APARTMENT INVESTMENT & MANAGEMENT CO - Quarter Report: 2011 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-13232

 

Apartment Investment and Management Company

(Exact name of registrant as specified in its charter)

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares of Class A Common Stock outstanding as of July 27, 2011: 120,802,584

 

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

TABLE OF CONTENTS

FORM 10-Q

		Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010 (Unaudited)			2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010 (Unaudited)			3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 (Unaudited)			4
Notes to Condensed Consolidated Financial Statements (Unaudited)			5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			37
ITEM 4. Controls and Procedures			37
PART II. OTHER INFORMATION
ITEM 1A. Risk Factors			37
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
ITEM 6. Exhibits			38
Signatures			39
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 99.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

ITEM 1.		Financial Statements

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

		June 30,				December 31,
		2011				2010
ASSETS
Buildings and improvements		$	6,993,515			$	7,100,012
Land			2,107,082				2,108,349
Total real estate			9,100,597				9,208,361
Less accumulated depreciation			(2,837,896	)			(2,821,935	)
Net real estate ($817,297 and $846,081 related to VIEs)			6,262,701				6,386,426
Cash and cash equivalents ($35,430 and $34,808 related to VIEs)			85,324				111,325
Restricted cash ($50,373 and $55,076 related to VIEs)			196,426				200,503
Accounts receivable, net ($10,238 and $8,393 related to VIEs)			41,293				49,855
Accounts receivable from affiliates, net			5,179				8,392
Deferred financing costs, net			46,984				46,953
Notes receivable from unconsolidated real estate partnerships, net			10,209				10,896
Notes receivable from non-affiliates, net			117,078				116,726
Investment in unconsolidated real estate partnerships ($48,748 and $54,374 related to VIEs)			74,349				59,282
Other assets			239,797				180,596
Deferred income tax assets, net			61,919				58,736
Assets held for sale			23,713				148,876
Total assets		$	7,164,972			$	7,378,566
LIABILITIES AND EQUITY
Non-recourse property tax-exempt bond financing ($225,837 and $209,550 related to VIEs)		$	434,536			$	511,811
Non-recourse property loans payable ($417,669 and $428,417 related to VIEs)			4,872,614				4,833,938
Revolving credit facility borrowings			21,500				—
Other borrowings ($13,294 and $15,486 related to VIEs)			40,974				47,018
Total indebtedness			5,369,624				5,392,767
Accounts payable			25,988				27,322
Accrued liabilities and other ($66,162 and $79,170 related to VIEs)			228,396				250,103
Deferred income			147,082				150,577
Security deposits			34,982				34,308
Liabilities related to assets held for sale			24,177				113,289
Total liabilities			5,830,249				5,968,366
Preferred noncontrolling interests in Aimco Operating Partnership			83,387				83,428
Preferred stock subject to repurchase agreement			10,000				20,000
Commitments and contingencies (Note 5)			—				—
Equity:
Perpetual Preferred Stock			657,601				657,601
Class A Common Stock, $0.01 par value, 485,687,260 and 422,157,736 shares authorized, 120,477,521 and 117,642,872 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively			1,205				1,176
Additional paid-in capital			3,095,994				3,070,296
Accumulated other comprehensive loss			(1,147	)			(2,076	)
Distributions in excess of earnings			(2,774,353	)			(2,680,955	)
Total Aimco equity			979,300				1,046,042
Noncontrolling interests in consolidated real estate partnerships			289,865				291,458
Common noncontrolling interests in Aimco Operating Partnership			(27,829	)			(30,728	)
Total equity			1,241,336				1,306,772
Total liabilities and equity		$	7,164,972			$	7,378,566

See notes to condensed consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
REVENUES:
Rental and other property revenues		$	273,384			$	266,728			$	545,176			$	533,332
Asset management and tax credit revenues			7,651				9,796				16,887				14,497
Total revenues			281,035				276,524				562,063				547,829
OPERATING EXPENSES:
Property operating expenses			117,379				123,126				240,908				250,266
Investment management expenses			2,187				5,141				5,219				8,370
Depreciation and amortization			94,084				102,809				193,117				206,092
General and administrative expenses			12,372				15,184				23,498				26,919
Other expenses (income), net			5,222				(4,485	)			9,156				(2,148	)
Total operating expenses			231,244				241,775				471,898				489,499
Operating income			49,791				34,749				90,165				58,330
Interest income			2,254				1,909				4,502				5,080
(Provision for) recovery of losses on notes receivable, net			(36	)			148				(53	)			(278	)
Interest expense			(96,716	)			(76,203	)			(171,805	)			(152,579	)
Equity in (losses) earnings of unconsolidated real estate partnerships			(1,798	)			(5,295	)			(3,446	)			3,853
Gain on dispositions of unconsolidated real estate and other			808				3,041				2,021				4,485
Loss before income taxes and discontinued operations			(45,697	)			(41,651	)			(78,616	)			(81,109	)
Income tax benefit			2,257				3,385				4,765				7,151
Loss from continuing operations			(43,440	)			(38,266	)			(73,851	)			(73,958	)
Income from discontinued operations, net			16,469				28,096				19,603				47,028
Net loss			(26,971	)			(10,170	)			(54,248	)			(26,930	)
Noncontrolling interests:
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships			2,771				2,716				10,076				(9,418	)
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership			(1,671	)			(1,683	)			(3,342	)			(3,376	)
Net loss attributable to common noncontrolling interests in Aimco Operating Partnership			2,420				1,312				4,803				4,381
Total noncontrolling interests			3,520				2,345				11,537				(8,413	)
Net loss attributable to Aimco			(23,451	)			(7,825	)			(42,711	)			(35,343	)
Net income attributable to Aimco preferred stockholders			(9,672	)			(10,128	)			(22,128	)			(23,050	)
Net income attributable to participating securities			(54	)			(42	)			(111	)			—
Net loss attributable to Aimco common stockholders		$	(33,177	)		$	(17,995	)		$	(64,950	)		$	(58,393	)
Earnings (loss) attributable to Aimco per common share — basic and diluted (Note 6):
Loss from continuing operations attributable to Aimco common stockholders		$	(0.35	)		$	(0.33	)		$	(0.66	)		$	(0.75	)
Income from discontinued operations attributable to Aimco common stockholders			0.07				0.18				0.11				0.25
Net loss attributable to Aimco common stockholders		$	(0.28	)		$	(0.15	)		$	(0.55	)		$	(0.50	)
Weighted average common shares outstanding, basic and diluted			119,156				116,323				118,238				116,179
Dividends declared per common share		$	0.12			$	0.10			$	0.24			$	0.10

