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

For the quarterly period ended June 30, 2010

OR

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

For the transition period from                      to                     

Commission File Number 1-13232

Apartment Investment and Management Company

(Exact name of registrant as specified in its charter)

Maryland		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 o 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 28, 2010: 117,039,285

 

 

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, 2010 and December 31, 2009 (Unaudited)			2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009 (Unaudited)			3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (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			33
ITEM 4. Controls and Procedures			34
PART II. OTHER INFORMATION
ITEM 1A. Risk Factors			35
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
ITEM 6. Exhibits			36
Signatures			37
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 99.1

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

		June 30,				December 31,
		2010				2009
ASSETS
Real estate:
Buildings and improvements		$	7,461,121			$	7,326,284
Land			2,179,744				2,161,010
Total real estate			9,640,865				9,487,294
Less accumulated depreciation			(2,830,752	)			(2,626,047	)
Net real estate ($913,051 and $855,170 related to VIEs)			6,810,113				6,861,247
Cash and cash equivalents ($33,059 and $23,366 related to VIEs)			78,318				81,260
Restricted cash ($58,346 and $56,183 related to VIEs)			211,795				219,255
Accounts receivable, net ($19,782 and $20,766 related to VIEs)			47,192				59,822
Accounts receivable from affiliates, net			13,191				23,744
Deferred financing costs, net			50,272				51,611
Notes receivable from unconsolidated real estate partnerships, net			12,280				14,295
Notes receivable from non-affiliates, net			129,427				125,269
Investment in unconsolidated real estate partnerships ($109,463 and $99,460 related to VIEs)			114,549				105,324
Other assets			184,671				185,890
Deferred income tax assets, net			49,943				42,015
Assets held for sale			6,050				136,736
Total assets		$	7,707,801			$	7,906,468
LIABILITIES AND EQUITY
Property tax-exempt bond financing ($215,236 and $211,691 related to VIEs)		$	548,973			$	574,926
Property loans payable ($462,363 and $390,601 related to VIEs)			5,010,995				4,884,233
Term loans			25,000				90,000
Other borrowings ($19,733 and $15,665 related to VIEs)			58,943				53,057
Total indebtedness			5,643,911				5,602,216
Accounts payable			27,647				29,819
Accrued liabilities and other ($92,638 and $62,503 related to VIEs)			279,063				286,326
Deferred income			158,402				180,656
Security deposits			35,794				34,855
Liabilities related to assets held for sale			3,276				121,237
Total liabilities			6,148,093				6,255,109
Preferred noncontrolling interests in Aimco Operating Partnership			86,389				86,656
Preferred stock subject to repurchase agreement (Note 5)			20,000				30,000
Commitments and contingencies (Note 5)			—				—
Equity:
Perpetual Preferred Stock			660,500				660,500
Class A Common Stock, $0.01 par value, 426,157,736 shares authorized, 117,039,659 and 116,479,791 shares issued and outstanding, at June 30, 2010 and December 31, 2009, respectively			1,170				1,165
Additional paid-in capital			3,079,230				3,072,665
Accumulated other comprehensive loss			(2,872	)			(1,138	)
Notes due on common stock purchases			(911	)			(1,392	)
Distributions in excess of earnings			(2,597,379	)			(2,492,082	)
Total Aimco equity			1,139,738				1,239,718
Noncontrolling interests in consolidated real estate partnerships			341,707				316,177
Common noncontrolling interests in Aimco Operating Partnership			(28,126	)			(21,192	)
Total equity			1,453,319				1,534,703
Total liabilities and equity		$	7,707,801			$	7,906,468

