Exhibit 99.1

Item 6. Selected Financial Data

The following selected financial data is based on our audited historical financial statements. This information should be read in conjunction with such financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein or in previous filings with the Securities and Exchange Commission.

		For the Years Ended December 31,
		2009 (1)				2008 (1) (2)				2007 (1)				2006 (1)				2005 (1)
		(dollar amounts in thousands, except per share data)
OPERATING DATA:
Total revenues		$	1,151,736			$	1,199,423			$	1,132,109			$	1,043,683			$	866,992
Total operating expenses (3)			(1,051,394	)			(1,151,459	)			(958,070	)			(879,107	)			(731,102	)
Operating income (3)			100,342				47,964				174,039				164,576				135,890
Loss from continuing operations (3)			(198,703	)			(119,163	)			(50,097	)			(44,798	)			(36,366	)
Income from discontinued operations, net (4)			153,903				746,165				175,603				331,820				161,718
Net (loss) income			(44,800	)			627,002				125,506				287,022				125,352
Net income attributable to noncontrolling interests			(19,474	)			(214,995	)			(95,595	)			(110,234	)			(54,370	)
Net income attributable to preferred stockholders			(50,566	)			(53,708	)			(66,016	)			(81,132	)			(87,948	)
Net (loss) income attributable to Aimco common stockholders			(114,840	)			351,314				(40,586	)			93,710				(21,223	)
Earnings (loss) per common share — basic and diluted (5):
Loss from continuing operations attributable to Aimco common stockholders		$	(1.75	)		$	(2.11	)		$	(1.42	)		$	(1.48	)		$	(1.33	)
Net (loss) income attributable to Aimco common stockholders		$	(1.00	)		$	3.96			$	(0.43	)		$	0.98			$	(0.23	)
BALANCE SHEET INFORMATION:
Real estate, net of accumulated depreciation		$	6,795,391			$	6,956,631			$	6,729,914			$	6,265,294			$	5,573,491
Total assets			7,906,468				9,441,870				10,617,681				10,292,587				10,019,160
Total indebtedness			5,541,148				5,919,771				5,534,154				4,852,928				4,192,292
Total equity			1,534,703				1,646,749				2,048,546				2,650,182				3,060,969
OTHER INFORMATION:
Dividends declared per common share		$	0.40			$	7.48			$	4.31			$	2.40			$	3.00
Total consolidated properties (end of period)			426				514				657				703				619
Total consolidated apartment units (end of period).			95,202				117,719				153,758				162,432				158,548
Total unconsolidated properties (end of period)			77				85				94				102				264
Total unconsolidated apartment units (end of period)			8,478				9,613				10,878				11,791				35,269
Units managed (end of period) (6)			31,974				35,475				38,404				42,190				46,667

(1)		Certain reclassifications have been made to conform to the September 30, 2010 financial statement presentation, including retroactive adjustments to reflect additional properties sold or classified as held for sale as of September 30, 2010, as discontinued operations (see Note 13 to the consolidated financial statements in Item 8), and retroactive adjustments related to our January 1, 2009 adoption of the provisions of Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards No. 141(R), or SFAS 141(R), FASB Statement of Financial Accounting Standards No. 160, or SFAS 160, and FASB Staff Position No. EITF 03-6-1, or FSP EITF 03-6-1 (see Note 2 to the consolidated financial statements in Item 8).
(2)		The consolidated statement of income for the year ended December 31, 2008, has been restated to reclassify impairment losses on real estate development assets within operating income. The reclassification reduced operating income by $91.1 million for the year ended December 31, 2008, and had no effect on the reported amounts of loss from continuing operations, net income, net income available to the Partnership’s common unitholders or earnings per unit. Additionally, the reclassification had no effect on the consolidated balance sheets, statements of partners’ capital or statements of cash flows. See Note 2 to the consolidated financial statements in Item 8.
(3)		Total operating expenses, operating income and loss from continuing operations for the year ended December 31, 2008, include a $91.1 million pre-tax provision for impairment losses on real estate development assets, which is discussed further in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.

(4)		Income from discontinued operations for the years ended December 31, 2009, 2008, 2007, 2006 and 2005 includes $221.8 million, $800.3 million, $117.6 million, $337.1 million and $162.7 million in gains on disposition of real estate, respectively. Income from discontinued operations for 2009, 2008 and 2007 is discussed further in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7.
(5)		Weighted average common shares, common share equivalents, dilutive preferred securities and earnings per share amounts for each of the periods presented above have been adjusted for our application during the fourth quarter 2009 of a change in accounting, which requires the shares issued in our special dividends paid in 2008 and January 2009 to be treated as issued and outstanding on the dividend payment dates for basic purposes and as potential share equivalents for the periods between the ex-dividend dates and payment dates for diluted purposes, rather than treating the shares as issued and outstanding as of the beginning of the earliest period presented for both basic and diluted purposes. See Note 2 to the consolidated financial statements in Item 8 for further discussion of this accounting change.
(6)		Units managed represents units in properties for which we provide asset management services only, although in certain cases we may indirectly own generally less than one percent of the economic interest in such properties through a partnership syndication or other fund.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

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. Our property operations are characterized by diversification of product, location and price point. We primarily invest in the 20 largest U.S. markets, as measured by total market capitalization, which is the total market value of institutional-grade apartment properties in a particular market. We define these markets as “target markets” and they possess the following characteristics: a high concentration of population and apartment units; geographic and employment diversification; and historically strong returns with reduced volatility as part of a diversified portfolio. We are one of the largest owners and operators of apartment properties in the United States. As of December 31, 2009, we owned or managed 870 apartment properties containing 135,654 units located in 44 states, the District of Columbia and Puerto Rico. Our primary sources of income and cash are rents associated with apartment leases.

The key financial indicators that we use in managing our business and in evaluating our financial condition and operating performance are: NAV; Funds From Operations, or FFO; Adjusted FFO, or AFFO, which is FFO less spending for Capital Replacements; same store property operating results; net operating income; Free Cash Flow, which is net operating income less spending for Capital Replacements; financial coverage ratios; and leverage as shown on our balance sheet. FFO and Capital Replacements are defined and further described in the sections captioned “Funds From Operations” and “Capital Additions” below. The key macro-economic factors and non-financial indicators that affect our financial condition and operating performance are: household formations; rates of job growth; single-family and multifamily housing starts; interest rates; and availability and cost of financing.

Because our operating results depend primarily on income from our properties, the supply and demand for apartments influences our operating results. Additionally, the level of expenses required to operate and maintain our properties and the pace and price at which we redevelop, acquire and dispose of our apartment properties affect our operating results. Our cost of capital is affected by the conditions in the capital and credit markets and the terms that we negotiate for our equity and debt financings.

During the challenging financial and economic environment in 2009, we focused on: serving and retaining residents; continually improving our portfolio; reducing leverage and financial risk; and simplifying our business model.

We are focused on owning and operating B/B+ quality apartments concentrated in our target markets. We intend to upgrade the quality of our portfolio through the sale of approximately 5% to 10% of our portfolio annually, with the proceeds generally used to increase our allocation of capital to well located properties within our target markets through capital investments, redevelopment or acquisitions.

The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying consolidated financial statements in Item 8.

Results of Operations

Overview

2009 compared to 2008

We reported net loss attributable to Aimco of $64.3 million and net loss attributable to Aimco common stockholders of $114.8 million for the year ended December 31, 2009, compared to net income attributable to Aimco of $412.0 million and net income attributable to Aimco common stockholders of $351.3 million for the year ended December 31, 2008, decreases of $476.3 million and $466.1 million, respectively. These decreases were principally due to the following items, all of which are discussed in further detail below:

	•		a decrease in income from discontinued operations, primarily related to our sale of fewer assets in 2009 and the recognition of lower gains on sales as compared to 2008;
	•		a decrease in gain on dispositions of unconsolidated real estate and other, primarily due to a large gain on the sale of an interest in an unconsolidated real estate partnership in 2008;
	•		an increase in depreciation and amortization expense, primarily related to completed redevelopments and capital additions placed in service for partial periods during 2008 or 2009; and
	•		a decrease in asset management and tax credit revenues, primarily due to a reduction in promote income, which is income earned in connection with the disposition of properties owned by our consolidated joint ventures.

The effects of these items on our operating results were partially offset by:

	•		a decrease in earnings allocable to noncontrolling interests, primarily due to a decrease in the noncontrolling interests’ share of the decrease in gains on sales discussed above;
	•		a decrease in general and administrative expenses, primarily related to reductions in personnel and related expenses from our organizational restructuring activities during 2008 and 2009; and
	•		impairment losses on real estate development assets in 2008, for which no similar impairments were recognized in 2009.

2008 compared to 2007

We reported net income attributable to Aimco of $412.0 million and net income attributable to Aimco common stockholders of $351.3 million for the year ended December 31, 2008, compared to net income attributable to Aimco of $29.9 million and net loss attributable to Aimco common stockholders of $40.6 million for the year ended December 31, 2007, increases of $382.1 million and $391.9 million, respectively. These increases were principally due to the following items, all of which are discussed in further detail below:

	•		an increase in income from discontinued operations, primarily related to an increase in the number of assets sold during 2008 and our recognition of higher gains on sales as compared to 2007;
	•		an increase in gain on dispositions of unconsolidated real estate and other, primarily due to a large gain on the sale of an interest in an unconsolidated real estate partnership in 2008;
	•		an increase in net operating income associated with property operations, reflecting improved operations of our same store properties and other properties; and
	•		an increase in asset management and tax credit revenues, primarily due to an increase in promote income, which is income earned in connection with the disposition of properties owned by our consolidated joint ventures.

The effects of these items on our operating results were partially offset by:

	•		impairment losses on real estate development assets in 2008, for which no similar impairments were recognized in 2007;
	•		an increase in earnings allocable to noncontrolling interests, primarily due to an increase in the noncontrolling interests’ share of the increase in gains on sales discussed above;
	•		an increase in depreciation and amortization expense, primarily related to completed redevelopments placed in service for partial periods during 2007 or 2008;
	•		restructuring costs recognized during the fourth quarter of 2008; and

•

an increase in provisions for losses on notes receivable, primarily due to the impairment during 2008 of our interest in Casden Properties LLC.

The following paragraphs discuss these and other items affecting the results of our operations in more detail.

Business Segment Operating Results

As of December 31, 2009, we had two reportable segments: real estate (owning, operating and redeveloping apartments) and investment management (portfolio management and asset management). Based on a planned reduction in our transactional activities, during the three months ended March 31, 2010, we reevaluated our reportable segments and determined our investment management reporting unit no longer meets the requirements for a reportable segment. Additionally, to provide more meaningful information regarding our real estate operations, we elected to disaggregate information for the prior real estate segment. Following these changes, we have two reportable segments: conventional real estate operations and affordable real estate operations, which are discussed in further detail below.