See notes to condensed consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

		Six Months Ended
		June 30,
		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(54,248	)		$	(26,930	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			193,117				206,092
Equity in losses (earnings) of unconsolidated real estate partnerships			3,446				(3,853	)
Gain on dispositions of unconsolidated real estate and other			(2,021	)			(4,485	)
Discontinued operations			(16,641	)			(33,424	)
Other adjustments			9,063				2,090
Net changes in operating assets and operating liabilities			(37,508	)			(28,527	)
Net cash provided by operating activities			95,208				110,963
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(61,849	)			(79,023	)
Proceeds from dispositions of real estate			87,313				107,163
Purchases of interests in unconsolidated real estate and corporate assets			(28,714	)			(3,291	)
Purchase of investment in debt securities (Note 4)			(51,534	)			—
Originations of notes receivable from unconsolidated real estate partnerships			(411	)			(733	)
Proceeds from repayment of notes receivable			6,264				1,650
Proceeds from sale of interests in and distributions from real estate partnerships			3,303				9,132
Net increase in cash from consolidation and deconsolidation of entities			—				13,118
Other investing activities			12,090				8,341
Net cash (used in) provided by investing activities			(33,538	)			56,357
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from property loans			662,601				125,491
Principal repayments on property loans			(647,719	)			(124,794	)
Principal repayments on tax-exempt bond financing			(98,447	)			(31,061	)
Payments on term loans			—				(65,000	)
Net borrowings on revolving credit facility			21,500				—
Repurchases of preferred stock			(7,000	)			(7,000	)
Proceeds from issuance of Common Stock			60,973				—
Proceeds from Class A Common Stock option exercises			1,806				1,806
Payment of dividends to holders of preferred stock			(24,877	)			(25,829	)
Payment of dividends to holders of Class A Common Stock			(28,577	)			(23,334	)
Payment of distributions to noncontrolling interests			(21,973	)			(28,623	)
Other financing activities			(5,958	)			8,082
Net cash used in financing activities			(87,671	)			(170,262	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(26,001	)			(2,942	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			111,325				81,260
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	85,324			$	78,318

See notes to condensed consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2011
(Unaudited)

NOTE 1 — Organization

Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. We are a self-administered and self-managed real estate investment trust, or REIT. Our principal financial objective is to provide predictable and attractive returns to our stockholders. Our business plan to achieve this objective is to:

•

own and operate a broadly diversified portfolio of primarily class “B/B+” assets (defined below) with properties concentrated in the 20 largest markets in the United States (as measured by total apartment value, which is the estimated total market value of apartment properties in a particular market);

•

improve our portfolio by selling assets with lower projected returns and reinvesting those proceeds through the purchase of new assets or additional investment in existing assets in our portfolio, including increased ownership or redevelopment; and

•

provide financial leverage primarily by the use of non-recourse, long-dated, fixed-rate property debt and perpetual preferred equity.

As of June 30, 2011, we:

•

owned an equity interest in 215 conventional real estate properties with 67,049 units;

•

owned an equity interest in 205 affordable real estate properties with 24,406 units; and

•

provided services for, or managed, 13,921 units in 187 properties, primarily pursuant to long-term asset management agreements. In certain cases, we may indirectly own generally less than one percent of the operations of such properties through a syndication or other fund.

Of these properties, we consolidated 209 conventional properties with 65,603 units and 163 affordable properties with 20,235 units. These conventional and affordable properties generated 87% and 13%, respectively, of our proportionate property net operating income (as defined in Note 7) during the six months ended June 30, 2011. During the six months ended June 30, 2011, as part of our ongoing effort to simplify our business, we resigned from our role providing asset or property management services for approximately 100 properties with approximately 11,400 units.

For conventional assets, we focus on the ownership of primarily B/B+ assets. We measure conventional property asset quality based on average rents of our units compared to local market average rents as reported by a third-party provider of commercial real estate performance and analysis, with A-quality assets earning rents greater than 125% of local market average, B-quality assets earning rents 90% to 125% of local market average and C-quality assets earning rents less than 90% of local market average. We classify as B/B+ those assets earning rents ranging from 100% to 125% of local market average. Although some companies and analysts within the multifamily real estate industry use asset class ratings of A, B and C, some of which are tied to local market rent averages, the metrics used to classify asset quality as well as the timing for which local markets rents are calculated may vary from company to company. Accordingly, our rating system for measuring asset quality is neither broadly nor consistently used in the multifamily real estate industry.

Through our wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, we own a majority of the ownership interests in AIMCO Properties, L.P., which we refer to as the Aimco Operating Partnership. As of June 30, 2011, we held an interest of approximately 94% in the common partnership units and equivalents of the Aimco Operating Partnership. We conduct substantially all of our business and own substantially all of our assets through the Aimco Operating Partnership. Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as “OP Units.” OP Units include common partnership units, high performance partnership units and partnership preferred units, which we refer to as common OP Units, High Performance Units and preferred OP Units, respectively. At June 30, 2011, after elimination of shares held by consolidated subsidiaries, 120,477,521 shares of our Common Stock were outstanding and the Aimco Operating Partnership had 8,346,803 common OP Units and equivalents outstanding for a combined total of 128,824,324 shares of Common Stock, common OP Units and equivalents outstanding.

Except as the context otherwise requires, “we,” “our,” “us” and the “Company” refer to Aimco, the Aimco Operating Partnership and their consolidated entities, collectively.

NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2011, are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

The balance sheet at December 31, 2010, has been derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010. Certain 2010 financial statement amounts have been reclassified to conform to the 2011 presentation, including adjustments for discontinued operations.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Aimco, the Aimco Operating Partnership, and their consolidated entities. We consolidate all variable interest entities for which we are the primary beneficiary. Generally, we consolidate real estate partnerships and other entities that are not variable interest entities when we own, directly or indirectly, a majority voting interest in the entity or are otherwise able to control the entity. All significant intercompany balances and transactions have been eliminated in consolidation.

Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are reflected in the accompanying balance sheets as noncontrolling interests in Aimco Operating Partnership. Interests in partnerships consolidated into the Aimco Operating Partnership that are held by third parties are reflected in the accompanying balance sheets as noncontrolling interests in consolidated real estate partnerships. The assets of consolidated real estate partnerships owned or controlled by us generally are not available to pay creditors of Aimco or the Aimco Operating Partnership.