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,
		2010				2009				2010				2009
REVENUES:
Rental and other property revenues		$	285,395			$	279,041			$	570,622			$	559,303
Asset management and tax credit revenues			9,596				12,606				13,853				22,144
Total revenues			294,991				291,647				584,475				581,447
OPERATING EXPENSES:
Property operating expenses			132,946				125,665				271,354				259,149
Investment management expenses			5,141				4,716				8,370				8,506
Depreciation and amortization			108,667				108,437				217,006				212,606
Provision for operating real estate impairment losses			—				1,569				—				2,079
General and administrative expenses			15,184				14,577				26,919				30,837
Other (income) expenses, net			(6,693	)			3,748				(3,592	)			5,229
Total operating expenses			255,245				258,712				520,057				518,406
Operating income			39,746				32,935				64,418				63,041
Interest income			1,928				2,225				5,150				5,532
Recovery of (provision for) losses on notes receivable, net			148				(1,534	)			(278	)			(1,685	)
Interest expense			(79,499	)			(81,771	)			(159,294	)			(162,068	)
Equity in (losses) earnings of unconsolidated real estate partnerships			(7,224	)			(1,696	)			727				(3,736	)
Gain on dispositions of unconsolidated real estate and other, net			4,970				3,463				7,612				14,327
Loss before income taxes and discontinued operations			(39,931	)			(46,378	)			(81,665	)			(84,589	)
Income tax benefit			3,598				2,473				7,369				4,949
Loss from continuing operations			(36,333	)			(43,905	)			(74,296	)			(79,640	)
Income from discontinued operations, net			26,163				36,279				47,366				39,440
Net loss			(10,170	)			(7,626	)			(26,930	)			(40,200	)
Noncontrolling interests:
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships			2,716				(11,695	)			(9,418	)			(5,422	)
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership			(1,683	)			(1,746	)			(3,376	)			(2,815	)
Net loss attributable to common noncontrolling interests in Aimco Operating Partnership			1,312				2,623				4,381				5,458
Total noncontrolling interests			2,345				(10,818	)			(8,413	)			(2,779	)
Net loss attributable to Aimco			(7,825	)			(18,444	)			(35,343	)			(42,979	)
Net income attributable to Aimco preferred stockholders			(10,128	)			(11,477	)			(23,050	)			(24,643	)
Net income attributable to participating securities			(42	)			—				—				—
Net loss attributable to Aimco common stockholders		$	(17,995	)		$	(29,921	)		$	(58,393	)		$	(67,622	)
Earnings (loss) attributable to Aimco per common share — basic and diluted (Note 6):
Loss from continuing operations attributable to Aimco common stockholders		$	(0.30	)		$	(0.38	)		$	(0.74	)		$	(0.72	)
Income from discontinued operations attributable to Aimco common stockholders			0.15				0.12				0.24				0.12
Net loss attributable to Aimco common stockholders		$	(0.15	)		$	(0.26	)		$	(0.50	)		$	(0.60	)
Weighted average common shares outstanding, basic and diluted			116,323				115,510				116,179				112,886
Dividends declared per common share		$	0.10			$	0.10			$	0.10			$	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,
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(26,930	)		$	(40,200	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			217,006				212,606
Gain on dispositions of unconsolidated real estate and other			(7,612	)			(14,327	)
Discontinued operations			(44,120	)			(10,851	)
Other adjustments			2,612				21,407
Net changes in operating assets and operating liabilities			(29,993	)			(109,234	)
Net cash provided by operating activities			110,963				59,401
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(79,023	)			(147,337	)
Proceeds from dispositions of real estate			107,163				265,937
Purchases of partnership interests and other assets			(3,291	)			(2,567	)
Originations of notes receivable from unconsolidated real estate partnerships			(733	)			(4,111	)
Proceeds from repayment of notes receivable			1,650				4,376
Proceeds from sales of interests in unconsolidated real estate partnerships			9,132				12,596
Net increase in cash from consolidation and deconsolidation of entities (Note 2)			13,118				—
Other investing activities			8,341				20,453
Net cash provided by investing activities			56,357				149,347
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from property loans			125,491				610,803
Principal repayments on property loans			(124,794	)			(682,681	)
Principal repayments on tax-exempt bond financing			(31,061	)			(70,774	)
Payments on term loans			(65,000	)			(50,000	)
Proceeds from Class A Common Stock option exercises			1,806				—
Repurchases of preferred stock			(7,000	)			(4,200	)
Payment of preferred stock dividends			(25,829	)			(26,293	)
Payment of Class A Common Stock dividends			(23,334	)			(72,164	)
Payment of distributions to noncontrolling interests			(28,623	)			(80,626	)
Other financing activities			8,082				(20,375	)
Net cash used in financing activities			(170,262	)			(396,310	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(2,942	)			(187,562	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			81,260				299,676
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	78,318			$	112,114

See notes to condensed consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
(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, focused on the ownership and management of quality apartment communities located in the 20 largest markets in the United States (as measured by total market capitalization, which is the total market value of institutional-grade apartment properties in a particular market). We upgrade the quality of our portfolio through the sale of communities with rents below average market rents and the reinvestment of capital within these 20 target markets through redevelopment and acquisitions. Our apartment properties are generally financed with property-level, non-recourse, long-dated, fixed-rate, amortizing debt.

As of June 30, 2010, we:

•

owned an equity interest in 232 conventional real estate properties with 71,909 units;

•

owned an equity interest in 254 affordable real estate properties with 29,540 units; and

•

provided services for or managed 27,901 units in 331 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 230 conventional properties with 70,605 units and 197 affordable properties with 23,901 units. These conventional and affordable properties generated 84% and 16%, respectively, of consolidated property net operating income (as defined in Note 7) during the six months ended June 30, 2010, or 87% and 13%, respectively, after adjustments for our ownership in these properties.

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, 2010, we held an interest of approximately 93% 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 OP Units, partnership preferred units, or preferred OP Units, and high performance partnership units, or High Performance Units. The Aimco Operating Partnership’s income is allocated to holders of common OP Units and equivalents based on the weighted average number of common OP Units and equivalents outstanding during the period. The holders of the common OP Units and Class I High Performance Units receive distributions, prorated from the date of issuance, in an amount equivalent to the dividends paid to holders of Aimco Class A Common Stock (which we refer to as Common Stock). Holders of common OP Units may redeem such units for cash or, at the Aimco Operating Partnership’s option, Common Stock. Preferred OP Units entitle the holders thereof to a preference with respect to distributions or upon liquidation. At June 30, 2010, after elimination of shares held by consolidated subsidiaries, 117,039,659 shares of our Common Stock were outstanding and the Aimco Operating Partnership had 8,330,534 common OP Units and equivalents outstanding for a combined total of 125,370,193 shares of Common Stock and OP Units outstanding (excluding preferred OP Units).