Real Estate Operations

Our real estate portfolio is comprised of two business components: conventional real estate operations and affordable real estate operations, which also represent our two reportable segments. Our conventional real estate portfolio consists of market-rate apartments with rents paid by the resident and includes 226 properties with 70,758 units. Our affordable real estate portfolio consists of 244 properties with 28,034 units, with rents that are generally paid, in whole or part, by a government agency. Our conventional and affordable properties contributed 87% and 13%, respectively, of our property net operating income attributed to the Partnership’s common unitholders during the year ended December 31, 2009.

Our chief operating decision maker uses various generally accepted industry financial measures to assess the performance and financial condition of the business, including: net operating income; Net Asset Value; Pro forma Funds From Operations; Adjusted Funds From Operations; same store property operating results; Free Cash Flow; financial coverage ratios; and leverage as shown on our balance sheet. Our chief operating decision maker emphasizes net operating income as a key measurement of segment profit or loss. Segment net operating income is generally defined as segment revenues less direct segment operating expenses.

The following table summarizes the net operating income of our real estate operations, including our conventional and affordable segments, for the years ended December 31, 2009, 2008 and 2007 (in thousands):

		Year Ended
		December 31,
		2009				2008				2007
Rental and other property revenues:
Conventional real estate operations		$	909,218			$	913,793			$	882,545
Affordable real estate operations			187,583				180,456				168,885
Corporate and amounts not allocated			5,082				6,344				6,924
Total			1,101,883				1,100,593				1,058,354
Property operating expenses:
Conventional real estate operations			363,863				360,479				354,455
Affordable real estate operations			92,416				91,867				83,126
Corporate and amounts not allocated			59,469				74,870				69,822
Total			515,748				527,216				507,403
Real estate operations net operating income		$	586,135			$	573,377			$	550,951

For the year ended December 31, 2009, compared to the year ended December 31, 2008, our real estate operations net operating income increased $12.8 million, or 2.2%, due to an increase in rental and other property revenues of $1.3 million, or 0.1%, and a decrease in property operating expenses of $11.5 million, or 2.2%.

Our conventional real estate operations net operating income decreased $8.0 million, or 1.4%, from $553.3 million during the year ended December 31, 2008 to $545.3 million during the year ended December 31, 2009. This decrease was primarily attributable to our conventional same store properties, including an $10.1 million, or 1.4%, decrease in revenues due to lower average rent (approximately $19 per unit) and a decrease of 30 basis points in average physical occupancy, and $1.4 million increase in expenses due to increases in payroll, repairs and maintenance, and insurance expenses, partially offset by decreases in contract services, marketing and administrative expenses. The decrease in conventional net operating income associated with our same store properties was partially offset by a $3.5 million increase in net operating income associated with our conventional non-same store properties. Revenues of our conventional non-same store properties increased $5.5 million, primarily due to an $8.1 million increase in redevelopment revenues, primarily due to more units in service at these properties in 2009, partially offset by a $2.0 million increase in expenses related to our non-same store properties, primarily due to increases in real estate taxes and expenses related to properties newly consolidated in 2009.

Our affordable real estate operations net operating income increased $6.6 million, or 7.4%, from $88.6 million during the year ended December 31, 2008, to $95.2 million during the year ended December 31, 2009. This increase in net operating income was primarily due to increases in revenues of our affordable properties of $7.1 million, including a $5.0 million increase primarily due to higher average rents partially offset by lower physical occupancy, and a $2.1 million increase related to properties that were newly consolidated in 2009.

Real estate operations net operating income includes property management revenues and expenses and casualty losses, which we do not allocate to our conventional or affordable segments for purposes of evaluating segment performance. Property management revenues decreased by $1.3 million, due to a reduction in the number of properties managed due to sales. Expenses not allocated to our conventional or affordable segments decreased by $15.4 million, primarily due to a $16.6 million decrease in property management expenses, resulting primarily from reductions in personnel and related costs attributed to our restructuring activities (see Note 3 to the consolidated financial statements in Item 8).

For the year ended December 31, 2008, compared to the year ended December 31, 2007, our real estate operations net operating income increased $22.4 million, or 4.1%, due to an increase in rental and other property revenues of $42.2 million, or 4.0%, partially offset by an increase in property operating expenses of $19.8 million, or 3.9%.

Our conventional real estate operations net operating income increased $25.2 million, or 4.8%, from $528.1 million during the year ended December 31, 2007 to $553.3 million during the year ended December 31, 2008. This increase was primarily attributable to our conventional same store properties, including a $22.2 million, or 3.1%, increase in revenues due to higher average rent (approximately $21 per unit) and an increase of 80 basis points in average physical occupancy, partially offset by a $1.7 million increase in expenses due to increases in utility, real estate tax, marketing, administrative and contract service expenses, offset by decreases in payroll, turnover and repair and maintenance expenses. In addition to the increase in conventional same store net operating income, net operating income related to our conventional non-same store properties increased by $4.7 million. Revenues of our conventional non-same store properties increased $9.0 million, primarily due to a $6.5 million increase in redevelopment revenues due to more units in service during 2008, partially offset by a $4.3 million increase in expenses of our conventional non-same store properties primarily due to increases in payroll, real estate tax, contract services and marketing expenses.

Our affordable real estate operations net operating income increased $2.8 million, or 3.3%, from $85.8 million during the year ended December 31, 2007, to $88.6 million during the year ended December 31, 2008. Revenues of our affordable properties increased by $11.5 million and expenses of our affordable properties increased by $8.7 million, primarily due to properties newly consolidated during late 2007.

Real estate operations net operating income includes property management revenues and expenses and casualty losses, which we do not allocate to our conventional or affordable segments for purposes of evaluating segment performance. Property management revenues decreased by $0.6 million, primarily attributable to a reduction in the number of properties managed due to sales. Expenses not allocated to our conventional or affordable segments increased by $5.0 million, primarily due to a $2.8 million increase in casualty losses, primarily due to properties damaged by Tropical Storm Fay and Hurricane Ike in 2008, and a $2.2 million increase in property management expenses.

Asset Management and Tax Credit Revenues

We perform activities and services for consolidated and unconsolidated real estate partnerships, including portfolio strategy, capital allocation, joint ventures, tax credit syndication, acquisitions, dispositions and other transaction activities. Within our owned portfolio, we refer to these activities as “Portfolio Management,” and their benefit is seen in property operating results and in gains on dispositions. For affiliated partnerships, we refer to these activities as asset management, for which we are separately compensated through fees paid by third party investors. These activities are conducted in part by our taxable subsidiaries, and the related net operating income may be subject to income taxes.

Asset management revenue may include certain fees that were earned in a prior period, but not recognized at that time because collectibility was not reasonably assured. Those fees may be recognized in a subsequent period upon occurrence of a transaction or a high level of the probability of occurrence of a transaction, or improvement in operations that generates sufficient cash to pay the fees.

For the year ended December 31, 2009, compared to the year ended December 31, 2008, asset management and tax credit revenues decreased $49.0 million. This decrease is primarily attributable to a $42.8 million decrease in promote income, which is income earned in connection with the disposition of properties owned by our consolidated joint ventures, due to fewer related sales in 2009, a $7.6 million decrease in other general partner transactional fees and a $2.2 million decrease in asset management fees, offset by a $3.6 million increase in revenues associated with our affordable housing tax credit syndication business, including syndication fees and other revenue earned in connection with these arrangements.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, asset management and tax credit revenues increased $25.1 million. This increase is primarily attributable to a $30.7 million increase in promote income, which is income earned in connection with the disposition of properties owned by our consolidated joint ventures, and a $10.3 million increase in other general partner transactional fees. These increases are offset by a decrease of $10.0 million in asset management fees and a decrease of $5.9 million in revenues associated with our affordable housing tax credit syndication business, including syndication fees and other revenue earned in connection with these arrangements.

Investment Management Expenses

Investment management expenses consist primarily of the costs of departments that perform asset management and tax credit activities. For the year ended December 31, 2009, compared to the year ended December 31, 2008, investment management expenses decreased $9.0 million, primarily due to reductions in personnel and related costs from our organizational restructurings and a reduction in transaction costs related to our retroactive adoption of SFAS 141(R) (see Note 2 to the consolidated financial statements in Item 8).

For the year ended December 31, 2008, compared to the year ended December 31, 2007, investment management expenses increased $4.3 million, primarily due to a $3.5 million increase in acquisition costs.

Other Operating Expenses (Income)

Depreciation and Amortization

For the year ended December 31, 2009, compared to the year ended December 31, 2008, depreciation and amortization increased $50.8 million, or 13.3%. This increase primarily consists of depreciation related to properties acquired during the latter part of 2008, completed redevelopments and other capital projects recently placed in service.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, depreciation and amortization increased $45.3 million, or 13.4%. This increase reflects depreciation of $65.1 million for newly acquired properties, completed redevelopments and other capital projects recently placed in service. This increase was partially offset by a decrease of $25.7 million in depreciation adjustments necessary to reduce the carrying amount of buildings and improvements to their estimated disposition value, or zero in the case of a planned demolition, primarily due to a property that became fully depreciated during 2007.

Provision for Operating Real Estate Impairment Losses

Real estate and other long-lived assets to be held and used are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, we make an assessment of its recoverability by comparing the carrying amount to our estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

For the years ended December 31, 2009 and 2007, we recognized impairment losses of $2.3 million and $1.1 million, respectively, related to properties classified as held for use as of December 31, 2009. We recognized no such impairment losses during the year ended December 31, 2008.

Provision for Impairment Losses on Real Estate Development Assets

In connection with the preparation of our 2008 annual financial statements, we assessed the recoverability of our investment in our Lincoln Place property, located in Venice, California. Based upon the decline in land values in Southern California during 2008 and the expected timing of our redevelopment efforts, we determined that the total carrying amount of the property was no longer probable of full recovery and, accordingly, during the three months ended December 31, 2008, recognized an impairment loss of $85.4 million ($55.6 million net of tax).

Similarly, we assessed the recoverability of our investment in Pacific Bay Vistas (formerly Treetops), a vacant property located in San Bruno, California, and determined that the carrying amount of the property was no longer probable of full recovery and, accordingly, we recognized an impairment loss of $5.7 million for this property during the three months ended December 31, 2008.

The impairments discussed above totaled $91.1 million and are included in provisions for impairment losses on real estate development assets in our consolidated statement of income for the year ended December 31, 2009 included in Item 8. We recognized no similar impairments on real estate development assets during the years ended December 31, 2009 or 2007.