As used herein, and except where the context otherwise requires, “partnership” refers to a limited partnership or a limited liability company and “partner” refers to a partner in a limited partnership or a member in a limited liability company.

Variable Interest Entities

We consolidate all variable interest entities for which we are the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.

In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

As of June 30, 2011, we were the primary beneficiary of, and therefore consolidated, approximately 125 VIEs, which owned 84 apartment properties with 12,982 units. Real estate with a carrying value of $817.3 million collateralized $643.5 million of debt of those VIEs. Any significant amounts of assets and liabilities related to our consolidated VIEs are identified parenthetically on our accompanying condensed consolidated balance sheets. The creditors of the consolidated VIEs do not have recourse to our general credit.

As of June 30, 2011, we also held variable interests in 244 VIEs for which we were not the primary beneficiary. Those VIEs consist primarily of partnerships that are engaged, directly or indirectly, in the ownership and management of 297 apartment properties with 18,606 units. We are involved with those VIEs as an equity holder, lender, management agent, or through other contractual relationships. The majority of our investments in unconsolidated VIEs, or approximately $42.8 million at June 30, 2011, are held through consolidated investment partnerships that are VIEs and in which we generally hold a 1% or less general partner or equivalent interest. Accordingly, substantially all of the investment balances related to these unconsolidated VIEs are attributed to the noncontrolling interests in the consolidated investment partnerships that hold the investments in these unconsolidated VIEs. Our maximum risk of loss related to our investment in these VIEs is generally limited to our equity interest in the consolidated investment partnerships, which is insignificant. The remainder of our investment in unconsolidated VIEs, or approximately $5.9 million at June 30, 2011, is held through consolidated tax credit funds that are VIEs and in which we hold substantially all of the economic interests. Our maximum risk of loss related to our investment in these VIEs is limited to our $5.9 million recorded investment in such entities.

In addition to our investments in unconsolidated VIEs discussed above, at June 30, 2011, we had in aggregate $99.8 million of receivables from these unconsolidated VIEs and we had a contractual obligation to advance funds to certain unconsolidated VIEs totaling $3.4 million. Our maximum risk of loss associated with our lending and management activities related to these unconsolidated VIEs is limited to these amounts. We may be subject to additional losses to the extent of any receivables relating to future provision of services to these entities or financial support that we voluntarily provide.

As discussed in Note 5, noncompliance with applicable requirements related to our consolidated and unconsolidated tax credit partnerships, substantially all of which are VIEs, could result in projected tax credits not being realized and require a refund of investor contributions already received or a reduction of future investor contributions. We have not historically had, nor do we anticipate, any material refunds or reductions of investor capital contributions in connection with these arrangements.

Notes Receivable

Notes receivable from unconsolidated real estate partnerships and from non-affiliates represent our two portfolio segments (as defined in FASB ASC Topic 310) that we use to evaluate for potential loan loss. Notes receivable from unconsolidated real estate partnerships consist primarily of notes receivable from partnerships in which we are the general partner but do not consolidate the partnership. These loans are typically due on demand, have no stated maturity date and may not require current payments of principal or interest. Notes receivable from non-affiliates have stated maturity dates and may require current payments of principal and interest. Repayment of our notes is subject to a number of variables, including the performance and value of the underlying real estate properties and the claims of unaffiliated mortgage lenders, which are generally senior to our claims. Our notes receivable consist of two classes: 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 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 or 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 notes, 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.

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 update our cash flow projections of the borrowers annually, and more frequently for certain loans depending on facts and circumstances. We recognize provisions for losses on notes receivable when it is probable that principal and interest will not be received in accordance with the contractual terms of the loan. Factors that affect this assessment include the fair value of the partnership’s real estate, pending transactions to refinance the partnership’s senior obligations or sell the partnership’s real estate, and market conditions (current and forecasted) related to a particular asset. The amount of the provision 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 provision is measured by discounting the estimated cash flows at the loan’s original effective interest rate.

The following table summarizes our notes receivable as of June 30, 2011 and December 31, 2010 (in thousands):

		June 30, 2011												December 31, 2010
		Unconsolidated												Unconsolidated
		Real Estate				Non-								Real Estate				Non-
		Partnerships				Affiliates				Total				Partnerships				Affiliates				Total
Par value notes		$	10,081			$	19,572			$	29,653			$	10,821			$	17,899			$	28,720
Discounted notes			1,011				97,506				98,517				980				98,827				99,807
Allowance for loan losses			(883	)			—				(883	)			(905	)			—				(905	)
Total notes receivable		$	10,209			$	117,078			$	127,287			$	10,896			$	116,726			$	127,622
Face value of discounted notes		$	31,448			$	106,466			$	137,914			$	31,755			$	108,621			$	140,376

Notes receivable from unconsolidated real estate partnerships are generally unsecured and have various annual interest rates ranging between 4.3% and 12.0% and averaging 9.8%. Notes receivable from non-affiliates have various annual interest rates ranging between 2.1% and 8.8% and averaging 4.1%. Included in the notes receivable from non-affiliates at June 30, 2011 and December 31, 2010 are $99.9 million and $103.9 million, respectively, in notes that were secured by interests in real estate or interests in real estate partnerships.

During the six months ended June 30, 2011, there have been no significant changes in the allowance for loan losses related to our notes receivable from unconsolidated real estate partnerships and non-affiliates. Additionally, there have been no significant changes related to the carrying amounts, our average recorded investment in or unpaid principal balances for impaired loans. During the three and six months ended June 30, 2011 and 2010, we did not recognize any significant amounts of interest income related to impaired or non-impaired notes receivable.

We recognize interest income as earned on the $28.5 million of our par value notes receivable at June 30, 2011 that are estimated to be collectible and have not been impaired. Of our total par value notes outstanding at June 30, 2011, notes with balances of $18.9 million have stated maturity dates and the remainder have no stated maturity date and are governed by the terms of the partnership agreements pursuant to which the loans were extended. At June 30, 2011, none of the par value notes with stated maturity dates were past due.