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

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, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

The balance sheet at December 31, 2009, 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 Aimco’s Annual Report on Form 10-K for the year ended December 31, 2009. Certain 2009 financial statement amounts have been reclassified to conform to the 2010 presentation, including adjustments for discontinued operations, and certain 2009 share and per share information has been revised as compared to the amounts reported in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, as further discussed in Note 6.

During the three months ended March 31, 2010, we reduced the investment and noncontrolling interest balances for certain of our consolidated partnerships by $38.7 million related to excess amounts allocated to the investments upon our consolidation of such partnerships. Additionally, during the six months ended June 30, 2010, we reversed approximately $11.2 million of excess equity in losses recognized during 2008 and 2009 related to these partnerships, with a corresponding adjustment to net income attributed to noncontrolling interests in consolidated real estate partnerships. These adjustments had no significant effect on Aimco equity or net income or loss attributable to Aimco during the affected periods.

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.

Effective January 1, 2010, we adopted the provisions of FASB Accounting Standards Update 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, or ASU 2009-17, on a prospective basis. ASU 2009-17, which modified the guidance in FASB ASC Topic 810, introduces a more qualitative approach to evaluating VIEs for consolidation and requires a company to perform an analysis to determine whether its variable interests give it a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether it has the power to direct the activities of the VIE that most significantly affect the VIE’s performance, ASU 2009-17 requires a company to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed, requires continuous reassessment of primary beneficiary status rather than periodic, event-driven assessments as previously required, and incorporates expanded disclosure requirements.

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 VIEs 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 a result of our adoption of ASU 2009-17, we concluded we are the primary beneficiary of, and therefore consolidated, approximately 49 previously unconsolidated partnerships. Those partnerships own, or control other entities that own, 31 apartment properties. Our direct and indirect interests in the profits and losses of those partnerships range from less than 1% to 35%, and average approximately 7%. We applied the practicability exception for initial measurement of consolidated VIEs to partnerships that own 13 properties and accordingly recognized the consolidated assets, liabilities and noncontrolling interests at fair value effective January 1, 2010 (refer to the Fair Value Measurements section for further information regarding certain of the fair value amounts recognized upon consolidation). We deconsolidated partnerships that own ten apartment properties in which we hold an average interest of approximately 55%. The initial consolidation and deconsolidation of these partnerships resulted in increases (decreases), net of intercompany eliminations, in amounts included in our consolidated balance sheet as of January 1, 2010, as follows (in thousands):

		Consolidation				Deconsolidation
Real estate, net		$	144,292			$	(86,151	)
Cash and cash equivalents and restricted cash			25,047				(7,425	)
Accounts and notes receivable			(13,456	)			6,002
Investment in unconsolidated real estate partnerships			47,974				11,302
Other assets			4,190				(1,084	)
Total assets		$	208,047			$	(77,356	)
Total indebtedness		$	131,710			$	(56,938	)
Accrued and other liabilities			37,504				(15,005	)
Total liabilities			169,214				(71,943	)
Cumulative effect of a change in accounting principle:
Noncontrolling interests			76,120				(8,501	)
Aimco			(37,287	)			3,088
Total equity			38,833				(5,413	)
Total liabilities and equity		$	208,047			$	(77,356	)

In periods prior to 2009, when consolidated real estate partnerships made cash distributions to partners in excess of the carrying amount of the noncontrolling interest, we generally recorded a charge to earnings equal to the amount of such excess distribution, even though there was no economic effect or cost. Also prior to 2009, we allocated the noncontrolling partners’ share of partnership losses to noncontrolling partners to the extent of the carrying amount of the noncontrolling interest. Consolidation of a partnership does not ordinarily result in a change to the net amount of partnership income or loss that is recognized using the equity method. However, prior to 2009, when a partnership had a deficit in equity, GAAP may have required the controlling partner that consolidates the partnership to recognize any losses that would otherwise be allocated to noncontrolling partners, in addition to the controlling partner’s share of losses. Certain of the partnerships that we consolidated in accordance with ASU 2009-17 had deficits in equity that resulted from losses or deficit distributions during prior periods when we accounted for our investment using the equity method. We would have been required to recognize the noncontrolling partners’ share of those losses had we consolidated those partnerships in those periods prior to 2009. In accordance with our prospective transition method for the adoption of ASU 2009-17 related to our consolidation of previously unconsolidated partnerships, we recorded a $37.3 million charge to our equity, the majority of which was attributed to the cumulative amount of additional losses that we would have recognized had we applied ASU 2009-17 in periods prior to 2009. Substantially all of those losses were attributable to real estate depreciation expense.