General and Administrative Expenses

For the year ended December 31, 2009, compared to the year ended December 31, 2008, general and administrative expenses decreased $23.7 million, or 29.5%. This decrease is primarily attributable to reductions in personnel and related expenses associated with our organizational restructurings (see Note 3 to the consolidated financial statements in Item 8), pursuant to which we eliminated approximately 400, or 36%, of our offsite positions between December 31, 2008 and December 31, 2009.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, general and administrative expenses increased $8.0 million, or 11.1%. This increase is primarily attributable to higher personnel and related expenses of $6.1 million and an increase of $1.5 million in information technology communications costs.

Other Expenses, Net

Other expenses, net includes franchise taxes, risk management activities, partnership administration expenses and certain non-recurring items.

For the year ended December 31, 2009, compared to the year ended December 31, 2008, other expenses, net decreased by $6.3 million. The decrease is primarily attributable to a $5.4 million write-off during 2008 of certain communications hardware and capitalized costs in 2008, and a $5.3 million reduction in expenses of our self insurance activities, including a decrease in casualty losses on less than wholly owned properties from 2008 to 2009. These decreases are partially offset by an increase of $4.8 million in costs related to certain litigation matters.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, other expenses, net increased by $3.1 million. The increase includes a $5.4 million write-off of certain communications hardware and capitalized costs during 2008 and a $1.2 million write-off of redevelopment costs associated with a change in the planned use of a property during 2008. The net unfavorable change also reflects $3.6 million of income recognized in 2007 related to the transfer of certain property rights to an unrelated party. These increases were partially offset by a $3.7 million reduction in expenses of our self insurance activities (net of costs in 2008 related to Tropical Storm Fay and Hurricane Ike) and a net decrease of $2.0 million in costs related to certain litigation matters.

Restructuring Costs

For the year ended December 31, 2009, we recognized restructuring costs of $11.2 million, as compared to $22.8 million in the year ended December 31, 2008, related to our organizational restructurings, which are further discussed in Note 3 to the consolidated financial statements in Item 8. We recognized no restructuring costs during the year ended December 31, 2007.

Interest Income

Interest income consists primarily of interest on notes receivable from non-affiliates and unconsolidated real estate partnerships, interest on cash and restricted cash accounts, and accretion of discounts on certain notes receivable from unconsolidated real estate partnerships. Transactions that result in accretion occur infrequently and thus accretion income may vary from period to period.

For the year ended December 31, 2009, compared to the year ended December 31, 2008, interest income decreased $10.5 million, or 53.7%. Interest income decreased by $8.7 million due to lower interest rates on notes receivable, cash and restricted cash balances and lower average balances and by $4.1 million due to a decrease in accretion income related to our note receivable from Casden Properties LLC for which we ceased accretion following impairment of the note in 2008. These decreases were partially offset by a $2.3 million increase in accretion income related to other notes during the year ended December 31, 2008, resulting from a change in the timing and amount of collection.

For the year ended December 31, 2008, as compared to the year ended December 31, 2007, interest income decreased $23.2 million, or 54.1%. Interest income decreased by $15.9 million due to lower interest rates on notes receivable, cash and restricted cash balances and lower average balances. Interest income also decreased by $5.8 million due to an adjustment of accretion on certain discounted notes during the year ended December 31, 2008, resulting from a change in the estimated timing and amount of collection, and by $1.5 million for accretion income recognized during the year ended December 31, 2007, related to the prepayment of principal on certain discounted loans collateralized by properties in West Harlem in New York City.

Provision for Losses on Notes Receivable

During the years ended December 31, 2009, 2008 and 2007, we recognized net provisions for losses on notes receivable of $21.5 million, $17.6 million and $2.0 million, respectively. The provisions for losses on notes receivable for the years ended December 31, 2009 and 2008, primarily consist of impairments related to our investment in Casden Properties LLC, which are discussed further below.

As part of the March 2002 acquisition of Casden Properties, Inc., we invested $50.0 million for a 20% passive interest in Casden Properties LLC, an entity organized to acquire, re-entitle and develop land parcels in Southern California. Based upon the profit allocation agreement, we account for this investment as a note receivable and through 2008 were amortizing the discounted value of the investment to the $50.0 million previously estimated to be collectible, through January 2, 2009, the initial dissolution date of the entity. In 2009, the managing member extended the dissolution date. In connection with the preparation of our 2008 annual financial statements and as a result of a decline in land values in Southern California, we determined our recorded investment amount was not fully recoverable, and accordingly recognized an impairment loss of $16.3 million ($10.0 million net of tax) during the three months ended December 31, 2008. In connection with the preparation of our 2009 annual financial statements and as a result of continued declines in land values in Southern California, we determined our then recorded investment amount was not fully recoverable, and accordingly recognized an impairment loss of $20.7 million ($12.4 million net of tax) during the three months ended December 31, 2009.

In addition to the impairments related to Casden Properties LLC discussed above, we recognized provisions for losses on notes receivable totaling $0.8 million, $1.3 million and $2.0 million during the years ended December 31, 2009, 2008 and 2007, respectively.

Interest Expense

For the years ended December 31, 2009 and December 31, 2008, interest expense, which includes the amortization of deferred financing costs, totaled $315.4 million and $315.0 million, respectively. Interest expense increased by $14.5 million due to a reduction in redevelopment activity during 2009, which resulted in a reduction in capitalized interest. In addition, interest expense increased by $1.2 million due to an increase in prepayment penalties associated with refinancing activities, from $2.8 million in 2008 to $4.0 million in 2009, and by $4.0 million related to non-recourse property loans, from $301.9 million to $305.9 million, primarily due to higher average interest rates partially offset by lower average balances during 2009. These increases in interest expense were substantially offset by decreases in corporate interest expense. Interest expense related to corporate debt, which is primarily floating rate, decreased by $19.4 million, from $34.8 million to $15.4 million, primarily due to lower average balances and interest rates during 2009.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, interest expense increased $10.3 million, or 3.4%. Interest expense related to non-recourse property loans increased by $16.2 million, from $285.7 million to $301.9 million, primarily due to higher average balances partially offset by lower average interest rates during 2008. In addition, interest expense increased by $4.6 million, due to a decrease in capitalized interest from $29.1 million in 2007 to $24.5 million in 2008, resulting from more units in service and lower interest rates. These increases were partially offset by a decrease in interest expense related to corporate debt, which is primarily floating rate and which decreased by $10.4 million, from $45.2 million to $34.8 million, primarily due to lower average balances and interest rates during 2008.

Equity in Losses of Unconsolidated Real Estate Partnerships

Equity in losses of unconsolidated real estate partnerships includes our share of net losses of our unconsolidated real estate partnerships and is primarily driven by depreciation expense in excess of the net operating income recognized by such partnerships.

During the years ended December 31, 2009, 2008 and 2007, we recognized equity in losses of unconsolidated real estate partnerships of $12.0 million, $4.6 million and $3.3 million, respectively. The $7.4 million increase in our equity in losses from 2008 to 2009 was primarily due to our sale in late 2008 of an interest in an unconsolidated real estate partnership that generated $3.0 million of equity in earnings during the year ended December 31, 2008, and our sale during 2009 of our interest in an unconsolidated group purchasing organization which resulted in a decrease of equity in earnings of approximately $1.2 million. The increase in equity in losses also includes additional losses recognized during 2009 related to the underlying investment properties of certain tax credit syndications we consolidated during 2009 and 2008.

Impairment Losses Related to Unconsolidated Real Estate Partnerships

Impairment losses related to unconsolidated real estate partnerships includes our share of impairment losses recognized by our unconsolidated real estate partnerships. For the year ended December 31, 2009, compared to the year ended December 31, 2008, impairment losses related to unconsolidated real estate partnerships decreased $2.3 million, and for the year ended December 31, 2008, compared to the year ended December 31, 2007, impairment losses related to unconsolidated real estate partnerships increased $2.7 million. This decrease and increase are primarily attributable to impairment losses recognized by unconsolidated partnerships on their underlying real estate properties during 2008.

Gain on Dispositions of Unconsolidated Real Estate and Other

Gain on dispositions of unconsolidated real estate and other includes our share of gains related to dispositions of real estate by unconsolidated real estate partnerships, gains on disposition of interests in unconsolidated real estate partnerships, gains on dispositions of land and other non-depreciable assets and costs related to asset disposal activities. Changes in the level of gains recognized from period to period reflect the changing level of disposition activity from period to period. Additionally, gains on properties sold are determined on an individual property basis or in the aggregate for a group of properties that are sold in a single transaction, and are not comparable period to period.

For the year ended December 31, 2009, compared to the year ended December 31, 2008, gain on dispositions of unconsolidated real estate and other decreased $77.4 million. This decrease is primarily attributable to a gain of $98.4 million on our disposition in 2008 of interests in two unconsolidated real estate partnerships. This decrease was partially offset by $18.7 million of gains on the disposition of interests in unconsolidated partnerships during 2009. Gains recognized in 2009 consist of $8.6 million related to our receipt in 2009 of additional proceeds related to our disposition during 2008 of one of the partnership interests discussed above (see Note 3 to the consolidated financials statements in Item 8), $4.0 million from the disposition of our interest in a group purchasing organization (see Note 3 to the consolidated financial statements in Item 8), and $6.1 million from our disposition in 2009 of interests in unconsolidated real estate partnerships.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, gain on dispositions of unconsolidated real estate and other increased $76.5 million. This increase is primarily attributable to a $98.4 million net gain on the disposition of interests in two unconsolidated real estate partnerships during the year ended December 31, 2008. During 2007, we recognized a $6.0 million non-refundable option and extension fee resulting from the termination of rights under an option agreement to sell the North and Central towers of our Flamingo South Beach property, approximately $6.4 million of net gains on dispositions of land parcels and our share of gains on dispositions of properties by unconsolidated real estate partnerships in 2007, and a $9.5 million gain on debt extinguishment related to properties in the VMS partnership (see Note 3 to the consolidated financial statements in Item 8).

Income Tax Benefit

Certain of our operations or a portion thereof, such as property management, asset management and risk management, are conducted through, and certain of our properties are owned by, taxable REIT subsidiaries, each of which we refer to as a TRS. A TRS is a C-corporation that has not elected REIT status and, as such, is subject to United States Federal corporate income tax. We use TRS entities to facilitate our ability to offer certain services and conduct certain activities that generally cannot be offered directly by the REIT. We also use TRS entities to hold investments in certain properties. Income taxes related to the results of continuing operations of our TRS entities are included in income tax benefit in our consolidated statements of income.