Equity (including Noncontrolling Interests)

The following table presents a reconciliation of our consolidated temporary equity accounts from December 31, 2010 to June 30, 2011 (in thousands):

		Preferred
		noncontrolling				Preferred stock
		interests in Aimco				subject to
		Operating				repurchase
		Partnership				agreement
Balance, December 31, 2010		$	83,428			$	20,000
Preferred distributions			(3,342	)			—
Redemption of preferred units			(41	)			—
Repurchase of preferred shares			—				(10,000	)
Net income			3,342				—
Balance, June 30, 2011		$	83,387			$	10,000

The following table presents a reconciliation of our consolidated permanent equity accounts from December 31, 2010 to June 30, 2011(in thousands):

						Noncontrolling				Common
						interests in				noncontrolling
						consolidated real				interests in
		Aimco				estate				Aimco Operating				Total
		Equity				partnerships				Partnership				Equity
Balance, December 31, 2010		$	1,046,042			$	291,458			$	(30,728	)		$	1,306,772
Contributions			—				11,121				—				11,121
Issuance of common stock			60,973				—				—				60,973
Discount on repurchase of preferred shares			3,000				—				—				3,000
Preferred stock dividends			(24,877	)			—				—				(24,877	)
Common dividends and distributions			(28,577	)			(16,606	)			(2,022	)			(47,205	)
Repurchases of common units			—				—				350				350
Amortization of stock based compensation cost			3,557				—				—				3,557
Stock option exercises			1,806				—				—				1,806
Effect of changes in ownership for consolidated entities (Note 4)			(41,112	)			14,124				9,454				(17,534	)
Change in accumulated other comprehensive loss			929				(103	)			(80	)			746
Other			270				(53	)			—				217
Net loss			(42,711	)			(10,076	)			(4,803	)			(57,590	)
Balance, June 30, 2011		$	979,300			$	289,865			$	(27,829	)		$	1,241,336

Derivative Financial Instruments

We have limited exposure to derivative financial instruments. We are contractually obligated on certain of our variable rate debt to limit our exposure to interest rate fluctuations, and we do so by entering into interest rate swap agreements. We primarily use long-term, fixed-rate and self-amortizing non-recourse debt to avoid, among other things, risk related to fluctuating interest rates. For our variable rate debt, we are sometimes required by our lenders to limit our exposure to interest rate fluctuations by entering into interest rate swap agreements, which moderate our exposure to interest rate risk by effectively converting the interest on variable rate debt to a fixed rate. The fair values of the interest rate swaps are reflected as assets or liabilities in the balance sheet, and periodic changes in fair value are included in interest expense or equity, as appropriate.

At June 30, 2011 and December 31, 2010, we had interest rate swaps with aggregate notional amounts of $52.3 million, and recorded fair values of $3.6 million and $2.7 million, respectively, reflected in accrued liabilities and other in our condensed consolidated balance sheets. At June 30, 2011, these interest rate swaps had a weighted average term of 9.6 years. We have designated these interest rate swaps as cash flow hedges and recognize any changes in their fair value as an adjustment of accumulated other comprehensive loss within equity to the extent of their effectiveness. Changes in the fair value of these instruments and the related amounts of such changes that were reflected as an adjustment of accumulated other comprehensive loss within equity and as an adjustment of earnings (ineffectiveness) are discussed in the Fair Value Measurements section below.

If the forward rates at June 30, 2011 remain constant, we estimate that during the next twelve months, we would reclassify into earnings approximately $1.6 million of the unrealized losses in accumulated other comprehensive loss. If market interest rates increase above the 3.43% weighted average fixed rate under these interest rate swaps we will benefit from a lower effective rate than the underlying variable rates on this debt.

We have entered into total rate of return swaps on various fixed-rate property debt to convert these borrowings from a fixed rate to a variable rate and provide an efficient financing product to lower our cost of borrowing. In exchange for our receipt of a fixed rate generally equal to the underlying borrowing’s interest rate, the total rate of return swaps require that we pay a variable rate, equivalent to one of several indices, plus a risk spread. The underlying borrowings are generally callable at our option, with no prepayment penalty, with 30 days advance notice, and the swaps mature in 2012.

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.

As of June 30, 2011 and December 31, 2010, we had borrowings payable subject to total rate of return swaps with aggregate outstanding principal balances of $164.3 million and $276.9 million, respectively. We reduced by $112.0 million the amount of debt subject to certain total rate of return swaps and terminated the associated swaps during the six months ended June 30, 2011, in connection with our refinancing of the underlying debt. We repaid the debt subject to the swaps at par and, accordingly, no payments were required upon termination of the swaps. The remaining reduction in the outstanding principal balance during the six months ended June 30, 2011 was due to other principal amortization. At June 30, 2011, the weighted average fixed receive rate under the total return swaps was 6.4% and the weighted average variable pay rate was 1.6%, based on the applicable index rates effective as of that date. Information related to the fair value of these instruments at June 30, 2011 and December 31, 2010, is discussed in the Fair Value Measurements section below.

Fair Value Measurements

We measure certain assets and liabilities in our consolidated financial statements at fair value, both on a recurring and nonrecurring basis. Certain of these fair value measurements are based on significant unobservable inputs classified within Level 3 of the valuation hierarchy defined in FASB ASC Topic 820. When a determination is made to classify a fair value measurement within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, Level 3 fair value measurements typically also include observable components that can be validated to observable external sources; accordingly, the changes in fair value in the table below are due in part to observable factors that are part of the valuation methodology.

The table below presents information regarding significant items measured in our condensed consolidated financial statements at fair value on a recurring basis, consisting of investments in securities classified as available for sale (AFS), interest rate swaps (IR swaps), total rate of return swaps (TRR swaps) and debt subject to TRR swaps (TRR debt) (in thousands):

		Level 2								Level 3
						IR				TRR				TRR
		AFS (1)				swaps (2)				swaps (3)				debt (4)				Total
Fair value at December 31, 2009		$	—			$	(1,596	)		$	(24,307	)		$	24,307			$	(1,596	)
Unrealized gains (losses) included in earnings (5)			—				(23	)			907				(907	)			(23	)
Realized gains (losses) included in earnings			—				—				—				—				—
Unrealized gains (losses) included in equity			—				(2,006	)			—				—				(2,006	)
Fair value at June 30, 2010		$	—			$	(3,625	)		$	(23,400	)		$	23,400			$	(3,625	)
Fair value at December 31, 2010		$	—			$	(2,746	)		$	(19,542	)		$	19,542			$	(2,746	)
Purchases			51,534				—				—				—				51,534
Investment accretion (see Note 4)			269				—				—				—				269
Unrealized gains (losses) included in earnings (5)			—				(24	)			8,547				(8,547	)			(24	)
Realized gains (losses) included in earnings			—				—				—				—				—
Unrealized gains (losses) included in equity			1,573				(827	)			—				—				746
Fair value at June 30, 2011		$	53,376			$	(3,597	)		$	(10,995	)		$	10,995			$	49,779