Our consolidated statements of operations for the three and six months ended June 30, 2010, include the following amounts for the entities and related real estate properties consolidated as of January 1, 2010, in accordance with ASU 2009-17 (in thousands):

		Three Months				Six Months
		Ended				Ended
		June 30, 2010				June 30, 2010
Rental and other property revenues		$	8,222			$	16,272
Operating expenses			(4,577	)			(9,203	)
Depreciation and amortization			(2,458	)			(4,685	)
Other income (expenses)			258				(328	)
Operating income			1,445				2,056
Interest income			—				16
Interest expense			(2,258	)			(4,423	)
Equity in losses of unconsolidated real estate partnerships			(5,787	)			(7,005	)
Gain on disposition of unconsolidated real estate and other			3,819				5,167
Net loss			(2,781	)			(4,189	)
Net loss attributable to noncontrolling interests in consolidated real estate partnerships			3,546				4,855
Net income attributable to noncontrolling interests in the Aimco Operating Partnership			(54	)			(47	)
Net income attributable to Aimco		$	711			$	619

Our equity in the results of operations of the partnerships and related properties we deconsolidated in connection with our adoption of ASU 2009-17 is included in equity in earnings or losses of unconsolidated real estate partnerships in our consolidated statements of operations for the three and six months ended June 30, 2010. Based on our effective ownership in these entities, these amounts are not significant.

As of June 30, 2010, we were the primary beneficiary of, and therefore consolidated, approximately 143 VIEs, which owned 102 apartment properties with 14,846 units. Real estate with a carrying value of $913.1 million collateralized $677.6 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, 2010, we also held variable interests in 290 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 343 apartment properties with 21,572 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 $92.5 million at June 30, 2010, is held through consolidated tax credit funds 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 is attributed to the noncontrolling interests in the consolidated tax credit funds 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 tax credit funds, which is insignificant. The remainder of our investment in unconsolidated VIEs, or approximately $17.0 million at June 30, 2010, 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 $17.0 million recorded investment in such entities.

In addition to our investments in these unconsolidated VIEs discussed above, at June 30, 2010, we had in aggregate $101.3 million of receivables from these VIEs and we had a contractual obligation to advance funds to certain VIEs totaling $4.1 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.

Equity (including Noncontrolling Interests)

The following table presents a reconciliation of our December 31, 2009 and June 30, 2010 consolidated equity accounts:

		Temporary equity								Equity
																		Common
		Preferred												Noncontrolling				noncontrolling
		noncontrolling				Preferred								interests in				interests in
		interests in				stock subject				Equity				consolidated real				Aimco
		Aimco Operating				to repurchase				attributable				estate				Operating				Total
		Partnership				agreement				to Aimco				partnerships				Partnership				equity
Balance, December 31, 2009		$	86,656			$	30,000			$	1,239,718			$	316,177			$	(21,192	)		$	1,534,703
Contributions			—				—				—				4,498				—				4,498
Dividends/distributions			(3,376	)			—				(37,514	)			(23,568	)			(1,680	)			(62,762	)
Repurchases of common units and shares			—				—				—				—				(942	)			(942	)
Repurchases of preferred units and shares			(267	)			(10,000	)			3,000				—				—				3,000
Stock based compensation cost			—				—				3,761				—				—				3,761
Stock option exercises			—				—				1,806				—				—				1,806
Effect of entities newly consolidated			—				—				—				6,324				—				6,324
Cumulative effect of a change in accounting principle			—				—				(34,199	)			67,550				69				33,420
Adjustment of noncontrolling interests related to revision of investment balances			—				—				—				(38,718	)			—				(38,718	)
Change in accumulated other comprehensive loss			—				—				(1,734	)			(272	)			—				(2,006	)
Other			—				—				243				298				—				541
Net income (loss)			3,376				—				(35,343	)			9,418				(4,381	)			(30,306	)
Balance, June 30, 2010		$	86,389			$	20,000			$	1,139,738			$	341,707			$	(28,126	)		$	1,453,319

Derivative Financial Instruments

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 or cap agreements. The interest rate swap agreements moderate our exposure to interest rate risk by effectively converting the interest on variable rate debt to a fixed rate. The interest rate cap agreements effectively limit our exposure to interest rate risk by providing a ceiling on the underlying variable interest 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. The interest rate caps are not material to our financial position or results of operations.

At June 30, 2010 and December 31, 2009, we had interest rate swaps with aggregate notional amounts of $52.3 million, and recorded fair values of $3.6 million and $1.6 million, respectively, reflected in accrued liabilities and other in our condensed consolidated balance sheets. At June 30, 2010, these interest rate swaps had a weighted average term of 10.6 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 income within equity to the extent of their effectiveness. For the six months ended June 30, 2010 and 2009, we recognized changes in fair value of $2.0 million and $1.7 million, respectively, of which $2.0 million and $2.2 million, respectively, resulted in an adjustment to consolidated equity. We recognized less than $0.1 million and $0.5 million of ineffectiveness as an adjustment of interest expense during the six months ended June 30, 2010 and 2009, respectively. Our consolidated comprehensive loss for the three and six months ended June 30, 2010, totaled $12.0 million and $28.9 million, respectively, and consolidated comprehensive loss for the three and six months ended June 30, 2009, totaled $5.8 million and $38.0 million, respectively, before the effects of noncontrolling interests. If the forward rates at June 30, 2010 remain constant, we estimate that during the next twelve months, we would reclassify into earnings approximately $1.5 million of the unrealized losses in accumulated other comprehensive income.