For the year ended December 31, 2009, compared to the year ended December 31, 2008, income tax benefit decreased by $34.5 million. This decrease was primarily attributed to $36.1 million of income tax benefit recognized in 2008 related to the impairments of our Lincoln Place property and our investment in Casden Properties LLC, both of which are owned through TRS entities, partially offset by $8.1 million of income tax benefit recognized in 2009 related to the impairment of our investment in Casden Properties LLC.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, income tax benefit increased by $33.4 million. This increase was primarily attributed to $36.1 million of income tax benefit recognized in 2008 related to the impairments of our Lincoln Place property and our investment in Casden Properties LLC.

Income from Discontinued Operations, Net

The results of operations for properties sold during the period or designated as held for sale at the end of the period are generally required to be classified as discontinued operations for all periods presented. The components of net earnings that are classified as discontinued operations include all property-related revenues and operating expenses, depreciation expense recognized prior to the classification as held for sale, property-specific interest expense and debt extinguishment gains and losses to the extent there is secured debt on the property. In addition, any impairment losses on assets held for sale and the net gain or loss on the eventual disposal of properties held for sale are reported in discontinued operations.

For the years ended December 31, 2009 and 2008, income from discontinued operations totaled $153.9 million and $746.2 million, respectively. The $592.3 million decrease in income from discontinued operations was principally due to a $541.2 million decrease in gain on dispositions of real estate, net of income taxes, primarily attributable to fewer properties sold in 2009 as compared to 2008, and a $111.8 million decrease in operating income (inclusive of a $27.1 million increase in real estate impairment losses), partially offset by a $59.1 million decrease in interest expense.

For the years ended December 31, 2008 and 2007, income from discontinued operations totaled $746.2 million and $175.6 million, respectively. The $570.6 million increase in income from discontinued operations was principally due to a $641.7 million increase in gain on dispositions of real estate, net of income taxes, primarily attributable to more properties sold in 2008 as compared to 2007 and a $27.1 million decrease in interest expense. These increases were partially offset by a $66.7 million decrease in operating income (inclusive of a $22.0 million increase in real estate impairment losses) and a $32.7 million decrease related to a 2007 gain on debt extinguishment related to properties in the VMS partnership.

During the year ended December 31, 2009, we sold 89 consolidated properties for gross proceeds of $1.3 billion and net proceeds of $432.7 million, resulting in a net gain on sale of approximately $216.0 million (which is net of $5.8 million of related income taxes). During the year ended December 31, 2008, we sold 151 consolidated properties for gross proceeds of $2.4 billion and net proceeds of $1.1 billion, resulting in a net gain on sale of approximately $757.2 million (which is net of $43.1 million of related income taxes). During the year ended December 31, 2007, we sold 73 consolidated properties for gross proceeds of $480.0 million and net proceeds of $203.8 million, resulting in a net gain on sale of approximately $115.5 million (which is net of $2.1 million of related income taxes).

For the years ended December 31, 2009, 2008 and 2007, income from discontinued operations includes the operating results of the properties sold or classified as held for sale as of September 30, 2010.

Changes in the level of gains recognized from period to period reflect the changing level of our disposition activity from period to period. Additionally, gains on properties sold are determined on an individual property basis or in the aggregate for a group of properties that are sold in a single transaction, and are not comparable period to period (see Note 13 of the consolidated financial statements in Item 8 for additional information on discontinued operations).

Noncontrolling Interests in Consolidated Real Estate Partnerships

Noncontrolling interests in consolidated real estate partnerships reflects the non-Aimco partners’, or noncontrolling partners’, share of operating results of consolidated real estate partnerships. This generally includes the noncontrolling partners’ share of property management fees, interest on notes and other amounts eliminated in consolidation that we charge to such partnerships. As discussed in Note 2 to the consolidated financial statements in Item 8, we adopted the provisions of SFAS 160, which are now codified in the Financial Accounting Standards Board’s Accounting Standards Codification, or FASB ASC, Topic 810, effective January 1, 2009. Prior to our adoption of SFAS 160, we generally did not recognize a benefit for the noncontrolling interest partners’ share of partnership losses for partnerships that have deficit noncontrolling interest balances and we generally recognized a charge to our earnings for distributions paid to noncontrolling partners for partnerships that had deficit noncontrolling interest balances. Under the updated provisions of FASB ASC Topic 810, we are required to attribute losses to noncontrolling interests even if such attribution would result in a deficit noncontrolling interest balance and we are no longer required to recognize a charge to our earnings for distributions paid to noncontrolling partners for partnerships that have deficit noncontrolling interest balances.

For the year ended December 31, 2009, compared to the year ended December 31, 2008, net earnings attributed to noncontrolling interests in consolidated real estate partnerships decreased by $133.2 million. This decrease is primarily attributable to a reduction of $108.7 million related to the noncontrolling interests in consolidated real estate partnerships’ share of gains on dispositions of real estate, due primarily to fewer sales in 2009 as compared to 2008, $5.5 million of losses allocated to noncontrolling interests in 2009 that we would not have allocated to the noncontrolling interest partners in 2008 because to do so would have resulted in deficits in their noncontrolling interest balances, and approximately $3.8 million related to deficit distribution charges recognized as a reduction to our earnings in 2008, for which we did not recognize similar charges in 2009 based on the change in accounting discussed above. These decreases are in addition to the noncontrolling interest partners’ share of increased losses of our consolidated real estate partnerships in 2009 as compared to 2008.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, net income attributed to noncontrolling interests in consolidated real estate partnerships increased by $63.6 million. This increase is primarily attributable to an increase of $105.6 million related to the noncontrolling interests in consolidated real estate partnerships’ share of gains on dispositions of real estate, due primarily to more sales in 2008 as compared to 2007, partially offset by increases of $42.0 million in net recoveries of deficit distributions.

As discussed in Note 2 to the consolidated financial statements in Item 8, during the first quarter 2010, we will adopt new accounting guidance related to accounting for variable interest entities. This change in accounting guidance may result in our consolidation of certain previously unconsolidated entities as well as our deconsolidation of certain we currently consolidate. At this time, we have not yet determined the effect this accounting change will have on our consolidated financial statements.

Noncontrolling Interests in Aimco Operating Partnership

Noncontrolling interests in Aimco Operating Partnership consist of common OP Units, High Performance Units and preferred OP Units. We allocate the Aimco Operating Partnership’s income or loss to the holders of common OP Units and High Performance Units based on the weighted average number of common OP Units and High Performance Units outstanding during the period. Holders of the preferred OP Units participate in the Aimco Operating Partnership’s income or loss only to the extent of their preferred distributions.

For the year ended December 31, 2009, compared to the year ended December 31, 2008, the effect on our earnings of income or loss attributable to noncontrolling interests in the Aimco Operating Partnership changed favorably by $62.3 million. This favorable change is attributable to a decrease of $51.1 million related to the noncontrolling interests in the Aimco Operating Partnership’s share of income from discontinued operations (net of noncontrolling interests in consolidated real estate partnerships), due primarily to larger gains on sales in 2008 relative to 2009 and $11.2 million in deficit distribution charges recognized during 2008 due to distributions in excess of the positive balance in noncontrolling interest. These changes were also affected by a decrease in the noncontrolling interests in the Aimco Operating Partnership’s effective ownership interest from 2008 to 2009.

For the year ended December 31, 2008, compared to the year ended December 31, 2007, the effect on our earnings of income or loss attributable to noncontrolling interests in the Aimco Operating Partnership changed unfavorably by $55.8 million. This unfavorable change is attributable to an increase of $48.1 million related to the noncontrolling interests in the Aimco Operating Partnership’s share of income from discontinued operations (net of noncontrolling interests in consolidated real estate partnerships), due primarily to larger gains on sales in 2008 relative to 2007, $11.5 million in deficit distribution charges recognized during 2008 due to distributions in excess of the positive balance in noncontrolling interest, and a $0.5 million increase in distributions to holders of preferred OP Units. These unfavorable changes were partially offset by a $4.3 million increase in noncontrolling interests in the Aimco Operating Partnership’s share of losses from continuing operations (net of noncontrolling interests in consolidated real estate partnerships) in 2008 as compared to 2007.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, which requires us to make estimates and assumptions. We believe that the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Impairment of Long-Lived Assets

Real estate and other long-lived assets to be held and used are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, we make an assessment of its recoverability by comparing the carrying amount to our estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

From time to time, we have non-revenue producing properties that we hold for future redevelopment. We assess the recoverability of the carrying amount of these redevelopment properties by comparing our estimate of undiscounted future cash flows based on the expected service potential of the redevelopment property upon completion to the carrying amount. In certain instances, we use a probability-weighted approach to determine our estimate of undiscounted future cash flows when alternative courses of action are under consideration. As discussed in Provision for Impairment Losses on Real Estate Development Assets within the preceding discussion of our Results of Operations, during 2008 we recognized impairment losses on our Lincoln Place and Pacific Bay Vistas properties of $85.4 million ($55.6 million net of tax) and $5.7 million, respectively.

Real estate investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of our real estate investments. These factors include:

	•		the general economic climate;
	•		competition from other apartment communities and other housing options;
	•		local conditions, such as loss of jobs or an increase in the supply of apartments, that might adversely affect apartment occupancy or rental rates;
	•		changes in governmental regulations and the related cost of compliance;
	•		increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents;
	•		changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multifamily housing; and
	•		changes in interest rates and the availability of financing.

Any adverse changes in these and other factors could cause an impairment in our long-lived assets, including real estate and investments in unconsolidated real estate partnerships. In addition to the impairments of Lincoln Place and Pacific Bay Vistas discussed above, based on periodic tests of recoverability of long-lived assets, for the years ended December 31, 2009 and 2007, we recorded net impairment losses of $2.3 million and $1.1 million, respectively, related to properties classified as held for use, and during the year ended December 31, 2008, we recorded no additional impairments related to properties held for use.

Notes Receivable and Interest Income Recognition

Notes receivable from unconsolidated real estate partnerships consist primarily of notes receivable from partnerships in which we are the general partner. Notes receivable from non-affiliates consist of notes receivable from unrelated third parties. The ultimate repayment of these notes is subject to a number of variables, including the performance and value of the underlying real estate and the claims of unaffiliated mortgage lenders. Our notes receivable include loans extended by us that we carry at the face amount plus accrued interest, which we refer to as “par value notes,” and loans extended by predecessors, some of whose positions we generally acquired at a discount, which we refer to as “discounted notes.”

