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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 (Do not check if a smaller reporting company)		Smaller reporting company o

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 29, 2009: 117,042,795

 

 

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, 2009 and December 31, 2008 (Unaudited)			2
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2009 and 2008 (Unaudited)			3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008 (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			36
ITEM 4. Controls and Procedures			36
PART II. OTHER INFORMATION
ITEM 1A. Risk Factors			37
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
ITEM 4. Submission of Matters to a Vote of Security Holders			37
ITEM 5. Other Information			38
ITEM 6. Exhibits			39
Signatures			40
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

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

		June 30,				December 31,
		2009				2008
ASSETS
Real estate:
Buildings and improvements		$	8,231,111			$	8,145,589
Land			2,273,852				2,264,335
Total real estate			10,504,963				10,409,924
Less accumulated depreciation			(2,812,016	)			(2,627,373	)
Net real estate			7,692,947				7,782,551
Cash and cash equivalents			112,114				299,676
Restricted cash			257,432				256,817
Accounts receivable, net			67,729				92,923
Accounts receivable from affiliates, net			27,644				36,372
Deferred financing costs, net			59,038				56,052
Notes receivable from unconsolidated real estate partnerships, net			14,818				22,567
Notes receivable from non-affiliates, net			141,125				139,897
Investment in unconsolidated real estate partnerships			117,432				119,036
Other assets			222,081				188,765
Deferred income tax assets, net			28,332				28,326
Assets held for sale			100,729				391,884
Total assets		$	8,841,421			$	9,414,866
LIABILITIES AND EQUITY
Property tax-exempt bond financing		$	624,975			$	669,339
Property loans payable			5,423,593				5,425,908
Term loan			350,000				400,000
Other borrowings			88,237				95,981
Total indebtedness			6,486,805				6,591,228
Accounts payable			33,335				64,241
Accrued liabilities and other			292,110				411,093
Deferred income			183,594				194,867
Security deposits			41,427				41,308
Liabilities related to assets held for sale			72,570				245,332
Total liabilities			7,109,841				7,548,069
Preferred noncontrolling interests in Aimco Operating Partnership			87,286				88,148
Preferred stock subject to repurchase agreement			30,000				—
Commitments and contingencies (Note 5)			—				—
Equity:
Perpetual Preferred Stock			660,500				696,500
Class A Common Stock, $.01 par value, 426,157,736 shares authorized, 116,435,004 and 116,180,877 shares issued and outstanding, at June 30, 2009 and December 31, 2008, respectively			1,164				1,162
Additional paid-in capital			3,065,080				3,058,799
Accumulated other comprehensive loss			(473	)			(2,249	)
Notes due on common stock purchases			(1,403	)			(3,607	)
Distributions in excess of earnings			(2,413,472	)			(2,335,628	)
Total Aimco equity			1,311,396				1,414,977
Noncontrolling interests in consolidated real estate partnerships			311,384				363,672
Common noncontrolling interests in Aimco Operating Partnership			(8,486	)			—
Total equity			1,614,294				1,778,649
Total liabilities and equity		$	8,841,421			$	9,414,866