The table below presents information regarding amounts measured at fair value in our condensed consolidated financial statements on a nonrecurring basis during the six months ended June 30, 2011 and 2010, all of which were based, in part, on significant unobservable inputs classified within Level 3 of the valuation hierarchy (in thousands):

		Six Months Ended								Six Months Ended
		June 30, 2011								June 30, 2010
		Fair value				Total				Fair value				Total
		measurement				gain (loss)				measurement				gain (loss)
Real estate (impairment losses) (1)(3)		$	49,114			$	(7,390	)		$	29,050			$	(6,883	)
Real estate (newly consolidated) (2)(3)			—				—				117,083				236
Property debt (newly consolidated) (2)(4)			—				—				83,890				—

We believe that the aggregate fair value of our cash and cash equivalents, receivables, payables and short-term secured debt approximates their aggregate carrying amounts at June 30, 2011 and December 31, 2010, due to their relatively short-term nature and high probability of realization. We estimate fair value for our notes receivable and debt instruments using present value techniques that include income and market valuation approaches using observable inputs such as market rates for debt with the same or similar terms and unobservable inputs such as collateral quality and loan-to-value ratios on similarly encumbered assets. Because of the significance of unobservable inputs to these fair value measurements, we classify them within Level 3 of the fair value hierarchy. Present value calculations vary depending on the assumptions used, including the discount rate and estimates of future cash flows. In many cases, the fair value estimates may not be realizable in immediate settlement of the instruments. The estimated aggregate fair value of our notes receivable was approximately $114.7 million and $116.0 million at June 30, 2011 and December 31, 2010, respectively, as compared to their carrying amounts of $127.3 million and $127.6 million. The estimated aggregate fair value of our consolidated debt (including amounts reported in liabilities related to assets held for sale) was approximately $5.5 billion and $5.6 billion at June 30, 2011 and December 31, 2010, respectively, as compared to aggregate carrying amounts of $5.4 billion and $5.5 billion, respectively. The fair values of our derivative instruments at June 30, 2011 and December 31, 2010, are included in the recurring fair value measurements table above.

In May 2011, the FASB issued Accounting Standards Update 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, or ASU 2011-04. ASU 2011-04 amended ASC 820, Fair Value Measurements and Disclosures, to converge the fair value measurement guidance in GAAP and International Financial Reporting Standards. The amendments, which primarily require additional fair value disclosures, are to be applied prospectively for annual periods beginning after December 15, 2011. We are currently evaluating the effect ASU 2011-04 will have on our consolidated financial statements.

Comprehensive Income or Loss

As discussed in the Derivative Financial Instruments section, we recognize changes in the fair value of our cash flow hedges as changes in accumulated other comprehensive loss within equity. Additionally, as discussed in Note 4, we have investments classified as available for sale which are measured at fair value with unrealized gains or losses recognized as an adjustment of accumulated other comprehensive loss within equity. Our consolidated comprehensive loss for the three months ended June 30, 2011 and 2010, totaled $26.3 million and $12.0 million, respectively, and for the six months ended June 30, 2011 and 2010, totaled $53.5 million and $28.9 million, respectively, before the effects of noncontrolling interests.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income, or ASU 2011-15, which revises the manner in which companies present comprehensive income. Under ASU 2011-15, companies may present comprehensive income, which is net income adjusted for the components of other comprehensive income, either in a single, continuous statement of comprehensive income or by using two separate but consecutive statements. Regardless of the alternative chosen, companies must display adjustments for items reclassified from other comprehensive income into net income within the presentation of both net income and other comprehensive income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011. We are currently evaluating the effect ASU 2011-15 will have on our consolidated financial statements and have not yet determined which method of presentation we will elect.

Concentration of Credit Risk

At June 30, 2011, we had total rate of return swap positions with two financial institutions totaling $164.6 million. We periodically evaluate counterparty credit risk associated with these arrangements. In the event either 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 impact our results of operations and operating cash flows. However, at the current time, we have concluded we do not have material exposure.

Income Taxes

In March 2008, we were notified by the Internal Revenue Service, or the IRS, that it intended to examine the 2006 Federal tax return for the Aimco Operating Partnership. During June 2008, the IRS issued AIMCO-GP, Inc., the general partner and tax matters partner of the Aimco Operating Partnership, a summary report including the IRS’s proposed adjustments to the Aimco Operating Partnership’s 2006 Federal tax return. In addition, in May 2009, we were notified by the IRS that it intended to examine the 2007 Federal tax return for the Aimco Operating Partnership. During November 2009, the IRS issued AIMCO-GP, Inc. a summary report including the IRS’s proposed adjustments to the Aimco Operating Partnership’s 2007 Federal tax return. The matter is currently pending administratively before IRS Appeals and the IRS has made no determination. We do not expect the 2006 or 2007 proposed adjustments to have any material effect on our unrecognized tax benefits, financial condition or results of operations.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes thereto. Actual results could differ from those estimates.

NOTE 3 — Real Estate Dispositions

Real Estate Dispositions (Discontinued Operations)

We are currently marketing for sale certain real estate properties that are inconsistent with our long-term investment strategy. At the end of each reporting period, we evaluate whether such properties meet the criteria to be classified as held for sale, including whether such properties are expected to be sold within 12 months. Additionally, certain properties that do not meet all of the criteria to be classified as held for sale at the balance sheet date may nevertheless be sold and included in discontinued operations in the subsequent 12 months; thus, the number of properties that may be sold during the subsequent 12 months could exceed the number classified as held for sale. At June 30, 2011 and December 31, 2010, we had two and 29 properties, with an aggregate of 710 and 4,750 units, respectively, classified as held for sale. Amounts classified as held for sale in the accompanying condensed consolidated balance sheets are as follows (in thousands):

		June 30,				December 31,
		2011				2010
Real estate, net		$	23,137			$	146,805
Other assets			576				2,071
Assets held for sale		$	23,713			$	148,876
Property debt		$	23,951			$	112,034
Other liabilities			226				1,255
Liabilities related to assets held for sale		$	24,177			$	113,289

During the six months ended June, 2011 and 2010, we sold or disposed of 27 properties and 23 properties with an aggregate of 4,040 units and 3,547 units, respectively. During the year ended December 31, 2010, we disposed of 51 consolidated properties with an aggregate of 8,189 units. For the three and six months ended June 30, 2011 and 2010, discontinued operations includes the results of operations for the periods prior to the date of disposition for all properties disposed of and for properties classified as held for sale as of June 30, 2011.

