Forward Looking Statements



The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. Certain information
included in this Quarterly Report on Form 10-Q contains or may contain
information that is forward-looking within the meaning of the federal securities
laws, including, without limitation, statements regarding: adverse economic and
geopolitical conditions, including as a result of the COVID-19 pandemic, which
negatively impact our operations, including on our ability to maintain current
or meet projected occupancy, rental rate and property operating results; the
effect of acquisitions, dispositions, developments, and redevelopments;
including our ability to meet budgeted costs and timelines, and achieve budgeted
rental rates related to our development and redevelopment investments;
expectations regarding sales of our apartment communities and the use of
proceeds thereof; the availability and cost of corporate debt; and our ability
to comply with debt covenants, including financial coverage ratios.

These forward-looking statements are based on management's judgment as of this
date, which is subject to risks and uncertainties that could cause actual
results to differ materially from our expectations, including, but not limited
to: the effects and duration of the COVID-19 pandemic, geopolitical events which
may adversely affect the markets in which our securities trade, and other
macroeconomic conditions, including, among other things, supply chain
challenges, rising interest rates and inflation, all of which heightens the
impact of the other risks and factors described herein, and the impact on
entities in which we hold a partial interest, including our indirect interest in
the partnership that owns Parkmerced Apartments; real estate and operating
risks, including fluctuations in real estate values and the general economic
climate in the markets in which we operate and competition for residents in such
markets; national and local economic conditions, including the pace of job
growth and the level of unemployment; the amount, location and quality of
competitive new housing supply; the timing and effects of acquisitions,
dispositions, developments and redevelopments; expectations regarding sales of
apartment communities and the use of proceeds thereof; insurance risks,
including the cost of insurance, and natural disasters and severe weather such
as hurricanes; supply chain disruptions, particularly with respect to raw
materials such as lumber, steel, and concrete; financing risks, including the
availability and cost of financing; the risk that cash flows from operations may
be insufficient to meet required payments of principal and interest; the risk
that earnings may not be sufficient to maintain compliance with debt covenants,
including financial coverage ratios; legal and regulatory risks, including costs
associated with prosecuting or defending claims and any adverse outcomes; the
terms of laws and governmental regulations that affect us and interpretations of
those laws and regulations; possible environmental liabilities, including costs,
fines or penalties that may be incurred due to necessary remediation of
contamination of apartment communities presently owned by us; and such other
risks and uncertainties described from time to time in our filings with the
Securities and Exchange Commission ("SEC").

In addition, our current and continuing qualification as a real estate
investment trust involves the application of highly technical and complex
provisions of the Internal Revenue Code of 1986, as amended (the "Code") and
depends on our ability to meet the various requirements imposed by the Code
through actual operating results, distribution levels and diversity of stock
ownership.

Readers should carefully review our financial statements and the notes thereto,
as well as Item 1A. Risk Factors in Part II of this report. These factors should
not be construed as exhaustive and should be read in conjunction with the other
cautionary statements that are included elsewhere in this Quarterly Report on
Form 10-Q. We undertake no obligation to publicly update or review any
forward-looking statement, whether as a result of new information, future
developments or otherwise, except as required by law.

Readers should also carefully review the section entitled "Risk Factors"
described in Item 1A of Apartment Investment and Management Company's and Aimco
OP L.P.'s combined Annual Report on Form 10-K for the year ended December 31,
2022, and subsequent documents we file from time to time with the SEC.

As used herein and except as the context otherwise requires, "we," "our," and
"us" refer to Apartment Investment and Management Company (which we refer to as
Aimco), Aimco OP L.P. (which we refer to as Aimco Operating Partnership) and
their consolidated subsidiaries, collectively.

Certain financial and operating measures found herein and used by management are
not defined under accounting principles generally accepted in the United States
("GAAP"). These measures are defined and reconciled to the most comparable GAAP
measures under the Non-GAAP Measures heading.



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Executive Overview

Our mission is to make real estate investments, primarily focused on the multifamily sector within targeted U.S. markets, where outcomes are enhanced through our human capital and substantial value is created for investors, teammates, and the communities in which we operate.