We have entered into total rate of return swaps on various fixed-rate secured tax-exempt bonds payable and fixed-rate notes payable to convert these borrowings from a fixed rate to a variable rate and provide an efficient financing product to lower our cost of borrowing. 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 the Securities Industry and Financial Markets Association Municipal Swap Index, or SIFMA, rate for tax-exempt bonds payable and the 30-day LIBOR rate for notes payable, plus a risk spread. These swaps generally have a second or third lien on the property collateralized by the related borrowings and the obligations under certain of these swaps are cross-collateralized with certain of the other swaps with a particular counterparty. The underlying borrowings are generally callable at our option, with no prepayment penalty, with 30 days advance notice, and the swaps generally have a term of less than five years. The total rate of return swaps have a contractually defined termination value generally equal to the difference between the fair value and the counterparty’s purchased value of the underlying borrowings, which may require payment by us or to us for such difference. Accordingly, we believe fluctuations in the fair value of the borrowings from the inception of the hedging relationship generally will be offset by a corresponding fluctuation in the fair value of the total rate of return swaps.

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, 2010 and December 31, 2009, we had borrowings payable subject to total rate of return swaps with aggregate outstanding principal balances of $307.7 million and $352.7 million. At June 30, 2010, the weighted average fixed receive rate under the total return swaps was 6.8% and the weighted average variable pay rate was 1.0%, based on the applicable SIFMA and 30-day LIBOR rates effective as of that date. Information related to the fair value of these instruments at June 30, 2010 and December 31, 2009, is discussed further 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 include, in addition to the unobservable or Level 3 components, 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 consolidated financial statements at fair value on a recurring basis (in thousands):

		Level 2				Level 3
		Interest rate				Total rate of				Changes in fair
		swaps (1)				return swaps (2)				value of debt (3)				Total
Fair value at December 31, 2008		$	(2,557	)		$	(29,495	)		$	29,495			$	(2,557	)
Unrealized gains (losses) included in earnings (4)(5)			(440	)			(85	)			85				(440	)
Realized gains (losses) included in earnings			—				—				—				—
Unrealized gains (losses) included in equity			2,164				—				—				2,164
Fair value at June 30, 2009		$	(833	)		$	(29,580	)		$	29,580			$	(833	)
Fair value at December 31, 2009		$	(1,596	)		$	(24,307	)		$	24,307			$	(1,596	)
Unrealized gains (losses) included in earnings (4)(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	)

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

		Fair value				Total
		measurement				gain (loss)
Real estate (impairments losses) (1)		$	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, 2010 and December 31, 2009, 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 $128.7 million and $126.1 million at June 30, 2010 and December 31, 2009, respectively, as compared to their carrying amounts of $141.7 million and $139.6 million. The estimated aggregate fair value of our consolidated debt (including amounts reported in liabilities related to assets held for sale) was approximately $5.9 billion and $5.7 billion at June 30, 2010 and December 31, 2009, respectively, as compared to aggregate carrying amounts of $5.6 billion. The fair values of our derivative instruments at June 30, 2010 and December 31, 2009, are included in the table presented above.

Concentration of Credit Risk

Financial instruments that potentially could subject us to significant concentrations of credit risk consist principally of notes receivable and total rate of return swaps. Approximately $88.4 million of our notes receivable at June 30, 2010, are collateralized by 84 buildings with 1,596 residential units in the West Harlem area of New York City. There are no other significant concentrations of credit risk with respect to our notes receivable due to the large number of partnerships that are borrowers under the notes and the geographic diversification of the properties that serve as the primary source of repayment of the notes.

At June 30, 2010, we had total rate of return swap positions with two financial institutions totaling $308.0 million. We periodically evaluate counterparty credit risk associated with these arrangements. At the current time, we have concluded we do not have material exposure. In the event 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. Additionally, the swap agreements with a specific counterparty provide for collateral calls to maintain specified loan-to-value ratios. As of June 30, 2010, we were not required to provide cash collateral pursuant to the total rate of return swaps. In the event the values of the real estate properties serving as collateral under these agreements decline, we may be required to provide additional collateral pursuant to the swap agreements, which may adversely affect our cash flows.

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. 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, 2010 and December 31, 2009, we had one and 24 properties, with an aggregate of 198 and 3,745 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,
		2010				2009
Real estate, net		$	5,725			$	133,886
Other assets			325				2,850
Assets held for sale		$	6,050			$	136,736
Property debt		$	3,135			$	117,271
Other liabilities			141				3,966
Liabilities related to assets held for sale		$	3,276			$	121,237

During the six months ended June 30, 2010 and 2009, we sold 23 properties and 29 properties with an aggregate of 3,547 units and 6,597 units, respectively. During the year ended December 31, 2009, we sold 89 consolidated properties with an aggregate of 22,503 units. For the three and six months ended June 30, 2010 and 2009, discontinued operations includes the results of operations for the periods prior to the date of sale for all properties sold and for properties classified as held for sale as of June 30, 2010.