The following is a summary of the components of income from discontinued operations and the related amounts of income from discontinued operations attributable to Aimco and to noncontrolling interests for the three and six months ended June 30, 2011 and 2010 (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Rental and other property revenues		$	4,019			$	21,695			$	11,538			$	47,639
Property operating expenses			(2,169	)			(9,590	)			(6,288	)			(25,910	)
Depreciation and amortization			(1,647	)			(6,311	)			(4,065	)			(12,839	)
Provision for operating real estate impairment losses			(2,452	)			(895	)			(6,307	)			(8,121	)
Operating (loss) income			(2,249	)			4,899				(5,122	)			769
Interest income			262				101				314				183
Interest expense			(1,009	)			(3,881	)			(2,602	)			(8,308	)
(Loss) income before gain on dispositions of real estate and income tax			(2,996	)			1,119				(7,410	)			(7,356	)
Gain on dispositions of real estate			19,716				26,982				27,434				53,321
Income tax (expense) benefit			(251	)			(5	)			(421	)			1,063
Income from discontinued operations, net		$	16,469			$	28,096			$	19,603			$	47,028
(Income) loss from discontinued operations attributable to:
Noncontrolling interests in consolidated real estate partnerships		$	(7,196	)		$	(6,383	)		$	(5,943	)		$	(16,241	)
Noncontrolling interests in Aimco Operating Partnership			(653	)			(1,455	)			(945	)			(2,064	)
Total noncontrolling interests			(7,849	)			(7,838	)			(6,888	)			(18,305	)
Income from discontinued operations attributable to Aimco		$	8,620			$	20,258			$	12,715			$	28,723

Gain on dispositions of real estate is reported net of incremental direct costs incurred in connection with the transactions, including any prepayment penalties incurred upon repayment of property loans collateralized by the properties being sold. Such prepayment penalties totaled $4.8 million and $5.0 million for the three and six months ended June 30, 2011, respectively, and $2.6 million and $3.2 million for the three and six months ended June 30, 2010, respectively. We classify interest expense related to property debt within discontinued operations when the related real estate asset is sold or classified as held for sale.

In connection with properties sold or classified as held for sale during the three and six months ended June 30, 2011, we allocated $0.9 million and $1.7 million, respectively, of goodwill related to our conventional and affordable segments to the carrying amounts of the properties sold or classified as held for sale. Of these amounts, $0.7 million and $1.2 million, respectively, were recognized as a reduction of gain on dispositions of real estate and $0.2 million and $0.5 million, respectively, were recognized as an adjustment of impairment losses during the three and six months ended June 30, 2011. In connection with properties sold or classified as held for sale during the three and six months ended June 30, 2010, we allocated $1.5 million and $2.8 million, respectively, of goodwill related to our conventional and affordable segments to the carrying amounts of the properties sold or classified as held for sale. Of these amounts, $1.4 million and $2.6 million, respectively, were treated as a reduction of gain on dispositions of real estate and $0.1 million and $0.2 million, respectively, were treated as an adjustment of impairment losses during the three and six months ended June 30, 2010. The amounts of goodwill allocated to these properties were based on the relative fair values of the properties sold or classified as held for sale and the retained portions of the reporting units to which the goodwill was allocated.

NOTE 4 — Other Significant Transactions

Property Loan Securitization Transactions

During the three months ended June 30, 2011, we completed a series of financing transactions that repaid $625.7 million of non-recourse property loans that were scheduled to mature between the years 2012 and 2016 with proceeds from new long-term, fixed-rate, non-recourse property loans, or the New Loans. The New Loans, which total $673.8 million, were closed in three parts; $218.6 million closed during the three months ended December 31, 2010, $120.6 million closed during the three months ended March 31, 2011, and $334.6 million closed during the three months ended June 30, 2011. All of the New Loans have a ten year term, with principal scheduled to amortize over 30 years. Subsequent to origination, the New Loans were sold to Federal Home Loan Mortgage Corp, or Freddie Mac, which then securitized the New Loans. The securitization trust will hold only the New Loans referenced above and the trust securities trade under the label FREMF 2011K-AIV. In connection with the refinancings during the three months ended June 30, 2011, we recognized a loss on debt extinguishment of $23.0 million in interest expense, consisting of $20.7 million in prepayment penalties and a $2.3 million write off of previous deferred loan costs.

During the three months ended June 30, 2011, as part of the securitization transaction, we purchased for $51.5 million the first loss and mezzanine positions in the securitization trust, which have a face value of $100.9 million and stated maturity dates corresponding to the terms of the loans held by the trust. We designated these investments as available for sale securities and they are included in other assets in our condensed consolidated balance sheet at June 30, 2011. These investments were initially recognized at their purchased value and the discount to the face value will be accreted into interest income over the expected term of the securities. Based on their classification as available for sale securities, we measure these investment at fair value with changes in their fair value, other than the changes attributed to the accretion described above, recognized as an adjustment of accumulated other comprehensive income or loss within equity.

Common Stock Issuances

During the six months ended June 30, 2011, we sold 2.8 million shares of Common Stock under our “at the market,” or ATM, offering program, generating $70.6 million of gross proceeds, or $69.2 million net of commissions. Sales of approximately 325,000 of these shares were initiated during the six months ended June 30, 2011, but settled in the subsequent period. Accordingly, for accounting purposes these shares were not reflected as issued and outstanding during the six months ended June 30, 2011, and the net proceeds of $8.2 million will be recognized in the subsequent period. We used the net proceeds to fund the prepayment penalties and investments discussed above.

Acquisitions of Noncontrolling Partnership Interests

During the six months ended June 30, 2011, we acquired the remaining noncontrolling limited partnership interests in six consolidated real estate partnerships that own nine properties and in which our affiliates serve as general partner, for a total cost of $13.6 million. We recognized the excess of the cost over the carrying amount of the noncontrolling interests acquired as an adjustment of additional paid-in capital within Aimco equity, net of the amount of such adjustment allocated to common noncontrolling interests in Aimco Operating Partnership. During the six months ended June 30, 2010, there were no comparable acquisitions of noncontrolling limited partnership interests.