Our value proposition includes our:

•


Platform, consisting of a cohesive, talented, and tenured team with diverse real
estate industry experience combined with a disciplined and proven investment
process;

•


Diversified portfolio, consisting of in-process value-add investments, a deep
pipeline, which includes approximately 14 million square feet of potential
future development, a national portfolio of stabilized multifamily real estate
and select indirect and passive investments; and

•

Capital redeployment plan of prudent recycling of capital, reallocating our equity to higher returning investments.



Our primary goal is outsized risk adjusted returns and accelerating growth for
our shareholders. We are focused on providing superior total-return performance
to shareholders, primarily through capital appreciation driven by accretive
investment and active portfolio management over multi-year periods. We plan to
reinvest earnings to facilitate growth and, therefore, do not presently intend
to pay a regular quarterly cash dividend.

Our financial objectives are to create value and produce superior,
project-level, risk-adjusted returns on equity as measured by the investment
period Internal Rate of Return ("IRR") and the project-level Multiple on
Invested Capital ("MOIC"). We measure broader performance based on Net Asset
Value ("NAV") growth over time.

Our capital allocation strategy is designed to leverage our investment platform and optimize risk-adjusted returns for our shareholders.



Aimco targets a balanced allocation, which includes investments in "Value Add"
and "Opportunistic" multifamily real estate, primarily located in Southeast
Florida, the Washington D.C. Metro Area and Colorado's Front Range, plus
investment in a geographically diversified portfolio of "Core" and "Core-Plus"
apartment communities.

In addition, we currently hold select alternative assets, consisting primarily of indirect, real estate related debt and equity investments. We plan to significantly reduce our allocation to these investments over time.



We have policies in place that support our stated strategy, guide our investment
allocations, and manage risk, including to hold at all times a sizeable portion
of our net equity in stabilized cash-flowing assets and to require cash or
committed credit necessary for completion of development and redevelopment
projects prior to their commencement.



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Given our stated strategy, it is expected that at any point in time the value-creation process will be ongoing at numerous of our investments. Over time, we expect our enterprise to produce superior returns on equity on a risk-adjusted basis and it is our plan to do so by:

•

Benefiting from a national platform while leveraging local and regional expertise



We have corporate headquarters in Denver, Colorado and Washington D.C. Our
investment platform is managed by experienced professionals based in three
regions, where we will focus our new investment activity: Southeast Florida, the
Washington D.C. Metro Area and Colorado's Front Range. By regionalizing this
platform, we are able to leverage the in-depth local market knowledge of each
regional leader, creating a comparative advantage when sourcing, evaluating, and
executing investment opportunities.

•

Managing and investing in value-add and opportunistic real estate



Our dedicated team will source and execute development and redevelopment
projects, and various other direct investment strategies. Our development and
redevelopment portfolio currently includes projects in construction and
lease-up. In addition, our team has secured significant, high-quality, future
development opportunities, including total potential of more than 14 million
square feet, located in high-growth markets. Generally, we seek direct
investment opportunities in locations where barriers to entry are high, target
customers can be clearly defined and where we have a comparative advantage over
others in the market.

•

Owning a portfolio of stabilized core and core plus real estate



Our entire portfolio of operating properties includes 26 apartment communities
(22 consolidated properties and four unconsolidated properties) with average
rents in line with local market averages (generally defined as B class). We also
own one commercial office building that is part of an assemblage with an
adjacent apartment building. The target composition of our stabilized portfolio
will continue to include primarily B multifamily assets, spread across a
geographically diversified portfolio, with a bias toward long established
residential neighborhoods that rank highly in regard to schools, employment
fundamentals and state and regional governance. Core-Plus opportunities offer
the opportunity for incremental capital investment while maintaining stabilized
cashflow to accelerate income growth and improve asset values.

•

Managing and, over time, reducing our allocation to alternative investments



We currently hold select alternative investments, the majority of which
originated with Aimco Predecessor and, over time, plan to significantly reduce
capital allocated to these investments. Our current allocation to alternative
investments includes: our indirect interest in the Mezzanine Investment to the
Parkmerced partnership, which owns 3,165 apartment homes and future development
rights in San Francisco, California, and our passive equity investments in IQHQ,
Inc. ("IQHQ"), a privately-held life sciences real estate development company,
and in property technology funds consisting of entities that develop technology
related to the real estate industry.