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, 2010 and 2009 (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Rental and other property revenues		$	3,218			$	56,872			$	10,977			$	118,186
Property operating expenses			(1,773	)			(29,015	)			(5,199	)			(61,262	)
Depreciation and amortization			(453	)			(17,538	)			(1,925	)			(36,962	)
Provision for operating real estate impairment losses			(895	)			(17,268	)			(8,121	)			(13,904	)
Other expenses, net			(194	)			(3,180	)			(1,046	)			(5,180	)
Operating (loss) income			(97	)			(10,129	)			(5,314	)			878
Interest income			81				46				107				188
Interest expense			(585	)			(10,898	)			(1,593	)			(23,343	)
Loss before gain on dispositions of real estate and income tax			(601	)			(20,981	)			(6,800	)			(22,277	)
Gain on dispositions of real estate			26,982				57,991				53,321				62,538
Income tax (expense) benefit			(218	)			(731	)			845				(821	)
Income from discontinued operations, net		$	26,163			$	36,279			$	47,366			$	39,440
Income from discontinued operations attributable to:
Noncontrolling interests in consolidated real estate partnerships		$	(7,107	)		$	(20,662	)		$	(17,800	)		$	(25,182	)
Noncontrolling interests in Aimco Operating Partnership			(1,323	)			(1,185	)			(2,058	)			(1,082	)
Total noncontrolling interests			(8,430	)			(21,847	)			(19,858	)			(26,264	)
Aimco		$	17,733			$	14,432			$	27,508			$	13,176

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 $2.6 million and $3.2 million for the three and six months ended June 30, 2010, respectively, and $11.6 million and $11.7 million for the three and six months ended June 30, 2009, 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, 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. In connection with properties sold or classified as held for sale during the three and six months ended June 30, 2009, $3.0 million of goodwill was reflected as a reduction of gain on dispositions of real estate. 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.

Gain on Dispositions of Unconsolidated Real Estate and Other

During the three and six months ended June 30, 2010, we recognized $5.0 million and $7.6 million, respectively, of gains on the disposition of interests in unconsolidated real estate partnerships and other. These gains were primarily related to investments held by partnerships we consolidated in accordance with our adoption of ASU 2009-17 (see Note 2) and in which we generally hold a nominal general partner interest. Accordingly, these gains were primarily attributed to noncontrolling interests in consolidated real estate partnerships.

During the three months ended June 30, 2009, we recognized $3.5 million of gains on the disposition of unconsolidated real estate and other, $3.2 million of which related to our disposition of an interest in an unconsolidated real estate partnership. During the six months ended June 30, 2009, we recognized $14.3 million of gains on the disposition of unconsolidated real estate and other. These gains consisted of $8.6 million resulting from our receipt in 2009 of additional proceeds related to our disposition during 2008 of an interest in an unconsolidated real estate partnership, $3.2 million related to our disposition of an interest in an unconsolidated real estate partnership, and approximately $2.5 million of other gains related to dispositions of interests in unconsolidated real estate partnerships or our equity in gains recognized by unconsolidated real estate partnerships.

NOTE 4 — Other Significant Transactions

Restructuring Costs

During 2009, in connection with the repositioning of our portfolio, we completed organizational restructuring activities that included reductions in workforce and related costs and the abandonment of additional leased corporate facilities and redevelopment projects. During the six months ended June 30, 2010, we reduced our restructuring accruals by $1.2 million and $4.7 million related to payments on unrecoverable lease obligations and severance and personnel related costs, respectively. As of June 30, 2010, the remaining accruals associated with our restructuring activity are $5.7 million for estimated unrecoverable lease obligations, which will be paid over the remaining terms of the affected leases.

NOTE 5 — Commitments and Contingencies

Commitments

In connection with our redevelopment activities, we have commitments of approximately $1.3 million related to construction projects that are expected to be completed during 2010. 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 $4.1 million in loans on certain properties in West Harlem in New York City. In certain circumstances, the obligor under these notes has the ability to put properties to us, which would result in a cash payment between $30.0 million and $97.5 million and the assumption of approximately $119.0 million in property debt. The ability to exercise the put and the amount of cash payment required upon exercise is dependent upon the achievement of specified thresholds by the current owner of the properties.

In June 2009, we entered into an agreement that allows the holder of our Series A Community Reinvestment Act Preferred Stock, or the CRA Preferred Stock, to require us to repurchase a portion of the CRA Preferred Stock at a 30% discount to the liquidation preference. In accordance with this repurchase agreement, in May 2010, we repurchased 20 shares, or $10.0 million in liquidation preference, of CRA Preferred Stock for $7.0 million. We reflected the $3.0 million excess of the carrying value over the repurchase price, offset by $0.2 million of issuance costs previously recorded as a reduction of additional paid-in capital, as a reduction of net income attributable to preferred stockholders for the three and six months ended June 30, 2010.

As of June 30, 2010, we had a remaining potential obligation under this agreement to repurchase up to $20.0 million in liquidation preference of our CRA Preferred Stock. If required, these additional repurchases will be for up to $10.0 million in liquidation preference in May 2011 and 2012. Based on the holder’s ability to require us to repurchase these amounts, the $20.0 million in liquidation preference of CRA Preferred Stock, or the maximum redemption value of such preferred stock, is classified within temporary equity in our consolidated balance sheet at June 30, 2010.

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.

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 hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances 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 presence of hazardous substances 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 hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances 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 facility. In connection with the ownership, operation and management of properties, we could potentially be liable 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 hazardous substances 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, 2010, are immaterial to our consolidated financial condition, results of operations and cash flows.

