as "consolidated"), of which 174,646 units were also managed by us;
•: owned an equity interest in and did not consolidate 54,245 units in 382 properties (which we refer to as "unconsolidated"), of which 47,446 units were also managed by us; and
•: provided services or managed, for third party owners, 49,006 units in 498 properties, primarily pursuant to long-term agreements (including 39,472 units in 416 properties that are asset managed only, and not property managed), although in certain cases we may indirectly own a small interest (generally less than one percent) in such properties through a partnership syndication or other fund.