•

Maintaining sufficient liquidity and utilizing safe financial leverage

At all times, we will guard our liquidity by maintaining sufficient cash and committed credit.



From time-to-time, we will allocate capital to financial assets designed to
mitigate risks elsewhere in the Aimco enterprise. Existing examples include our
option to acquire an interest rate swap designed to protect against repricing
risk on our maturing liabilities and the use of interest rate caps to provide
protection against increases in interest rates on in-place loans.

We expect to capitalize our activities through a combination of non-recourse
property debt, construction loans, third-party equity, and the recycling of
Aimco equity, including retained earnings. We plan to limit the use of recourse
leverage, with a strong preference towards non-recourse property-level debt in
order to limit risk to the Aimco enterprise. When warranted, we plan to seek
equity capital from joint venture partners to improve our cost of capital,
further leverage Aimco equity, reduce exposure to a single investment and, in
certain cases, for strategic benefits.

The results from the execution of our business plan during the three months ended March 31, 2023 are further described below.


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Financial Results and Recent Highlights

•


For the three months ended March 31, 2023, net loss attributable to Aimco common
stockholders per share, on a fully dilutive basis, was $0.06, compared to net
income per share of $0.05 for the same period in 2022, primarily due to a
reduction in accrued Mezzanine Investment income recognition and fair value
adjustments on our interest rate options.

•


For the three months ended March 31, 2023, revenue and net operating income from
our Stabilized Operating Properties were up 11.4% and 13.1%, respectively, year
over year, with average monthly revenue per apartment home of $2,227, up $238
year over year.

Value Add, Opportunistic & Alternative Investments

Development and Redevelopment



We generally seek development and redevelopment opportunities where barriers to
entry are high, target customers can be clearly defined, and where we have a
comparative advantage over others in the market. We will focus our new
investment activity in Southeast Florida, the Washington D.C. Metro Area and
Colorado's Front Range. Our Value Add and Opportunistic investments may also
target portfolio acquisitions, operational turnarounds, and re-entitlements.

We currently have five active development and redevelopment projects, located in
four U.S. markets, in varying phases of construction and lease-up. These
projects remain on track, as measured by budget, lease-up metrics, and current
market valuations. Additionally, we have a pipeline of future value-add
opportunities totaling approximately 14 million gross square feet of development
in our target markets of Southeast Florida, the Washington D.C. Metro, and
Colorado's Front Range. During the three months ended March 31, 2023, we
invested $64.8 million in development and redevelopment activities.

Updates include:

•

Construction is now complete at the major redevelopment of The Hamilton, a 276-unit bayfront apartment community in Miami, Florida, and the property was 88% leased or pre-leased as of March 31, 2023, at rates well ahead of underwritten rents.

•


Construction is progressing on plan at the first phase of Strathmore Square in
Bethesda, Maryland, which will contain 220 highly tailored apartment homes when
complete in 2025. This suburban infill project is located adjacent to the
Grosvenor-Strathmore Metro station and the Strathmore Performing Arts Campus,
and is 1.5 miles from The National Institutes of Health main campus. Funding for
the $164.0 million project is fully secured with Aimco having a remaining equity
commitment, as of March 31, 2023, of $10.7 million.

•


Construction remains on schedule and on budget at Upton Place in Northwest
Washington, D.C. We plan to start pre-leasing Upton's 689 apartment homes during
the summer of 2023 in anticipation of initial delivery in the fourth quarter of
2023. As of March 31, 2023, 80% of the project's 105,000 square feet of retail
space has been leased.

•

Construction is ongoing at Oak Shore, in Corte Madera, California, where 16 luxury single family rental homes and eight accessory dwelling units are being developed. We expect to deliver the first homes in the third quarter with pre-leasing efforts having begun in the first quarter of 2023.

•


Construction of the Benson Hotel and Faculty Club, a 106-key boutique hotel and
event center, with 18,000 square feet of event space, located on the Anschutz
Medical Campus in Aurora, Colorado. In April, the hotel was completed and open
to guests. As the only 'on campus' accommodations, The Benson is garnering
strong interest from the many departments and offices located on the surrounding
Anschutz Medical Campus which includes The University of Colorado Medical
School, UC Health Hospital, Children's Hospital Colorado, The Rocky Mountain VA
Medical Center and the burgeoning Fitzsimons Innovation Community.