Mold

We have been named as a defendant in lawsuits that have alleged personal injury and property damage as a result of the presence of mold. In addition, we are aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. We have only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. We have implemented policies, procedures, third-party audits and training, and include a detailed moisture intrusion and mold assessment during acquisition due diligence. We believe these measures will prevent or eliminate mold exposure from our properties and will minimize the effects that mold may have on our residents. To date, we have not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change, we can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on our consolidated financial condition, results of operations or 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, 2010 and 2009 (in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Numerator:
Loss from continuing operations		$	(36,333	)		$	(43,905	)		$	(74,296	)		$	(79,640	)
Loss from continuing operations attributable to noncontrolling interests			10,775				11,029				11,445				23,485
Income attributable to preferred stockholders			(10,128	)			(11,477	)			(23,050	)			(24,643	)
Income attributable to participating securities			(42	)			—				—				—
Loss from continuing operations attributable to Aimco common stockholders		$	(35,728	)		$	(44,353	)		$	(85,901	)		$	(80,798	)
Income from discontinued operations		$	26,163			$	36,279			$	47,366			$	39,440
Income from discontinued operations attributable to noncontrolling interests			(8,430	)			(21,847	)			(19,858	)			(26,264	)
Income from discontinued operations attributable to Aimco common stockholders		$	17,733			$	14,432			$	27,508			$	13,176
Net loss		$	(10,170	)		$	(7,626	)		$	(26,930	)		$	(40,200	)
Loss (income) attributable to noncontrolling interests			2,345				(10,818	)			(8,413	)			(2,779	)
Income attributable to preferred stockholders			(10,128	)			(11,477	)			(23,050	)			(24,643	)
Income attributable to participating securities			(42	)			—				—				—
Net loss attributable to Aimco common stockholders		$	(17,995	)		$	(29,921	)		$	(58,393	)		$	(67,622	)
Denominator:
Denominator for basic earnings per share — weighted average number of shares of Common Stock outstanding			116,323				115,510				116,179				112,886
Effect of dilutive securities:
Dilutive potential common shares			—				—				—				—
Denominator for diluted earnings per share			116,323				115,510				116,179				112,886
Earnings (loss) per common share:
Basic and diluted earnings (loss) per common share:
Loss from continuing operations attributable to Aimco common stockholders		$	(0.30	)		$	(0.38	)		$	(0.74	)		$	(0.72	)
Income from discontinued operations attributable to Aimco common stockholders			0.15				0.12				0.24				0.12
Net loss attributable to Aimco common stockholders		$	(0.15	)		$	(0.26	)		$	(0.50	)		$	(0.60	)

As of June 30, 2010 and 2009, the common share equivalents that could potentially dilute basic earnings per share in future periods totaled 7.2 million and 10.9 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, 2010 and 2009, 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 0.6 million and 0.9 million at June 30, 2010 and 2009, respectively. The effect of participating securities is reflected 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 1.84% to 9.5% per annum per unit, or equal to the dividends paid on Common Stock based on the conversion terms. As of June 30, 2010, a total of 3.1 million preferred OP Units were outstanding with redemption values of $85.4 million and were potentially redeemable for approximately 4.4 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; however, 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.

In December 2009, we adopted the provisions of FASB Accounting Standards Update 2010-01, Accounting for Distributions to Shareholders with Components of Stock and Cash, or ASU 2010-01, which are codified in FASB ASC Topic 505. ASU 2010-01 requires that for distributions with components of cash and stock, the portion distributed in stock should be accounted for prospectively as a stock issuance with no retroactive adjustment to basic and diluted earnings per share. In accordance with ASU 2010-01, we retrospectively revised the accounting treatment of our special dividend paid in January 2009, resulting in a 2.4 million reduction in the number of weighted average shares outstanding and a $0.01 increase in the loss per share attributed to Aimco common stockholders for the six months ended June 30, 2009, as compared to the amounts reported in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009.

NOTE 7 — Business Segments

Based on a planned reduction in our transactional activities, during the three months ended March 31, 2010, we reevaluated our reportable segments and determined our investment management reporting unit no longer meets the requirements for a reportable segment. Additionally, to provide more meaningful information regarding our real estate operations, we elected to disaggregate information for the prior real estate segment. Following these changes, we have two reportable segments: conventional real estate operations and affordable real estate operations. Our conventional real estate operations consist of market-rate apartments with rents paid by the resident and include 232 properties with 71,909 units. Our affordable real estate operations consist of 254 properties with 29,540 units, with rents that are generally paid, in whole or part, by a government agency.

Our chief operating decision maker uses various generally accepted industry financial measures to assess the performance of the business, including: property net operating income, which is rental and other property revenues less direct property operating expenses, including real estate taxes; Net Asset Value, which is the estimated fair value of our assets, net of debt; Pro forma Funds From Operations, which is Funds From Operations excluding operating real estate impairment losses and preferred stock redemption related gains or losses; Adjusted Funds From Operations, which is Pro forma Funds From Operations less spending for Capital Replacements; same store property operating results; Free Cash Flow, which is net operating income less spending for Capital Replacements; financial coverage ratios; and leverage as shown on our balance sheet. The chief operating decision maker emphasizes net operating income as a key measurement of segment profit or loss. Segment net operating income is generally defined as segment revenues less direct segment operating expenses.