We record interest income on par value notes as earned in accordance with the terms of the related loan agreements. We discontinue the accrual of interest on such notes when the notes are impaired, as discussed below, or when there is otherwise significant uncertainty as to the collection of interest. We record income on such nonaccrual loans using the cost recovery method, under which we apply cash receipts first to the recorded amount of the loan; thereafter, any additional receipts are recognized as income.

We recognize interest income on discounted notes receivable based upon whether the amount and timing of collections are both probable and reasonably estimable. We consider collections to be probable and reasonably estimable when the borrower has closed transactions or has entered into certain pending transactions (which include real estate sales, refinancings, foreclosures and rights offerings) that provide a reliable source of repayment. In such instances, we recognize accretion income, on a prospective basis using the effective interest method over the estimated remaining term of the loans, equal to the difference between the carrying amount of the discounted notes and the estimated collectible value. We record income on all other discounted notes using the cost recovery method. Accretion income recognized in any given period is based on our ability to complete transactions to monetize the notes receivable and the difference between the carrying value and the estimated collectible amount of the notes; therefore, accretion income varies on a period by period basis and could be lower or higher than in prior periods.

Provision for Losses on Notes Receivable

We assess the collectibility of notes receivable on a periodic basis, which assessment consists primarily of an evaluation of cash flow projections of the borrower to determine whether estimated cash flows are sufficient to repay principal and interest in accordance with the contractual terms of the note. We recognize impairments on notes receivable when it is probable that principal and interest will not be received in accordance with the contractual terms of the loan. The amount of the impairment to be recognized generally is based on the fair value of the partnership’s real estate that represents the primary source of loan repayment. In certain instances where other sources of cash flow are available to repay the loan, the impairment is measured by discounting the estimated cash flows at the loan’s original effective interest rate.

During the years ended December 31, 2009, 2008 and 2007 we recorded net provisions for losses on notes receivable of $21.5 million, $17.6 million and $2.0 million, respectively. As discussed in Provision for Losses on Notes Receivable within the preceding discussion of our Results of Operations, provisions for losses on notes receivable in 2009 and 2008 include impairment losses of $20.7 million ($12.4 million net of tax) and $16.3 million ($10.0 million net of tax), respectively, on our investment in Casden Properties LLC, which we account for as a note receivable. We will continue to evaluate the collectibility of these notes, and we will adjust related allowances in the future due to changes in market conditions and other factors.

Capitalized Costs

We capitalize costs, including certain indirect costs, incurred in connection with our capital additions activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital additions activities at the property level. We characterize as “indirect costs” an allocation of certain department costs, including payroll, at the area operations and corporate levels that clearly relate to capital additions activities. We capitalize interest, property taxes and insurance during periods in which redevelopment and construction projects are in progress. We charge to expense as incurred costs that do not relate to capital additions activities, including ordinary repairs, maintenance, resident turnover costs and general and administrative expenses (see Capital Additions and Related Depreciation in Note 2 to the consolidated financial statements in Item 8).

For the years ended December 31, 2009, 2008 and 2007, for continuing and discontinued operations, we capitalized $9.8 million, $25.7 million and $30.8 million of interest costs, respectively, and $40.0 million, $78.1 million and $78.1 million of site payroll and indirect costs, respectively. The reduction is primarily due to a reduced level of redevelopment activities.

Funds From Operations

FFO is a non-GAAP financial 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 generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers or other personal property. The Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (loss), computed in accordance with GAAP, excluding gains from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We compute FFO for all periods presented in accordance with the guidance set forth by NAREIT’s April 1, 2002, White Paper, which we refer to as the White Paper. We calculate FFO attributable to Aimco common stockholders (diluted) by subtracting redemption or repurchase related preferred stock issuance costs and dividends on preferred stock and adding back dividends/distributions on dilutive preferred securities and premiums or discounts on preferred stock redemptions or repurchases. FFO should not be considered an alternative to net income or net cash flows from operating activities, as determined in accordance with GAAP, as an indication of our performance or as a measure of liquidity. FFO is not necessarily indicative of cash available to fund future cash needs. In addition, although FFO is a measure used for comparability in assessing the performance of REITs, there can be no assurance that our basis for computing FFO is comparable with that of other REITs.

In addition to FFO, we compute an alternate measure of FFO, which we refer to as Proforma FFO and which is FFO attributable to Aimco common stockholders (diluted), excluding operating real estate impairments and preferred stock redemption related amounts (adjusted for the noncontrolling interests). Both operating real estate impairment losses and preferred stock redemption related amounts are recurring items that affect our operating results. We exclude operating real estate impairment losses, net of related income tax benefits and noncontrolling interests, from our calculation of Proforma FFO because we believe the inclusion of such losses in FFO is inconsistent with the treatment of gains on the disposition of operating real estate, which are not included in FFO. We exclude preferred redemption related amounts (gains or losses) from our calculation of Proforma FFO because such amounts are not representative of our operating results. Similar to FFO, we believe Proforma FFO is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciating assets such as machinery, computers or other personal property. Not all REITs present an alternate measure of FFO similar to our Proforma FFO measure and there can be no assurance our basis for calculating Proforma FFO is comparable to those of other REITs.

For the years ended December 31, 2009, 2008 and 2007, our FFO and Proforma FFO are calculated as follows (in thousands):

		2009				2008				2007
Net (loss) income attributable to Aimco common stockholders (1)		$	(114,840	)		$	351,314			$	(40,586	)
Adjustments:
Depreciation and amortization			433,933				383,084				337,804
Depreciation and amortization related to non-real estate assets			(16,597	)			(17,305	)			(20,108	)
Depreciation of rental property related to noncontrolling partners and unconsolidated entities (2)			(39,278	)			(26,695	)			(13,167	)
Gain on dispositions of unconsolidated real estate and other, net of noncontrolling partners’ interest			(20,615	)			(99,597	)			(22,252	)
Income tax expense (benefit) arising from disposition of unconsolidated real estate and other			1,582				(433	)			(17	)
Add back portion of gain on dispositions of unconsolidated real estate and other that relates to non-depreciable assets and debt extinguishment gain			7,783				1,669				16,851
Deficit distributions to noncontrolling partners (3)			—				38,109				26,641
Discontinued operations:
Gain on dispositions of real estate, net of noncontrolling partners’ interest (2)			(166,159	)			(618,173	)			(65,035	)
Depreciation of rental property, net of noncontrolling partners’ interest (2)			54,671				115,714				121,500
(Recovery of deficit distributions) deficit distributions to noncontrolling partners, net (3)			—				(30,783	)			12,119
Income tax expense arising from disposals			5,788				43,146				2,135
Noncontrolling interests in Aimco Operating Partnership’s share of above adjustments (4)			(19,509	)			21,667				(36,830	)
Preferred stock dividends			52,215				55,190				63,381
Preferred stock redemption related (gains) costs			(1,649	)			(1,482	)			2,635
Amounts allocable to participating securities (5)			—				6,985				4,481
FFO		$	177,325			$	222,410			$	389,552
Preferred stock dividends			(52,215	)			(55,190	)			(63,381	)
Preferred stock redemption related gains (costs)			1,649				1,482				(2,635	)
Amounts allocable to participating securities (5)			(773	)			(6,985	)			(4,481	)
Dividends/distributions on dilutive preferred securities			—				4,292				1,442
FFO attributable to Aimco common stockholders — diluted		$	125,986			$	166,009			$	320,497
Operating real estate impairment losses, continuing operations, net of noncontrolling partners’ interest (6)			2,012				1,131				1,080
Operating real estate impairment losses, discontinued operations, net of noncontrolling partners’ interest (6)			61,313				26,285				5,430
Income tax benefit on impairment losses			(4,075	)			(511	)			—
Preferred stock redemption related (gains) costs (7)			(1,649	)			(1,482	)			2,635
Noncontrolling interests in Aimco Operating Partnership’s share of above adjustments			(4,304	)			(2,474	)			(850	)
Amounts allocable to participating securities (5)			(448	)			—				—
Dividends/distributions on dilutive preferred securities			—				—				426
Proforma FFO attributable to Aimco common stockholders — diluted		$	178,835			$	188,958			$	329,218
FFO attributable to Aimco common stockholders — diluted
Weighted average number of common shares, common share equivalents and dilutive preferred securities outstanding (8):
Common shares and equivalents (9)			115,563				89,827				97,055
Dilutive preferred securities			—				1,490				457
Total			115,563				91,317				97,512
Proforma FFO attributable to Aimco common stockholders — diluted
Weighted average number of common shares, common share equivalents and dilutive preferred securities outstanding (8):
Common shares and equivalents (9)			115,563				89,827				97,055
Dilutive preferred securities			—				1,490				580
Total			115,563				91,317				97,635

Notes:

(1)		Represents the numerator for calculating basic earnings per common share in accordance with GAAP (see Note 14 to the consolidated financial statements in Item 8).
(2)		“Noncontrolling partners” refers to noncontrolling partners in our consolidated real estate partnerships.
(3)		Prior to adoption of SFAS 160 (see Note 2 to the consolidated financial statements in Item 8), we recognized deficit distributions to noncontrolling partners as charges in our income statement when cash was distributed to a noncontrolling partner in a consolidated partnership in excess of the positive balance in such partner’s noncontrolling interest balance. We recorded these charges for GAAP purposes even though there was no economic effect or cost. Deficit distributions to noncontrolling partners occurred when the fair value of the underlying real estate exceeded its depreciated net book value because the underlying real estate had appreciated or maintained its value. As a result, the recognition of expense for deficit distributions to noncontrolling partners represented, in substance, either (a) our recognition of depreciation previously allocated to the noncontrolling partner or (b) a payment related to the noncontrolling partner’s share of real estate appreciation. Based on White Paper guidance that requires real estate depreciation and gains to be excluded from FFO, we added back deficit distributions and subtracted related recoveries in our reconciliation of net income to FFO. Subsequent to our adoption of SFAS 160, effective January 1, 2009, we may reduce the balance of noncontrolling interests below zero in such situations and we are no longer required to recognize such charges in our income statement.
(4)		During the years ended December 31, 2009, 2008 and 2007, the Aimco Operating Partnership had 6,534,140, 7,191,199, and 7,367,400 common OP Units outstanding and 2,344,719, 2,367,629 and 2,379,084 High Performance Units outstanding.
(5)		Amounts allocable to participating securities represent dividends declared and any amounts of undistributed earnings allocable to participating securities. See Note 2 and Note 14 to the consolidated financial statements in Item 8 for further information regarding participating securities.
(6)		On October 1, 2003, NAREIT clarified its definition of FFO to include operating real estate impairment losses, which previously had been added back to calculate FFO. Although Aimco’s presentation conforms with the NAREIT definition, Aimco considers such approach to be inconsistent with the treatment of gains on dispositions of operating real estate, which are not included in FFO.
(7)		In accordance with the Securities and Exchange Commission’s July 31, 2003 interpretation of the Emerging Issues Task Force Topic D-42, Aimco includes preferred stock redemption related charges or gains in FFO. As a result, FFO for the years ended December 31, 2009, 2008 and 2007 includes redemption discounts, net of issuance costs, of $1.6 million and $1.5 million and a redemption premium of $2.6 million, respectively.
(8)		Weighted average common shares, common share equivalents, dilutive preferred securities for each of the periods presented above have been adjusted for our application during the fourth quarter 2009 of a change in GAAP, which requires the shares issued in our special dividends paid in 2008 and January 2009 to be treated as issued and outstanding on the dividend payment dates for basic purposes and as potential share equivalents for the periods between the ex-dividend dates and the payment dates for diluted purposes, rather than treating the shares as issued and outstanding as of the beginning of the earliest period presented for both basic and diluted purposes. The change in accounting treatment had no effect on diluted weighted average shares outstanding for the year ended December 31, 2009. The change in accounting treatment reduced diluted weighted average shares outstanding by 32.7 million and 46.5 million for the years ended December 31, 2008 and 2007, respectively.
(9)		Represents the denominator for earnings per common share — diluted, calculated in accordance with GAAP, plus common share equivalents that are dilutive for FFO.

Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flow from our operations. Additional sources are proceeds from property sales and proceeds from refinancings of existing property loans and borrowings under new property loans.

Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital additions, dividends paid to stockholders and distributions paid to noncontrolling interest partners, repurchases of shares of our Common Stock, and acquisitions of, and investments in, properties. We use our cash and cash equivalents and our cash provided by operating activities to meet short-term liquidity needs. In the event that our cash and cash equivalents and cash provided by operating activities are not sufficient to cover our short-term liquidity demands, we have additional means, such as short-term borrowing availability and proceeds from property sales and refinancings, to help us meet our short-term liquidity demands. We may use our revolving credit facility for general corporate purposes and to fund investments on an interim basis. We expect to meet our long-term liquidity requirements, such as debt maturities and property acquisitions, through long-term borrowings, primarily secured, the issuance of equity securities (including OP Units), the sale of properties and cash generated from operations.

The state of credit markets and related effect on the overall economy may have an adverse affect on our liquidity, both through increases in interest rates and credit risk spreads, and access to financing. As further discussed in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, we are subject to interest rate risk associated with certain variable rate liabilities, preferred stock and assets. Based on our net variable rate liabilities, preferred stock and assets outstanding at December 31, 2009, we estimate that a 1.0 % increase in 30-day LIBOR with constant credit risk spreads would reduce our income attributable to Aimco common stockholders by approximately $1.5 million on an annual basis. Although base interest rates have generally decreased relative to their levels prior to the disruptions in the financial markets, the tightening of credit markets has affected the credit risk spreads charged over base interest rates on, and the availability of, property loan financing. For future refinancing activities, our liquidity and cost of funds may be affected by increases in base interest rates or higher credit risk spreads. If timely property financing options are not available for maturing debt, we may consider alternative sources of liquidity, such as reductions in certain capital spending or proceeds from asset dispositions.

As further discussed in Note 2 to our consolidated financial statements in Item 8, we use total rate of return swaps as a financing product to lower our cost of borrowing through conversion of fixed rate tax-exempt bonds payable and fixed rate notes payable to variable interest rates indexed to the SIFMA rate for tax-exempt bonds payable and the 30-day LIBOR rate for notes payable, plus a credit risk spread. The cost of financing through these arrangements is generally lower than the fixed rate on the debt. As of December 31, 2009, we had total rate of return swap positions with two financial institutions with notional amounts totaling $353.1 million. Swaps with notional amounts of $307.9 million and $45.2 million had maturity dates in May 2012 and October 2012, respectively.

The total rate of return swaps require specified loan-to-value ratios. In the event the values of the real estate properties serving as collateral under these agreements decline or if we sell properties in the collateral pool with low loan-to-value ratios, certain of our consolidated subsidiaries have an obligation to pay down the debt or provide additional collateral pursuant to the swap agreements, which may adversely affect our cash flows. The obligation to provide collateral is limited to these subsidiaries and is non-recourse to Aimco. At December 31, 2009, these subsidiaries were not required to provide cash collateral based on the loan-to-value ratios of the real estate properties serving as collateral under these agreements.

We periodically evaluate counterparty credit risk associated with these arrangements. At the current time, we have concluded we do not have material exposure. In the event a counterparty were to default under these arrangements, loss of the net interest benefit we generally receive under these arrangements, which is equal to the difference between the fixed rate we receive and the variable rate we pay, may adversely affect our operating cash flows.

See Derivative Financial Instruments in Note 2 to the consolidated financial statements in Item 8 for additional discussion of these arrangements, including the current swap maturity dates.

As of December 31, 2009, the amount available under our $180.0 million revolving credit facility was $136.2 million (after giving effect to $43.8 million outstanding for undrawn letters of credit). Our total outstanding term loan of $90.0 million at December 31, 2009, matures in March 2011. We repaid an additional $45.0 million on the term loan through February 26, 2010, leaving a remaining outstanding balance of $45.0 million. Additionally, we have limited obligations to fund redevelopment commitments during the year ending December 31, 2010, and no development commitments.

At December 31, 2009, we had $81.3 million in cash and cash equivalents, a decrease of $218.4 million from December 31, 2008. At December 31, 2009, we had $219.0 million of restricted cash, primarily consisting of reserves and escrows held by lenders for bond sinking funds, capital additions, property taxes and insurance. In addition, cash, cash equivalents and restricted cash are held by partnerships that are not presented on a consolidated basis. The following discussion relates to changes in cash due to operating, investing and financing activities, which are presented in our consolidated statements of cash flows in Item 8.

Operating Activities

For the year ended December 31, 2009, our net cash provided by operating activities of $233.8 million was primarily related to operating income from our consolidated properties, which is affected primarily by rental rates, occupancy levels and operating expenses related to our portfolio of properties, in excess of payments of operating accounts payable and accrued liabilities, including amounts related to our organizational restructuring. Cash provided by operating activities decreased $206.6 million compared with the year ended December 31, 2008, primarily due to a $159.3 million decrease in operating income related to consolidated properties included in discontinued operations, which was attributable to property sales in 2009 and 2008, a $42.8 million decrease in promote income, which is generated by the disposition of properties by consolidated real estate partnerships, and an increase in payments on operating accounts payable and accrued expenses, including payments related to our restructuring accrual, in 2009 as compared to 2008.

Investing Activities

For the year ended December 31, 2009, our net cash provided by investing activities of $630.3 million consisted primarily of proceeds from disposition of real estate and partnership interests, partially offset by capital expenditures.

Although we hold all of our properties for investment, we sell properties when they do not meet our investment criteria or are located in areas that we believe do not justify our continued investment when compared to alternative uses for our capital. During the year ended December 31, 2009, we sold 89 consolidated properties. These properties were sold for an aggregate sales price of $1.3 billion, or $1.2 billion, after the payment of transaction costs and debt prepayment penalties. The $1.2 billion is inclusive of promote income and debt assumed by buyers. Net cash proceeds from property sales were used primarily to repay term debt and for other corporate purposes.

Capital Additions

We classify all capital additions as Capital Replacements (which we refer to as CR), Capital Improvements (which we refer to as CI), casualties or redevelopment. Additions other than casualty or redevelopment capital additions are apportioned between CR and CI based on the useful life of the capital item under consideration and the period we have owned the property.

CR represents the share of capital additions that are deemed to replace the portion of acquired capital assets that was consumed during the period we have owned the asset. CI represents the share of additions that are made to enhance the value, profitability or useful life of an asset as compared to its original purchase condition. CR and CI exclude capital additions for casualties and redevelopment. Casualty additions represent capitalized costs incurred in connection with casualty losses and are associated with the restoration of the asset. A portion of the restoration costs may be reimbursed by insurance carriers subject to deductibles associated with each loss. Redevelopment additions represent additions that substantially upgrade the property.

The table below details our share of actual spending, on both consolidated and unconsolidated real estate partnerships, for CR, CI, casualties and redevelopment for the year ended December 31, 2009, on a per unit and total dollar basis (in thousands, except per unit amounts). Per unit numbers for CR and CI are based on approximately 97,196 average units for the year, including 81,135 conventional units and 16,061 affordable units. Average units are weighted for the portion of the period that we owned an interest in the property, represent ownership-adjusted effective units, and exclude non-managed units.

						Per
		Aimco’s Share				Effective
		of Additions				Unit
Capital Replacements Detail:
Building and grounds		$	32,876			$	338
Turnover related			30,298				312
Capitalized site payroll and indirect costs			7,076				73
Our share of Capital Replacements		$	70,250			$	723
Capital Replacements:
Conventional		$	64,675			$	797
Affordable			5,575			$	347
Our share of Capital Replacements			70,250			$	723
Capital Improvements:
Conventional			47,634			$	587
Affordable			5,755			$	358
Our share of Capital Improvements			53,389			$	549
Casualties:
Conventional			17,724
Affordable			1,872
Our share of casualties			19,596
Redevelopment:
Conventional projects			66,768
Tax credit projects (1)			46,066
Our share of redevelopment			112,834
Our share of capital additions			256,069
Plus noncontrolling partners’ share of consolidated additions			20,062
Less our share of unconsolidated additions			(687	)
Total capital additions		$	275,444

Included in the above additions for CI, casualties and redevelopment, was approximately $34.6 million of our share of capitalized site payroll and indirect costs related to these activities for the year ended December 31, 2009.

We generally fund capital additions with cash provided by operating activities, working capital and property sales as discussed below.

Financing Activities

For the year ended December 31, 2009, net cash used in financing activities of $1.1 billion was primarily attributed to debt principal payments, dividends paid to common and preferred stockholders and distributions to noncontrolling interests, partially offset by proceeds from property loans.

Property Debt

At December 31, 2009 and 2008, we had $5.6 billion and $6.3 billion, respectively, in consolidated property debt outstanding, which included $178.3 million and $909.4 million, respectively, of property debt classified within liabilities related to assets held for sale. During the year ended December 31, 2009, we refinanced or closed property loans on 55 properties generating $788.1 million of proceeds from borrowings with a weighted average interest rate of 5.78%. Our share of the net proceeds after repayment of existing debt, payment of transaction costs and distributions to limited partners, was $132.3 million. We used these total net proceeds for capital expenditures and other corporate purposes. We intend to continue to refinance property debt primarily as a means of extending current and near term maturities and to finance certain capital projects.