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•


In the three months ended March 31, 2023, we invested $5.7 million into our
future development pipeline projects located in Southeast Florida, the
Washington D.C. Metro, and Colorado's Front Range. Programming, design,
documentation and entitlement efforts continue with projected unit counts and
rentable square footage on track to meet or exceed initial projections. We have
received Urban Development Review Board approvals related to our 34th Street and
Biscayne Boulevard properties in Miami's Edgewater neighborhood, conditional
approvals on our Broward Boulevard sites in Fort Lauderdale, and earlier this
month submitted a major amendment to the existing approval for the first phase
of development at its site in Fort Lauderdale's Flagler Village neighborhood. As
part of our capital allocation strategy, we may choose to monetize certain of
our pipeline assets prior to vertical construction in an effort to maximize
value add and risk adjusted returns.

Alternative Investments



Our current alternative investments are primarily those investments originated
by Aimco Predecessor and include a Mezzanine Investment to the Parkmerced
partnership secured by a stabilized multifamily property with an option to
participate in future multifamily development, as well as three passive equity
investments. Over time, we plan to significantly reduce capital allocated to
these investments.

Updates for our alternative investments include:

•


In February 2023, we entered into an agreement to sell our Parkmerced Mezzanine
Investment for $167.5 million. The initial $5.0 million deposit received by the
purchaser became nonrefundable in April 2023 when various conditions, including
transfer consents, were cleared. The sale is expected to close during the three
months ended June 30, 2023. Together with the monetization of the $1.5 billion
notional swaption, purchased in conjunction with the Mezzanine Investment to
protect against future interest rate increases, we expect gross proceeds from
these transactions to be approximately $220 million.

Investment Activity

We are focused on development and redevelopment, primarily funded through construction loans and joint venture equity.

Updates include:

•


In February 2023, we entered into an option agreement with the Fitzsimons
Redevelopment Authority. If exercised, the option allows for the long-term lease
of 4.8 acres of land located on the Anschutz Medical Campus in Aurora, Colorado
that can accommodate approximately 850,000 square feet of commercial life
science development built out over multiple phases. The option's annual cost is
approximately $0.5 million.

Operating Property Results

We own a diversified portfolio of stabilized apartment communities located in
eight major U.S. markets with average rents in line with local market averages.
We also own a commercial office building that is part of an assemblage with an
adjacent apartment building.

Highlights for the three months ended March 31, 2023 include:

•


Revenue for our Operating segment for the three months ended March 31, 2023, was
$36.7 million, up 11.4% year over year, resulting from a $238 increase in
average monthly revenue per apartment home to $2,227, offset with a 50-basis
point decrease in Average Daily Occupancy to 98.0%.

•

Expenses for our Operating segment for the three months ended March 31, 2023, were $11.2 million, up 7.6% year-over-year.

•

Net operating income for our Operating segment for the three months ended March 31, 2023 was $25.5 million, up 13.1% year-over-year.

•

1001 Brickell Bay Drive, a waterfront office building in Miami, Florida, is
owned as part of a larger assemblage with substantial development potential.
Following first quarter lease expirations, as of March 31, 2023, the building
was 77% occupied.



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Balance Sheet and Financing Activity



We are highly focused on maintaining a strong balance sheet, including having at
all times ample liquidity. As of March 31, 2023, we had access to $338.6 million
in liquidity, including $166.1 million of cash on hand, $22.5 million of
restricted cash, and the capacity to borrow up to $150.0 million on our
revolving credit facility. Refer to the Liquidity and Capital Resources section
for additional information regarding our leverage.

Financial Results of Operations

We have three segments: (i) Development and Redevelopment, (ii) Operating, and (iii) Other.



Our Development and Redevelopment segment includes properties that are under
construction or have not achieved stabilization, as well as land assemblages
that are being held for future development. Our Operating segment includes 21
residential apartment communities that have achieved stabilized levels of
operations as of January 1, 2022 and maintained it throughout the current year
and comparable period. We aggregate all our apartment communities that have
reached stabilization into our Operating segment. Our Other segment consists of
properties currently owned that are not included in our Development and
Redevelopment or Operating segments.