The following tables present the revenues, net operating income (loss) and income (loss) from continuing operations of our conventional and affordable real estate operations segments for the three and six months ended June 30, 2010 and 2009 (in thousands):

										Corporate and
		Conventional				Affordable				Amounts Not
		Real Estate				Real Estate				Allocated to
		Operations				Operations (1)				Segments				Total
Three Months Ended June 30, 2010:
Rental and other property revenues (2)		$	230,267			$	54,268			$	860			$	285,395
Asset management and tax credit revenues			—				—				9,596				9,596
Total revenues			230,267				54,268				10,456				294,991
Property operating expenses (2)			89,735				26,363				16,848				132,946
Investment management expenses			—				—				5,141				5,141
Depreciation and amortization (2)			—				—				108,667				108,667
General and administrative expenses			—				—				15,184				15,184
Other income, net			—				—				(6,693	)			(6,693	)
Total operating expenses			89,735				26,363				139,147				255,245
Net operating income (loss)			140,532				27,905				(128,691	)			39,746
Other items included in continuing operations			—				—				(76,079	)			(76,079	)
Income (loss) from continuing operations		$	140,532			$	27,905			$	(204,770	)		$	(36,333	)
Three Months Ended June 30, 2009:
Rental and other property revenues (2)		$	229,048			$	48,653			$	1,340			$	279,041
Asset management and tax credit revenues			—				—				12,606				12,606
Total revenues			229,048				48,653				13,946				291,647
Property operating expenses (2)			90,518				22,078				13,069				125,665
Investment management expenses			—				—				4,716				4,716
Depreciation and amortization (2)			—				—				108,437				108,437
Provision for operating real estate impairment losses (2)			—				—				1,569				1,569
General and administrative expenses			—				—				14,577				14,577
Other expenses, net			—				—				3,748				3,748
Total operating expenses			90,518				22,078				146,116				258,712
Net operating income (loss)			138,530				26,575				(132,170	)			32,935
Other items included in continuing operations			—				—				(76,840	)			(76,840	)
Income (loss) from continuing operations		$	138,530			$	26,575			$	(209,010	)		$	(43,905	)

										Corporate and
		Conventional				Affordable				Amounts Not
		Real Estate				Real Estate				Allocated to
		Operations				Operations (1)				Segments				Total
Six Months Ended June 30, 2010:
Rental and other property revenues (2)		$	461,075			$	107,506			$	2,041			$	570,622
Asset management and tax credit revenues			—				—				13,853				13,853
Total revenues			461,075				107,506				15,894				584,475
Property operating expenses (2)			186,019				54,121				31,214				271,354
Investment management expenses			—				—				8,370				8,370
Depreciation and amortization (2)			—				—				217,006				217,006
General and administrative expenses			—				—				26,919				26,919
Other income, net			—				—				(3,592	)			(3,592	)
Total operating expenses			186,019				54,121				279,917				520,057
Net operating income (loss)			275,056				53,385				(264,023	)			64,418
Other items included in continuing operations			—				—				(138,714	)			(138,714	)
Income (loss) from continuing operations		$	275,056			$	53,385			$	(402,737	)		$	(74,296	)
Six Months Ended June 30, 2009:
Rental and other property revenues (2)		$	460,918			$	95,402			$	2,983			$	559,303
Asset management and tax credit revenues			—				—				22,144				22,144
Total revenues			460,918				95,402				25,127				581,447
Property operating expenses (2)			183,498				45,959				29,692				259,149
Investment management expenses			—				—				8,506				8,506
Depreciation and amortization (2)			—				—				212,606				212,606
Provision for operating real estate impairment losses (2)			—				—				2,079				2,079
General and administrative expenses			—				—				30,837				30,837
Other expenses, net			—				—				5,229				5,229
Total operating expenses			183,498				45,959				288,949				518,406
Net operating income (loss)			277,420				49,443				(263,822	)			63,041
Other items included in continuing operations			—				—				(142,681	)			(142,681	)
Income (loss) from continuing operations		$	277,420			$	49,443			$	(406,503	)		$	(79,640	)

The assets of our reportable segments are as follows (in thousands):

		June 30,				December 31,
		2010				2009
Conventional		$	5,973,276			$	6,096,406
Affordable			1,220,186				1,133,099
Corporate and other assets			514,339				676,963
Total consolidated assets		$	7,707,801			$	7,906,468

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 Report contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding our ability to maintain current or meet projected occupancy, rental rates and property operating results. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond our control, including, without limitation: financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; earnings may not be sufficient to maintain compliance with debt covenants; real estate 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; the terms of governmental regulations that affect us and interpretations of those regulations; the competitive environment in which we operate; the timing of acquisitions and dispositions; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us. 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 and depends on our ability to meet the various requirements imposed by the Internal Revenue 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 the section entitled “Risk Factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009, and the other documents we file from time to time with the Securities and Exchange Commission. As used herein and except as the context otherwise requires, “we,” “our,” “us” and the “Company” refer to Apartment Investment and Management Company (which we refer to as Aimco), AIMCO Properties, L.P. (which we refer to as the Aimco Operating Partnership) and Aimco’s consolidated corporate subsidiaries and consolidated real estate partnerships, collectively.