See notes to condensed consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
REVENUES:
Rental and other property revenues		$	320,852			$	316,970			$	643,010			$	633,727
Property management revenues, primarily from affiliates			1,340				1,415				2,983				3,519
Asset management and tax credit revenues			12,606				38,175				22,144				51,027
Total revenues			334,798				356,560				668,137				688,273
OPERATING EXPENSES:
Property operating expenses			142,914				141,213				292,108				294,945
Property management expenses			472				1,254				1,905				2,589
Investment management expenses			4,716				5,807				8,506				10,194
Depreciation and amortization			122,198				105,642				240,914				204,659
Provision for operating real estate impairment losses			4,988				—				5,498				—
General and administrative expenses			17,849				27,004				37,922				48,370
Other expenses, net			4,398				10,933				6,463				18,117
Total operating expenses			297,535				291,853				593,316				578,874
Operating income			37,263				64,707				74,821				109,399
Interest income			2,264				1,748				5,655				11,312
Provision for losses on notes receivable, net			(1,534	)			(42	)			(1,685	)			(265	)
Interest expense			(90,896	)			(89,790	)			(179,888	)			(178,391	)
Equity losses of unconsolidated real estate partnerships			(1,696	)			(843	)			(3,736	)			(1,872	)
Gain on dispositions of unconsolidated real estate and other			3,750				255				14,611				166
Loss before income taxes and discontinued operations			(50,849	)			(23,965	)			(90,222	)			(59,651	)
Income tax benefit			3,080				3,281				5,285				4,977
Loss from continuing operations			(47,769	)			(20,684	)			(84,937	)			(54,674	)
Income from discontinued operations, net			40,143				363,639				44,737				373,968
Net (loss) income			(7,626	)			342,955				(40,200	)			319,294
Noncontrolling interests:
Net income attributable to noncontrolling interests in consolidated real estate partnerships			(11,695	)			(58,648	)			(5,422	)			(61,963	)
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership			(1,746	)			(1,925	)			(2,815	)			(3,707	)
Net loss (income) attributable to common noncontrolling interests in Aimco Operating Partnership			2,623				(26,427	)			5,458				(22,319	)
Total noncontrolling interests			(10,818	)			(87,000	)			(2,779	)			(87,989	)
Net (loss) income attributable to Aimco			(18,444	)			255,955				(42,979	)			231,305
Net income attributable to Aimco preferred stockholders			(11,477	)			(13,670	)			(24,643	)			(27,878	)
Net income attributable to participating securities			—				(3,145	)			—				(2,497	)
Net (loss) income attributable to Aimco common stockholders		$	(29,921	)		$	239,140			$	(67,622	)		$	200,930
Earnings (loss) attributable to Aimco per common share — basic and diluted (Note 6):
Loss from continuing operations attributable to Aimco (net of income attributable to preferred stockholders and participating securities)		$	(0.41	)		$	(0.36	)		$	(0.74	)		$	(0.70	)
Income from discontinued operations attributable to Aimco			0.15				2.30				0.15				2.30
Net (loss) income attributable to Aimco common stockholders		$	(0.26	)		$	1.94			$	(0.59	)		$	1.60
Weighted average common shares outstanding, basic and diluted			115,510				123,484				115,304				125,723
Dividends declared per common share		$	0.10			$	0.43			$	0.10			$	0.43

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,
		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(40,200	)		$	319,294
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			240,914				204,659
Gain on dispositions of unconsolidated real estate and other			(14,611	)			(166	)
Discontinued operations			(41,958	)			(308,001	)
Other adjustments			23,915				29,575
Net changes in operating assets and operating liabilities			(108,659	)			4,798
Net cash provided by operating activities			59,401				250,159
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate			—				(56,534	)
Capital expenditures			(147,337	)			(307,378	)
Proceeds from dispositions of real estate			265,937				856,932
Proceeds from sales of interests in unconsolidated real estate partnerships			12,596				—
Purchases of partnership interests and other assets			(2,567	)			(20,131	)
Originations of notes receivable from unconsolidated real estate partnerships			(4,111	)			(4,864	)
Proceeds from repayment of notes receivable			4,376				5,044
Other investing activities			20,453				655
Net cash provided by investing activities			149,347				473,724
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from property loans			610,803				455,523
Principal repayments on property loans			(682,681	)			(600,683	)
Proceeds from tax-exempt bond financing			—				21,200
Principal repayments on tax-exempt bond financing			(70,774	)			(32,495	)
Payments on term loans			(50,000	)			—
Net borrowings on revolving credit facility			—				145,000
Repurchases of Class A Common Stock			—				(352,306	)
Repurchases of preferred stock			(4,200	)			—
Payment of Class A Common Stock dividends			(72,164	)			(107,808	)
Payment of preferred stock dividends			(26,293	)			(27,903	)
Payment of distributions to noncontrolling interests			(80,626	)			(119,180	)
Other financing activities			(20,375	)			14,471
Net cash used in financing activities			(396,310	)			(604,181	)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS			(187,562	)			119,702
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			299,676				210,461
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	112,114			$	330,163

See notes to condensed consolidated financial statements.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
(Unaudited)

NOTE 1 — Organization

Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. We are a self-administered and self-managed real estate investment trust, or REIT, engaged in the acquisition, ownership, management and redevelopment of apartment properties. As of June 30, 2009, we owned or managed a real estate portfolio of 950 apartment properties containing 154,511 apartment units located in 44 states, the District of Columbia and Puerto Rico. We are one of the largest owners and operators of apartment properties in the United States.

As of June 30, 2009, we:

•

owned an equity interest in and consolidated 111,054 units in 485 properties (which we refer to as “consolidated properties”), of which 108,713 units were also managed by us;

•

owned an equity interest in and did not consolidate 8,915 units in 82 properties (which we refer to as “unconsolidated properties”), of which 3,884 units were also managed by us; and

•

provided services for or managed 34,542 units in 383 properties, primarily pursuant to long-term agreements (including 32,241 units in 358 properties for which we provide asset management services only, and not also property management services). In certain cases, we may indirectly own generally less than one percent of the operations of such properties through a partnership syndication or other fund.