The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements included in Item 1.

Results of Operations for the three months ended March 31, 2023, compared to the same period in 2022



Net income attributable to Aimco common stockholders decreased by $17.0 million
for the three months ended March 31, 2023, compared to the same period in 2022,
as described more fully below.

Property Results



As of March 31, 2023, our Development and Redevelopment segment included 12
properties, five of which were properties that were under construction, while
the remaining were land held for development. Our Operating segment included 21
communities with 5,600 apartment homes, and our Other segment included 1001
Brickell Bay Drive, our only office building and St. George Villas. During the
three months ended March 31, 2023, we reclassified one residential apartment
community from the Other segment to the Operating segment because it reached
stabilization. Prior period segment information has been recast based upon our
current segment population, and is consistent with how our CODM evaluates the
business. The recast conforms with our reportable segment classification as of
March 31, 2023.

We use proportionate property net operating income to assess the operating performance of our segments. Proportionate property net operating income is defined as our share of rental and other property revenues, less direct property operating expenses, but

•

excluding utility reimbursements, for the consolidated communities. In our Condensed Consolidated Statements of Operations, utility reimbursements are included in Rental and other property revenues, in accordance with GAAP;

•

excluding the results of four apartment communities with an aggregate 142 apartment homes that we neither manage nor consolidate, our investment in IQHQ and the Mezzanine Investment; and

•

excluding property management costs and casualty gains or losses, reported in consolidated amounts, in our assessment of segment performance.



Please refer to Note 8 to the condensed consolidated financial statements in
Item 1 for further discussion regarding our segments, including a reconciliation
of these proportionate amounts to consolidated rental and other property
revenues and property operating expenses.

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Proportionate Property Net Operating Income



The results of our segments for the three months ended March 31, 2023 and 2022,
as presented below, are based on segment classifications as of March 31, 2023:

                                             Three Months Ended March 31,
(in thousands)                                 2023                 2022           $ Change      % Change
Rental and other property revenues,
before utility reimbursements:
  Development and Redevelopment           $        2,201       $           48     $    2,153         100.0 %
  Operating                                       36,672               32,930          3,742          11.4 %
  Other                                            3,694                4,354           (660 )       (15.2 %)
   Total                                          42,567               37,332          5,235          14.0 %
Property operating expenses, net of
utility reimbursements:
  Development and Redevelopment                    2,025                  209          1,816         100.0 %
  Operating                                       11,186               10,396            790           7.6 %
  Other                                            1,192                1,439           (247 )       (17.2 %)
   Total                                          14,403               12,044          2,359          19.6 %
Proportionate property net operating
income:
  Development and Redevelopment                      176                 (161 )          337        (100.0 %)
  Operating                                       25,486               22,534          2,952          13.1 %
  Other                                            2,502                2,915           (413 )       (14.2 %)
   Total                                  $       28,164       $       25,288     $    2,876          11.4 %

For the three months ended March 31, 2023, compared to the same period in 2022:

•

Development and Redevelopment proportionate property net operating income increased by $0.3 million due to the lease up of units at The Hamilton.

•


Operating proportionate property net operating income increased by $3.0 million,
or 13.1%. The increase was attributable primarily to a $3.7 million, or 11.4%
increase in rental and other property revenues due to higher average revenues of
$238 per apartment home, offset with a 50-basis point decrease in occupancy.

•

Other proportionate property net operating income decreased by $0.4 million, or 14.2%.

Non-Segment Real Estate Operations



Operating income amounts not attributed to our segments include property
management costs, casualty losses, and, if applicable, the results of apartment
communities sold or held for sale, reported in consolidated amounts, which we do
not allocate to our segments for purposes of evaluating segment performance.

Depreciation and Amortization



For the three months ended March 31, 2023, compared to the same period in 2022,
Depreciation and amortization decreased by $6.8 million, or 29.6%, due primarily
to the disposition of three properties and the termination of leases of four
properties and related relinquishment of the associated leasehold improvements
during the year ended December 31, 2022.