Term Loans and Credit Facility

We have an Amended and Restated Senior Secured Credit Agreement, as amended, with a syndicate of financial institutions, which we refer to as the Credit Agreement.

As of December 31, 2009, the Credit Agreement consisted of aggregate commitments of $270.0 million, comprised of our $90.0 million outstanding balance on the term loan and $180.0 million of revolving loan commitments. The term loan bears interest at LIBOR plus 1.5%, or at our option, a base rate equal to the prime rate, and matures March 2011. Borrowings under the revolving credit facility bear interest based on a pricing grid determined by leverage (either at LIBOR plus 4.25% with a LIBOR floor of 2.00% or, at our option, a base rate equal to the Prime rate plus a spread of 3.00%). The revolving credit facility matures May 1, 2011, and may be extended for an additional year, subject to certain conditions, including payment of a 45.0 basis point fee on the total revolving commitments and repayment of the remaining term loan balance by February 1, 2011.

At December 31, 2009, the term loan had an outstanding principal balance of $90.0 million and an interest rate of 1.73%. We repaid $45.0 million on the term loan through February 26, 2010, leaving a remaining outstanding balance of $45.0 million. At December 31, 2009, we had no outstanding borrowings under the revolving credit facility. The amount available under the revolving credit facility at December 31, 2009, was $136.2 million (after giving effect to $43.8 million outstanding for undrawn letters of credit issued under the revolving credit facility). The proceeds of revolving loans are generally permitted to be used to fund working capital and for other corporate purposes.

Fair Value Measurements

We have entered into total rate of return swaps on various fixed rate secured tax-exempt bonds payable and fixed rate notes payable to convert these borrowings from a fixed rate to a variable rate and provide an efficient financing product to lower our cost of borrowing. We designate total rate of return swaps as hedges of the risk of overall changes in the fair value of the underlying borrowings. At each reporting period, we estimate the fair value of these borrowings and the total rate of return swaps and recognize any changes therein as an adjustment of interest expense.

Our method used to calculate the fair value of the total rate of return swaps generally results in changes in fair value that are equal to the changes in fair value of the related borrowings, which is consistent with our hedging strategy. We believe that these financial instruments are highly effective in offsetting the changes in fair value of the related borrowings during the hedging period, and accordingly, changes in the fair value of these instruments have no material impact on our liquidity, results of operations or capital resources.

During the year ended December 31, 2009, changes in the fair values of these financial instruments resulted in increases of $5.2 million in the carrying amount of the hedged borrowings and equal decreases in accrued liabilities and other for total rate of return swaps. At December 31, 2009, the cumulative recognized changes in the fair value of these financial instruments resulted in a $24.3 million reduction in the carrying amount of the hedged borrowings offset by an equal increase in accrued liabilities and other for total rate of return swaps. The cumulative changes in the fair values of the hedged borrowings and related swaps reflect the recent uncertainty in the credit markets which has decreased demand and increased pricing for similar debt instruments.

During the year ended December 31, 2009, we received net cash receipts of $19.4 million under the total return swaps, which positively affected our liquidity. To the extent interest rates increase above the fixed rates on the underlying borrowings, our obligations under the total return swaps will negatively affect our liquidity. At December 31, 2009, we were not required to provide cash collateral pursuant to the total rate of return swaps. In the event the values of the real estate properties serving as collateral under these agreements decline, we may be required to provide additional collateral pursuant to the swap agreements, which would adversely affect our liquidity.

See Note 2 to the consolidated financial statements in Item 8 for more information on our total rate of return swaps and related borrowings.

Equity Transactions

During the year ended December 31, 2009, we paid cash dividends or distributions totaling $52.2 million, $95.3 million and $28.5 million to preferred stockholders, common stockholders and noncontrolling interests in the Aimco Operating Partnership, respectively. Additionally, we paid dividends totaling $149.0 million to common stockholders through the issuance of approximately 15.5 million shares. During the year ended December 31, 2009, we paid distributions of $91.9 million to noncontrolling interests in consolidated real estate partnerships.

During the year ended December 31, 2009, we repurchased 12 shares, or $6.0 million in liquidation preference, of CRA Preferred Stock for $4.2 million.

We and the Aimco Operating Partnership have a shelf registration statement that provides for the issuance of debt and equity securities by Aimco and debt securities by the Aimco Operating Partnership.

Contractual Obligations

This table summarizes information contained elsewhere in this Annual Report regarding payments due under contractual obligations and commitments as of December 31, 2009 (amounts in thousands):

						Less than												More than
		Total				One Year				1-3 Years				3-5 Years				5 Years
Scheduled long-term debt maturities (1)		$	5,451,148			$	100,958			$	651,166			$	843,747			$	3,855,277
Scheduled long-term debt maturities related to properties classified as held for sale (1)			178,339				4,855				20,773				25,736				126,975
Term loan (1) (2)			90,000				—				90,000				—				—
Redevelopment and other construction commitments			4,795				4,795				—				—				—
Leases for space occupied (3)			24,888				7,345				10,856				4,859				1,828
Other obligations (4)			4,605				4,605				—				—				—
Total		$	5,753,775			$	122,558			$	772,795			$	874,342			$	3,984,080

In addition to the amounts presented in the table above, at December 31, 2009, we had $690.5 million of outstanding preferred stock outstanding with annual dividend yields ranging from 1.5% (variable) to 9.4%, and $85.7 million of preferred units of the Aimco Operating Partnership outstanding with annual distribution yields ranging from 5.9% to 9.5%.

Additionally, we may enter into commitments to purchase goods and services in connection with the operations of our properties. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.

Future Capital Needs

In addition to the items set forth in “Contractual Obligations” above, we expect to fund any future acquisitions, additional redevelopment projects, capital improvements and capital replacement principally with proceeds from property sales (including tax-free exchange proceeds), short-term borrowings, debt and equity financing (including tax credit equity) and operating cash flows.

Off-Balance Sheet Arrangements

We own general and limited partner interests in unconsolidated real estate partnerships, in which our total ownership interests typically range from less than 1% to 50% and in some instances may exceed 50%. There are no lines of credit, side agreements, or any other derivative financial instruments related to or between our unconsolidated real estate partnerships and us and no material exposure to financial guarantees. Accordingly, our maximum risk of loss related to these unconsolidated real estate partnerships is limited to the aggregate carrying amount of our investment in the unconsolidated real estate partnerships and any outstanding notes receivable as reported in our consolidated financial statements (see Note 4 of the consolidated financial statements in Item 8 for additional information about our investments in unconsolidated real estate partnerships).

Item 8. Financial Statements and Supplementary Data

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

INDEX TO FINANCIAL STATEMENTS

		Page
Financial Statements:
Report of Independent Registered Public Accounting Firm		23
Consolidated Balance Sheets as of December 31, 2009 and 2008		24
Consolidated Statements of Income for the Years Ended December 31, 2009, 2008 (as restated) and 2007		25
Consolidated Statements of Equity for the Years Ended December 31, 2009, 2008 and 2007		26
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007		28
Notes to Consolidated Financial Statements		30
Financial Statement Schedule:
Schedule III — Real Estate and Accumulated Depreciation		72

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors
Apartment Investment and Management Company

We have audited the accompanying consolidated balance sheets of Apartment Investment and Management Company (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, equity and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the accompanying Index to Financial Statements. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with United States generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects the information set forth therein.

The consolidated financial statements include retroactive adjustments to reflect the adoption in 2009 of Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment to ARB 51 (codified in FASB ASC 810), Statement of Financial Accounting Standards No. 141(R), Business Combinations — a replacement of FASB Statement No 141 (codified in FASB ASC 805), FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (codified in FASB ASC 260), and FASB Accounting Standards Update No. 2010-01, Accounting for Distributions to Shareholders with Components of Stock and Cash (codified in FASB ASC 505). Further, as discussed in Notes 13 and 17, the Company retrospectively adjusted the consolidated financial statements to reflect real estate assets that meet the definition of a component and have been sold or meet the criteria to be classified as held for sale at December 31, 2009 pursuant to Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (codified in FASB ASC 360), through September 30, 2010, and to reflect changes in its reportable segments. As discussed in Note 2 to the consolidated financial statements, the consolidated statement of income for the year ended December 31, 2008 has been restated to reclassify provisions for impairment losses on real estate development assets into operating income.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2010 (which is not included herein) expressed an unqualified opinion thereon.

Denver, Colorado
February 26, 2010, except for Note 17, as to which the date is September 10, 2010,
and Note 13, as to which the date is November 19, 2010

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
As of December 31, 2009 and 2008
(In thousands, except share data)

		2009				2008
ASSETS
Real estate:
Buildings and improvements		$	7,242,051			$	7,047,744
Land			2,148,389				2,132,129
Total real estate			9,390,440				9,179,873
Less accumulated depreciation			(2,595,049	)			(2,223,242	)
Net real estate			6,795,391				6,956,631
Cash and cash equivalents			81,260				299,676
Restricted cash			218,981				252,199
Accounts receivable, net			59,822				90,318
Accounts receivable from affiliates, net			23,744				38,978
Deferred financing costs, net			50,807				49,947
Notes receivable from unconsolidated real estate partnerships, net			14,295				22,567
Notes receivable from non-affiliates, net			125,269				139,897
Investment in unconsolidated real estate partnerships			105,324				119,036
Other assets			185,890				198,713
Deferred income tax assets, net			42,015				28,326
Assets held for sale			203,670				1,245,582
Total assets		$	7,906,468			$	9,441,870
LIABILITIES AND EQUITY
Property tax-exempt bond financing		$	574,926			$	629,499
Property loans payable			4,823,165				4,794,291
Term loans			90,000				400,000
Other borrowings			53,057				95,981
Total indebtedness			5,541,148				5,919,771
Accounts payable			29,819				64,241
Accrued liabilities and other			286,326				569,997
Deferred income			179,433				192,368
Security deposits			34,491				35,920
Liabilities related to assets held for sale			183,892				924,676
Total liabilities			6,255,109				7,706,973
Preferred noncontrolling interests in Aimco Operating Partnership			86,656				88,148
Preferred stock subject to repurchase agreement (Note 11)			30,000				—
Commitments and contingencies (Note 8)			—				—
Equity:
Perpetual Preferred Stock (Note 11)			660,500				696,500
Class A Common Stock, $0.01 par value, 426,157,736 shares authorized, 116,479,791 and 100,631,881 shares issued and outstanding, at December 31, 2009 and 2008, respectively			1,165				1,006
Additional paid-in capital			3,072,665				2,910,002
Accumulated other comprehensive loss			(1,138	)			(2,249	)
Notes due on common stock purchases			(1,392	)			(3,607	)
Distributions in excess of earnings			(2,492,082	)			(2,335,628	)
Total Aimco equity			1,239,718				1,266,024
Noncontrolling interests in consolidated real estate partnerships			316,177				380,725
Common noncontrolling interests in Aimco Operating Partnership			(21,192	)			—
Total equity			1,534,703				1,646,749
Total liabilities and equity		$	7,906,468			$	9,441,870