NOTE 5 — Commitments and Contingencies

Commitments

In connection with our redevelopment and capital improvement activities, we have commitments of approximately $14.0 million related to construction projects, most of which we expect to incur during the remainder of 2011 and during 2012. Additionally, we enter into certain commitments for future purchases of 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.

We have committed to fund an additional $3.4 million in loans on certain unconsolidated properties in West Harlem in New York City. Additionally, in certain circumstances, the obligor under these notes has the ability to put the properties to us, which would result in a cash payment of approximately $30.7 million and the assumption of $118.5 million in property debt. The obligor’s right to exercise the put depends upon the achievement of specified operating performance thresholds.

We have an agreement that allows the holder of some of our Series A Community Reinvestment Act Preferred Stock, or the CRA Preferred Stock, to require us to repurchase $10.0 million in liquidation preference of the CRA Preferred Stock at a 30% discount, during the three months ending June 30, 2012. Based on the holder’s ability to require us to repurchase this amount, the $10.0 million in liquidation preference of CRA Preferred Stock, or the maximum redemption value of such preferred stock, is classified within temporary equity in our condensed consolidated balance sheet at June 30, 2011.

Tax Credit Arrangements

We are required to manage certain consolidated real estate partnerships in compliance with various laws, regulations and contractual provisions that apply to our historic and low-income housing tax credit syndication arrangements. In some instances, noncompliance with applicable requirements could result in projected tax benefits not being realized and require a refund or reduction of investor capital contributions, which are reported as deferred income in our consolidated balance sheet, until such time as our obligation to deliver tax benefits is relieved. The remaining compliance periods for our tax credit syndication arrangements range from less than one year to 15 years. We do not anticipate that any material refunds or reductions of investor capital contributions will be required in connection with these arrangements.

Legal Matters

In addition to the matters described below, we are a party to various legal actions and administrative proceedings arising in the ordinary course of business, some of which are covered by our general liability insurance program, and none of which we expect to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Limited Partnerships

In connection with our acquisitions of interests in real estate partnerships, we are sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the partners of such real estate partnerships or violations of the relevant partnership agreements. We may incur costs in connection with the defense or settlement of such litigation. We believe that we comply with our fiduciary obligations and relevant partnership agreements. Although the outcome of any litigation is uncertain, we do not expect any such legal actions to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

During the three months ended June 30, 2011, we mediated the previously disclosed dispute with respect to mergers completed earlier in 2011 in which we acquired the remaining noncontrolling interests in six consolidated real estate partnerships. As a result of the mediation we agreed to pay the limited partners additional consideration of $7.5 million for their partnership units.

Environmental

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials present on a property, including lead-based paint, asbestos, polychlorinated biphenyls, petroleum-based fuels, and other miscellaneous materials. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of such materials. The presence of, or the failure to manage or remedy properly, these materials may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the improper management of these materials on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of these materials through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of these materials is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of properties, we could potentially be responsible for environmental liabilities or costs associated with our properties or properties we acquire or manage in the future.

We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations, as defined in GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or property casualty, we believe that the fair value of our asset retirement obligations cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. Asset retirement obligations that are reasonably estimable as of June 30, 2011, are immaterial to our consolidated financial condition, results of operations and cash flows.

NOTE 6 — Earnings (Loss) per Share

We calculate earnings (loss) per share based on the weighted average number of shares of Common Stock, participating securities, common stock equivalents and dilutive convertible securities outstanding during the period. The following table illustrates the calculation of basic and diluted earnings (loss) per share for the three and six months ended June 30, 2011 and 2010 (in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Numerator:
Loss from continuing operations		$	(43,440	)		$	(38,266	)		$	(73,851	)		$	(73,958	)
Loss from continuing operations attributable to noncontrolling interests			11,369				10,183				18,425				9,892
Income attributable to preferred stockholders			(9,672	)			(10,128	)			(22,128	)			(23,050	)
Income attributable to participating securities			(54	)			(42	)			(111	)			—
Loss from continuing operations attributable to Aimco common stockholders		$	(41,797	)		$	(38,253	)		$	(77,665	)		$	(87,116	)
Income from discontinued operations		$	16,469			$	28,096			$	19,603			$	47,028
Income from discontinued operations attributable to noncontrolling interests			(7,849	)			(7,838	)			(6,888	)			(18,305	)
Income from discontinued operations attributable to Aimco common stockholders		$	8,620			$	20,258			$	12,715			$	28,723
Net loss		$	(26,971	)		$	(10,170	)		$	(54,248	)		$	(26,930	)
Loss (income) attributable to noncontrolling interests			3,520				2,345				11,537				(8,413	)
Income attributable to preferred stockholders			(9,672	)			(10,128	)			(22,128	)			(23,050	)
Income attributable to participating securities			(54	)			(42	)			(111	)			—
Net loss attributable to Aimco common stockholders		$	(33,177	)		$	(17,995	)		$	(64,950	)		$	(58,393	)
Denominator:
Denominator for basic earnings per share — weighted average number of shares of Common Stock outstanding			119,156				116,323				118,238				116,179
Effect of dilutive securities:
Dilutive potential common shares			—				—				—				—
Denominator for diluted earnings per share			119,156				116,323				118,238				116,179
Earnings (loss) per common share:
Basic and diluted earnings (loss) per common share:
Loss from continuing operations attributable to Aimco common stockholders		$	(0.35	)		$	(0.33	)		$	(0.66	)		$	(0.75	)
Income from discontinued operations attributable to Aimco common stockholders			0.07				0.18				0.11				0.25
Net loss attributable to Aimco common stockholders		$	(0.28	)		$	(0.15	)		$	(0.55	)		$	(0.50	)

As of June 30, 2011 and 2010, the common share equivalents that could potentially dilute basic earnings per share in future periods totaled 6.9 million and 7.2 million, respectively. These securities, representing stock options, have been excluded from the earnings (loss) per share computations for the three and six months ended June 30, 2011 and 2010, because their effect would have been anti-dilutive. Participating securities, consisting of unvested restricted stock and shares purchased pursuant to officer loans, receive dividends similar to shares of Common Stock and totaled 0.5 million and 0.6 million at June 30, 2011 and 2010, respectively. The effect of participating securities is included in basic and diluted earnings (loss) per share computations for the periods presented above using the two-class method of allocating distributed and undistributed earnings.