General and Administrative Expenses



For the three months ended March 31, 2023, compared to the same period in 2022,
General and administrative expenses decreased by $1.1 million, or 11.3%, due
primarily to a decrease in expenses for consulting services per the Separation
Agreement with AIR, which concluded at December 31, 2022.

Interest Income



For the three months ended March 31, 2023, compared to the same period in 2022,
interest income increased by $1.5 million, or 100%, due primarily to interest
earned on invested cash.

Interest Expense

For the three months ended March 31, 2023, compared to the same period in 2022,
interest expense decreased by $4.9 million, or 33.4%, due primarily to a
decrease related to the prepayment of the notes payable due to AIR, partially
offset by an increase related to the refinancing of certain property debt during
the year ended December 31, 2022.

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Mezzanine Investment Income (Loss), Net



For the three months ended March 31, 2023, we recognized $0.1 million of loss in
connection with the Mezzanine Investment, compared to $8.2 million of income for
the three months ended March 31, 2022, respectively. During the year ended
December 31, 2022, we recorded a non-cash impairment and as a result, we have
ceased recognition of income on the Mezzanine Investment.

Realized and Unrealized Gains (Losses) on Interest Rate Options



We are required to adjust our interest rate options to fair value on a quarterly
basis. As a result of the mark-to-market adjustments, we recorded unrealized
losses of $1.9 million and unrealized gains of $18.8 million for the three
months ended March 31, 2023 and 2022, respectively. In addition, we realized
gains of $0.8 million for the three months ended March 31, 2023.

Realized and Unrealized Gains (Losses) on Equity Investments



We measure our investment in stock based on its market price at period end and
our investments in property technology funds at NAV as a practical expedient. As
a result of changes in the values of these investments, we recorded unrealized
gains of $0.1 million for the three months ended March 31, 2023, compared to
unrealized losses of $4.3 million for the three months ended March 31, 2022.

Other Income (Expense), Net



Other income (expense), net, includes costs associated with our risk management
activities, partnership administration expenses, fee income, and certain
non-recurring items. For the three months ended March 31, 2023, compared to the
same period in 2022, other expenses, net increased by $2.5 million, or 100.0%,
primarily due to the incremental expense associated with pre-existing long-term
incentive partnership units recorded upon the resignation of one of our board
members.

Income Tax Benefit (Expense)

Certain aspects of our operations, including our development and redevelopment
activities, are conducted through taxable REIT subsidiaries, or TRS entities.
Additionally, our TRS entities hold investments in one of our apartment
communities and 1001 Brickell Bay Drive.

Our income tax benefit calculated in accordance with GAAP includes income taxes
associated with the income or loss of our TRS entities. Income taxes, as well as
changes in valuation allowance and incremental deferred tax items in conjunction
with intercompany asset transfers and internal restructurings (if applicable),
are included in Income tax benefit (expense) in our Condensed Consolidated
Statements of Operations.

Consolidated GAAP income or loss subject to tax consists of pretax income or
loss of our taxable entities and gains retained by the REIT. For the three
months ended March 31, 2023, we had consolidated net losses subject to tax of
$4.9 million, compared to net losses subject to tax of $14.8 million for the
same period in 2022.

For the three months ended March 31, 2023, we recognized income tax benefit of
$4.2 million, compared to income tax benefit of $4.1 million for the same period
in 2022. The change is due primarily to the tax effect of depreciation
associated with properties owned by, and activities of, our TRS entities, as
well as a reduction to the effective state tax rate expected to apply to the
reversal of our existing deferred items.

Critical Accounting Policies and Estimates



We prepare our condensed consolidated financial statements in accordance with
GAAP, which requires us to make estimates and assumptions. We believe that the
critical accounting policies that involve our more significant judgments and
estimates used in the preparation of our condensed consolidated financial
statements relate to capitalized costs, impairment of long-lived assets,
acquisitions, and the Mezzanine Investment.

Our critical accounting policies are described in more detail in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of Aimco's and Aimco Operating Partnership's combined Annual Report
on Form 10-K for the year ended December 31, 2022. There have been no
significant changes in our critical accounting policies from those reported in
our Form 10-K and we believe that the related judgments and assessments have
been consistently applied and produce financial information that fairly depicts
the financial condition, results of operations, and cash flows for all periods
presented.