See notes to consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2009, 2008 and 2007
(In thousands, except per share data)

		2009				2008				2007
						(as restated —
						see Note 2)
REVENUES:
Rental and other property revenues		$	1,101,883			$	1,100,593			$	1,058,354
Asset management and tax credit revenues			49,853				98,830				73,755
Total revenues			1,151,736				1,199,423				1,132,109
OPERATING EXPENSES:
Property operating expenses			515,748				527,216				507,403
Investment management expenses			15,779				24,784				20,507
Depreciation and amortization			433,933				383,084				337,804
Provision for operating real estate impairment losses			2,329				—				1,080
Provision for impairment losses on real estate development assets			—				91,138				—
General and administrative expenses			56,643				80,376				72,359
Other expenses, net			15,721				22,059				18,917
Restructuring costs			11,241				22,802				—
Total operating expenses			1,051,394				1,151,459				958,070
Operating income			100,342				47,964				174,039
Interest income			9,104				19,653				42,812
Provision for losses on notes receivable, net			(21,549	)			(17,577	)			(2,010	)
Interest expense			(315,416	)			(315,007	)			(304,752	)
Equity in losses of unconsolidated real estate partnerships			(12,025	)			(4,601	)			(3,347	)
Impairment losses related to unconsolidated real estate partnerships			(322	)			(2,661	)			—
Gain on dispositions of unconsolidated real estate and other			22,494				99,864				23,366
Loss before income taxes and discontinued operations			(217,372	)			(172,365	)			(69,892	)
Income tax benefit			18,669				53,202				19,795
Loss from continuing operations			(198,703	)			(119,163	)			(50,097	)
Income from discontinued operations, net			153,903				746,165				175,603
Net (loss) income			(44,800	)			627,002				125,506
Noncontrolling interests:
Net income attributable to noncontrolling interests in consolidated real estate partnerships			(22,541	)			(155,727	)			(92,165	)
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership			(6,288	)			(7,646	)			(7,128	)
Net loss (income) attributable to common noncontrolling interests in Aimco Operating Partnership			9,355				(51,622	)			3,698
Total noncontrolling interests			(19,474	)			(214,995	)			(95,595	)
Net (loss) income attributable to Aimco			(64,274	)			412,007				29,911
Net income attributable to Aimco preferred stockholders			(50,566	)			(53,708	)			(66,016	)
Net income attributable to participating securities			—				(6,985	)			(4,481	)
Net (loss) income attributable to Aimco common stockholders		$	(114,840	)		$	351,314			$	(40,586	)
Earnings (loss) per common share — basic and diluted:
Loss from continuing operations attributable to Aimco common stockholders		$	(1.75	)		$	(2.11	)		$	(1.42	)
Income from discontinued operations attributable to Aimco common stockholders			0.75				6.07				0.99
Net (loss) income attributable to Aimco common stockholders		$	(1.00	)		$	3.96			$	(0.43	)
Weighted average common shares outstanding — basic and diluted			114,301				88,690				95,107
Dividends declared per common share		$	0.40			$	7.48			$	4.31

See notes to consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
For the Years Ended December 31, 2009, 2008 and 2007
(In thousands)

																						Accumulated				Notes Due on
		Preferred Stock								Common Stock								Additional				Other				Common				Distributions
		Shares								Shares								Paid-in				Comprehensive				Stock				in Excess of				Total Aimco				Noncontrolling				Total
		Issued				Amount				Issued				Amount				Capital				Loss				Purchases				Earnings				Equity				Interests				Equity
Balances at December 31, 2006			26,845			$	823,500				96,820			$	968			$	3,095,564			$	(134	)		$	(4,714	)		$	(1,575,292	)		$	2,339,892			$	310,289			$	2,650,181
Redemption of Preferred Stock and preferred partnership units			(1,905	)			(100,000	)			—				—				635				—				—				(2,635	)			(102,000	)			—				(102,000	)
Cumulative effect of change in accounting principle — adoption of FIN 48			—				—				—				—				—				—				—				(764	)			(764	)			(81	)			(845	)
Redemption of Aimco Operating Partnership units for Common Stock			—				—				471				5				27,848				—				—				—				27,853				(27,810	)			43
Repurchases of Common Stock and common partnership units			—				—				(7,456	)			(75	)			(325,747	)			—				—				—				(325,822	)			(2,181	)			(328,003	)
Repayment of notes receivable from officers			—				—				—				—				—				—				1,659				—				1,659				—				1,659
Officer and employee stock awards and purchases, net			—				—				313				3				2,555				—				(2,386	)			—				172				—				172
Stock options exercised			—				—				1,403				14				53,705				—				—				—				53,719				—				53,719
Amortization of stock option and restricted stock compensation cost			—				—				—				—				19,224				—				—				—				19,224				—				19,224
Issuance of Aimco Operating Partnership units			—				—				—				—				—				—				—				—				—				2,998				2,998
Contributions from noncontrolling interests			—				—				—				—				—				—				—				—				—				203,552				203,552
Adjustment to noncontrolling interests from VMS transactions (Note 3)			—				—				—				—				—				—				—				—				—				62,820				62,820
Adjustment to noncontrolling interests from consolidation of entities			—				—				—				—				—				—				—				—				—				91,219				91,219
Reversal of excess income tax benefits related to stock-based compensation and other			—				—				—				—				(751	)			—				—				—				(751	)			—				(751	)
Change in accumulated other comprehensive income			—				—				—				—				—				(550	)			—				—				(550	)			365				(185	)
Net income			—				—				—				—				—				—				—				29,911				29,911				88,467				118,378
Common dividends and distributions			—				—				—				—				—				—				—				(406,121	)			(406,121	)			(252,887	)			(659,008	)
Preferred Stock dividends			—				—				—				—				—				—				—				(64,817	)			(64,817	)			—				(64,817	)
Balances at December 31, 2007			24,940				723,500				91,551				915				2,873,033				(684	)			(5,441	)			(2,019,718	)			1,571,605				476,751				2,048,356
Repurchase of Preferred Stock			—				(27,000	)			—				—				678				—				—				1,482				(24,840	)			—				(24,840	)
Redemption of Aimco Operating Partnership units for Common Stock			—				—				114				1				4,181				—				—				—				4,182				(4,182	)			—
Repurchases of Common Stock and common partnership units			—				—				(13,919	)			(139	)			(473,393	)			—				—				—				(473,532	)			(3,192	)			(476,724	)
Repayment of notes receivable from officers			—				—				—				—				—				—				1,458				—				1,458				—				1,458
Officer and employee stock awards and purchases, net			—				—				106				1				651				—				376				—				1,028				—				1,028
Amortization of stock option and restricted stock compensation cost			—				—				—				—				17,603				—				—				—				17,603				—				17,603
Common Stock issued pursuant to Special Dividend			—				—				22,780				228				487,249				—				—				—				487,477				—				487,477
Contributions from noncontrolling interests			—				—				—				—				—				—				—				—				—				6,854				6,854
Adjustment to noncontrolling interests from consolidation of entities			—				—				—				—				—				—				—				—				—				14,969				14,969
Change in accumulated other comprehensive income			—				—				—				—				—				(1,565	)			—				—				(1,565	)			190				(1,375	)
Net income			—				—				—				—				—				—				—				412,007				412,007				207,349				619,356
Common dividends and distributions			—				—				—				—				—				—				—				(674,185	)			(674,185	)			(318,014	)			(992,199	)
Preferred Stock dividends			—				—				—				—				—				—				—				(55,214	)			(55,214	)			—				(55,214	)
Balances at December 31, 2008			24,940				696,500				100,632				1,006				2,910,002				(2,249	)			(3,607	)			(2,335,628	)			1,266,024				380,725				1,646,749

See notes to consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
For the Years Ended December 31, 2009, 2008 and 2007
(In thousands)

																						Accumulated				Notes Due on
		Preferred Stock								Common Stock								Additional				Other				Common				Distributions
		Shares								Shares								Paid-in				Comprehensive				Stock				in Excess of				Total Aimco				Noncontrolling				Total
		Issued				Amount				Issued				Amount				Capital				Loss				Purchases				Earnings				Equity				Interests				Equity
Repurchase of Preferred Stock			—				(6,000	)			—				—				151				—				—				1,800				(4,049	)			—				(4,049	)
Reclassification of preferred stock to temporary equity			—				(30,000	)			—				—				—				—				—				—				(30,000	)			—				(30,000	)
Redemption or Conversion of Aimco Operating Partnership units for Common Stock			—				—				527				5				7,080				—				—				—				7,085				(7,085	)			—
Repurchases of Common Stock and common partnership units			—				—				—				—				—				—				—				—				—				(980	)			(980	)
Repayment of notes receivable from officers			—				—				—				—				—				—				763				—				763				—				763
Common Stock issued pursuant to special dividends			—				—				15,548				156				148,590				—				—				—				148,746				—				148,746
Officer and employee stock awards and purchases, net			—				—				(227	)			(2	)			(1,476	)			—				1,452				—				(26	)			—				(26	)
Amortization of stock option and restricted stock compensation cost			—				—				—				—				8,007				—				—				—				8,007				—				8,007
Expense for dividends on forfeited shares and other OP Unit distributions			—				—				—				—				311				—				—				2,917				3,228				(990	)			2,238
Contributions from noncontrolling interests			—				—				—				—				—				—				—				—				—				5,535				5,535
Adjustment to noncontrolling interests from consolidation of entities			—				—				—				—				—				—				—				—				—				(1,151	)			(1,151	)
Change in accumulated other comprehensive income			—				—				—				—				—				1,111				—				—				1,111				297				1,408
Net income			—				—				—				—				—				—				—				(64,274	)			(64,274	)			13,186				(51,088	)
Common dividends and distributions			—				—				—				—				—				—				—				(46,202	)			(46,202	)			(94,552	)			(140,754	)
Preferred Stock dividends			—				—				—				—				—				—				—				(50,695	)			(50,695	)			—				(50,695	)
Balances at December 31, 2009			24,940			$	660,500				116,480			$	1,165			$	3,072,665			$	(1,138	)		$	(1,392	)		$	(2,492,082	)		$	1,239,718			$	294,985			$	1,534,703