Various classes of preferred OP Units of the Aimco Operating Partnership are outstanding. Depending on the terms of each class, these preferred OP Units are convertible into common OP Units or redeemable for cash or, at the Aimco Operating Partnership’s option, Common Stock, and are paid distributions varying from 1.8% to 8.8% per annum per unit, or equal to the dividends paid on Common Stock based on the conversion terms. As of June 30, 2011, a total of 3.1 million preferred OP Units were outstanding with redemption values of $82.5 million and were potentially redeemable for approximately 3.2 million shares of Common Stock (based on the period end market price), or cash at the Aimco Operating Partnership’s option. The Aimco Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. The potential dilutive effect of these securities would have been antidilutive in the periods presented. Additionally, based on the Aimco Operating Partnership’s cash redemption policy, they may also be excluded from future earnings (loss) per share computations in periods during which their effect is dilutive.

NOTE 7 — Business Segments

We have two reportable segments: conventional real estate operations and affordable real estate operations. Our conventional real estate operations consist of market-rate apartments with rents paid by the resident and included 215 properties with 67,049 units at June 30, 2011. Our affordable real estate operations consisted of 205 properties with 24,406 units at June 30, 2011, with rents that are generally paid, in whole or part, by a government agency.

Our chief executive officer, who is our chief operating decision maker, uses various generally accepted industry financial measures to assess the performance and financial condition of the business, including: Net Asset Value, which is the estimated fair value of our assets, net of liabilities and preferred equity; Pro forma Funds From Operations, which is Funds From Operations excluding operating real estate impairment losses and preferred equity redemption related amounts; Adjusted Funds From Operations, which is Pro forma Funds From Operations less spending for Capital Replacements; property net operating income, which is rental and other property revenues less direct property operating expenses, including real estate taxes; proportionate property net operating income, which reflects our share of property net operating income of our consolidated and unconsolidated properties; same store property operating results; Free Cash Flow, which is net operating income less spending for Capital Replacements; Free Cash Flow internal rate of return; financial coverage ratios; and leverage as shown on our balance sheet. Our chief operating decision maker emphasizes proportionate property net operating income as a key measurement of segment profit or loss.

The following tables present the revenues, net operating income (loss) and income (loss) from continuing operations of our conventional and affordable real estate operations segments on a proportionate basis for the three and six months ended June 30, 2011 and 2010 (in thousands):

														Corporate and
		Conventional				Affordable				Proportionate				Amounts Not
		Real Estate				Real Estate				Adjustments				Allocated to
		Operations				Operations				(1)				Segments				Consolidated
Three Months Ended June 30, 2011:
Rental and other property revenues (2)		$	208,253			$	32,826			$	32,029			$	276			$	273,384
Asset management and tax credit revenues			—				—				—				7,651				7,651
Total revenues			208,253				32,826				32,029				7,927				281,035
Property operating expenses (2)			77,323				13,599				13,912				12,545				117,379
Investment management expenses			—				—				—				2,187				2,187
Depreciation and amortization (2)			—				—				—				94,084				94,084
General and administrative expenses			—				—				—				12,372				12,372
Other expenses, net			—				—				—				5,222				5,222
Total operating expenses			77,323				13,599				13,912				126,410				231,244
Net operating income (loss)			130,930				19,227				18,117				(118,483	)			49,791
Other items included in continuing operations			—				—				—				(93,231	)			(93,231	)
Income (loss) from continuing operations		$	130,930			$	19,227			$	18,117			$	(211,714	)		$	(43,440	)
Three Months Ended June 30, 2010:
Rental and other property revenues (2)		$	203,251			$	31,661			$	31,159			$	657			$	266,728
Asset management and tax credit revenues			—				—				—				9,796				9,796
Total revenues			203,251				31,661				31,159				10,453				276,524
Property operating expenses (2)			78,396				13,924				13,978				16,828				123,126
Investment management expenses			—				—				—				5,141				5,141
Depreciation and amortization (2)			—				—				—				102,809				102,809
General and administrative expenses			—				—				—				15,184				15,184
Other income, net			—				—				—				(4,485	)			(4,485	)
Total operating expenses			78,396				13,924				13,978				135,477				241,775
Net operating income (loss)			124,855				17,737				17,181				(125,024	)			34,749
Other items included in continuing operations			—				—				—				(73,015	)			(73,015	)
Income (loss) from continuing operations		$	124,855			$	17,737			$	17,181			$	(198,039	)		$	(38,266	)

														Corporate and
		Conventional				Affordable				Proportionate				Amounts Not
		Real Estate				Real Estate				Adjustments				Allocated to
		Operations				Operations				(1)				Segments				Consolidated
Six Months Ended June 30, 2011:
Rental and other property revenues (2)		$	414,800			$	65,704			$	63,816			$	856			$	545,176
Asset management and tax credit revenues			—				—				—				16,887				16,887
Total revenues			414,800				65,704				63,816				17,743				562,063
Property operating expenses (2)			156,752				27,346				28,332				28,478				240,908
Investment management expenses			—				—				—				5,219				5,219
Depreciation and amortization (2)			—				—				—				193,117				193,117
General and administrative expenses			—				—				—				23,498				23,498
Other expenses, net			—				—				—				9,156				9,156
Total operating expenses			156,752				27,346				28,332				259,468				471,898
Net operating income (loss)			258,048				38,358				35,484				(241,725	)			90,165
Other items included in continuing operations			—				—				—				(164,016	)			(164,016	)
Income (loss) from continuing operations		$	258,048			$	38,358			$	35,484			$	(405,741	)		$	(73,851	)
Six Months Ended June 30, 2010:
Rental and other property revenues (2)		$	407,082			$	62,723			$	62,137			$	1,390			$	533,332
Asset management and tax credit revenues			—				—				—				14,497				14,497
Total revenues			407,082				62,723				62,137				15,887				547,829
Property operating expenses (2)			162,300				28,805				29,025				30,136				250,266
Investment management expenses			—				—				—				8,370				8,370
Depreciation and amortization (2)			—				—				—				206,092				206,092
General and administrative expenses			—				—				—				26,919				26,919
Other income, net			—				—				—				(2,148	)			(2,148	)
Total operating expenses			162,300				28,805				29,025				269,369				489,499
Net operating income (loss)			244,782				33,918				33,112				(253,482	)			58,330
Other items included in continuing operations			—				—				—				(132,288	)			(132,288	)
Income (loss) from continuing operations		$	244,782			$	33,918			$	33,112			$	(385,770	)		$	(73,958	)