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Non-GAAP Measures

We use EBITDAre and Adjusted EBITDAre in managing our business and in evaluating
our financial condition and operating performance. These key financial
indicators are non-GAAP measures and are defined and described below. We provide
reconciliations of the non-GAAP financial measures to the most comparable
financial measure computed in accordance with GAAP.

Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization for Real Estate ("EBITDAre")



EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are
useful to investors, creditors, and rating agencies as a supplemental measure of
our ability to incur and service debt because they are recognized measures of
performance by the real estate industry and allow for comparison of our credit
strength to different companies. EBITDAre and Adjusted EBITDAre should not be
considered alternatives to net income (loss) as determined in accordance with
GAAP as indicators of liquidity. There can be no assurance that our method of
calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real
estate investment trusts. Nareit defines EBITDAre as net income computed in
accordance with GAAP, before interest expense, income taxes, depreciation, and
amortization expense, further adjusted for:

•

gains and losses on the dispositions of depreciated property;

•

impairment write-downs of depreciated property;

•

impairment write-downs of investments in unconsolidated partnerships caused by a decrease in the value of the depreciated property in such partnerships; and

•

adjustments to reflect our share of EBITDAre of investments in unconsolidated entities.



EBITDAre is defined by Nareit and provides for an additional performance measure
independent of capital structure for greater comparability between real estate
investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted to exclude
the effect of net (income) loss attributable to noncontrolling interests in
consolidated real estate partnerships and EBITDAre adjustments attributable to
noncontrolling interests, and realized and unrealized (gains) losses on interest
rate options, which we believe allow investors to compare a measure of our
earnings before the effects of our capital structure and indebtedness with that
of other companies in the real estate industry. Additionally, we exclude
interest income recognized on our Mezzanine Investment that was accrued but not
paid.

The reconciliation of net loss to EBITDAre and Adjusted EBITDAre for the three months ended March 31, 2023 and 2022, is as follows (in thousands):



                                                           Three Months Ended March 31,
                                                            2023                 2022
Net income (loss)                                       $      (5,753 )     $        10,112
Adjustments:
Interest expense                                                9,725                14,601
Income tax (benefit) expense                                   (4,196 )              (4,056 )
Depreciation and amortization                                  16,271

23,118


Adjustment related to EBITDAre of unconsolidated
partnerships                                                      223                   257
EBITDAre                                                $      16,270       $        44,032
Net (income) loss attributable to redeemable
noncontrolling
  interests in consolidated real estate partnerships           (3,274 )              (1,470 )
Net (income) loss attributable to noncontrolling
interests
  in consolidated real estate partnerships                       (264 )                   2

EBITDAre adjustments attributable to noncontrolling interests

                                                         (16 )                 (11 )
Mezzanine investment (income) loss, net                           128                (8,237 )
Realized and unrealized (gains) losses on interest
rate options                                                    1,057               (18,778 )
Adjusted EBITDAre                                       $      13,901       $        15,538





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Liquidity and Capital Resources

Liquidity

Liquidity is the ability to meet present and future financial obligations. Our primary sources of liquidity are cash flows from operations and borrowing capacity under our loan agreements.

As of March 31, 2023, our available liquidity was $338.6 million, which consisted of:

•

$166.1 million in cash and cash equivalents; and

•

$22.5 million of restricted cash, including amounts related to tenant security
deposits and escrows held by lenders for capital additions, property taxes, and
insurance; and

•

$150.0 million of available capacity to borrow under our revolving secured credit facility.



We have commitments for approximately $133.2 million and remaining planned spend
of $142.7 million on development and redevelopment projects, with $268.4 million
undrawn on our construction loans as of March 31, 2023. The initial allocation
to our joint ventures have remaining unfunded commitments of $9.5 million. We
also have unfunded commitments in the amount of $2.3 million related to four
investments in entities that develop technology related to the real estate
industry. Our principal uses for liquidity include normal operating activities,
payments of principal and interest on outstanding debt, capital expenditures,
and future investments. Additionally, our third-party property managers may
enter into commitments on our behalf to purchase goods and services in
connection with the operation of our apartment communities and our office
building. Those commitments generally have terms of one year or less and reflect
expenditure levels comparable to historical levels.

We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for the next twelve months.



In the event that our cash and cash equivalents, revolving secured credit
facility, and cash provided by operating activities are not sufficient to cover
our liquidity needs, we have the means to generate additional liquidity, such as
from additional property financing activity and proceeds from apartment
community sales. We expect to meet our long-term liquidity requirements,
including debt maturities, development and redevelopment spending, and future
investment activity, primarily through property financing activity, cash
generated from operations, and the recycling of our equity. Our revolving
secured credit facility matures in December 2023, prior to consideration of its
two one-year extension options.

Leverage and Capital Resources



The availability and cost of credit and its related effect on the overall
economy may affect our liquidity and future financing activities, both through
changes in interest rates and access to financing. Any adverse changes in the
lending environment could negatively affect our liquidity. We have taken steps
to mitigate a portion of our short-term refunding risk. However, if property or
development financing options become unavailable, we may consider alternative
sources of liquidity, such as reductions in capital spending or apartment
community dispositions.

As of March 31, 2023, approximately 83% of our outstanding non-recourse property
debt had a fixed interest rate and approximately 17% had a variable interest
rate. In addition, the weighted-average rate on our non-recourse debt was 5.3%,
and the average remaining term to maturity was 6.9 years. At March 31, 2023,
substantially all of our outstanding non-recourse property debt was either fixed
or hedged. Our use of interest rate caps may vary from quarter to quarter
depending on lender requirements, recycling of interest rate caps between
projects, and our view on forecasted interest rates.

While our primary source of leverage is property-level debt and construction
loans, we also have a secured $150.0 million credit facility with a syndicate of
financial institutions. As of March 31, 2023, we had no outstanding borrowings
under our revolving secured credit facility. Under our revolving secured credit
facility, we have agreed to maintain a fixed charge coverage ratio of 1.25X
minimum tangible net worth of $625.0 million, and maximum leverage of 60.0% as
defined in the credit agreement. We are currently in compliance and expect to
remain in compliance with these covenants during the next twelve months.



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Changes in Cash, Cash Equivalents, and Restricted Cash

The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash due to operating, investing and financing activities, which are presented in our Condensed Consolidated Statements of Cash Flows in Item 1 of this report.

Operating Activities



For the three months ended March 31, 2023, net cash provided by operating
activities was $5.6 million. Our operating cash flow is primarily affected by
rental rates, occupancy levels, and operating expenses related to our portfolio
of apartment communities and general and administrative costs. Cash provided by
operating activities for the three months ended March 31, 2023, decreased by
$0.9 million compared to the same period ended in 2022, due primarily to lower
net operating income associated with apartment communities sold in the latter
part of 2022 and timing of balance sheet position changes, partially offset by
decreased interest payments.

Investing Activities

For the three months ended March 31, 2023, net cash used in investing activities
of $63.2 million consisted primarily of capital expenditures of $64.8 million.
Net cash used in investing activities for the three months ended March 31, 2023,
decreased by $48.2 million compared to the same period ended in 2022, due
primarily to decreased real estate acquisitions and funding of our passive
equity investment in IQHQ, partially offset by increased capital expenditures.
We have generally funded capital additions with available cash and cash provided
by operating activities and construction loans.

Financing Activities



For the three months ended March 31, 2023, net cash provided by financing
activities of $16.5 million consisted primarily of proceeds from construction
loans, partially offset by repurchases of Common Stock and distributions to
noncontrolling interests. Net cash provided by financing activities for the
three months ended March 31, 2023, decreased by $21.5 million compared to the
same period ended in 2022, due primarily to decreased proceeds from non-recourse
property debt and increased common stock repurchased, as well as changes in
activity with noncontrolling interests, partially offset by decreased payments
on finance leases and increased proceeds from construction loans.

Future Capital Needs



We expect to fund any future acquisitions, development and redevelopment, and
other capital spending principally with operating cash flows, short-term
borrowings, and debt and equity financing. Our near-term business plan does not
contemplate the issuance of equity. We believe, based on the information
available at this time, that we have sufficient cash on hand and access to
additional sources of liquidity to meet our operational needs for the next
twelve months.





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