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, 2009, we held approximately 93% of 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 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, 2009, 116,435,004 shares of our Common Stock were outstanding and the Aimco Operating Partnership had 8,819,906 common OP Units and equivalents outstanding for a combined total of 125,254,910 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 generally accepted accounting principles 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, 2009, are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

The balance sheet at December 31, 2008, 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, 2008. Certain 2008 financial statement amounts have been reclassified to conform to the 2009 presentation, including adjustments for discontinued operations.

Share and per share information for the periods presented has been retroactively adjusted for the effect of shares of Common Stock issued in connection with special dividends paid during 2008 and January 2009.

Our management evaluated for subsequent events through the time this Quarterly Report on Form 10-Q was filed on July 31, 2009.

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

Financial Accounting Standards Board, or FASB, Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, or FIN 46, addresses the consolidation by business enterprises of 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. FIN 46 requires a VIE to be consolidated in the financial statements of the entity that is determined to be the primary beneficiary of the VIE. The primary beneficiary generally is the entity that will receive a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both.

In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investors’ ability to control or significantly influence key decisions for the VIE; 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, 2009, we were the primary beneficiary of, and therefore consolidated, 91 VIEs, which owned 68 apartment properties with 9,706 units. Real estate with a carrying value of $776.2 million collateralized $460.5 million of debt of those VIEs. The creditors of the consolidated VIEs do not have recourse to our general credit. As of June 30, 2009, we also held variable interests in 124 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 175 apartment properties with 10,061 units. We are involved with those VIEs as an equity holder, lender, management agent, or through other contractual relationships. At June 30, 2009, our maximum exposure to loss as a result of our involvement with unconsolidated VIEs is limited to our recorded investments in and receivables from those VIEs totaling $107.6 million and our contractual obligation to advance funds to certain VIEs totaling $5.3 million. We may be subject to additional losses to the extent of any financial support that we voluntarily provide in the future. Additionally, the provision of financial support in the future may require us to consolidate a VIE.

Noncontrolling Interests

We adopted the provisions of FASB Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51, or SFAS 160, effective January 1, 2009. SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in a consolidated entity, which should be reported as equity in the parent’s consolidated financial statements. SFAS 160 requires disclosure, on the face of the consolidated income statements, of those amounts of consolidated net income and other comprehensive income attributable to controlling and noncontrolling interests, eliminating the past practice of reporting amounts of income attributable to noncontrolling interests as an adjustment in arriving at consolidated net income. SFAS 160 requires the parent to attribute to noncontrolling interests their share of losses even if such attribution results in a deficit noncontrolling interest balance within the parent’s equity accounts, and in some instances, requires a parent to recognize a gain or loss in net income when a subsidiary is deconsolidated.

In connection with our adoption of SFAS 160, we reclassified into our consolidated equity accounts the historical balances related to noncontrolling interests in consolidated real estate partnerships and the portion of noncontrolling interests in Aimco Operating Partnership related to the Aimco Operating Partnership’s common OP Units and High Performance Units. At December 31, 2008, the carrying amount of noncontrolling interests in consolidated real estate partnerships was $363.7 million and the carrying amount for noncontrolling interests in Aimco Operating Partnership attributable to common OP Units and High Performance Units was zero, due to cash distributions in excess of the positive balances related to those noncontrolling interests.

Under SFAS 160, we no longer record a charge related to cash distributions to noncontrolling interests in excess of the carrying amount of such noncontrolling interests, and we attribute losses to noncontrolling interests even if such attribution results in a deficit noncontrolling interest balance within our equity accounts. The following table illustrates the pro forma amounts of loss from continuing operations, discontinued operations and net loss that would have been attributed to Aimco common stockholders for the three and six months ended June 30, 2009, had we applied the provisions of Accounting Research Bulletin No. 51, prior to their amendment by SFAS 160 (in thousands, except per share amounts):

		Three Months				Six Months
		Ended June 30,				Ended June 30,
		2009				2009
Loss from continuing operations attributable to Aimco (net of income attributable to preferred stockholders and participating securities)		$	(54,724	)		$	(112,997	)
Income from discontinued operations attributable to Aimco			18,331				17,832
Net loss attributable to Aimco common stockholders		$	(36,393	)		$	(95,165	)
Basic and diluted earnings (loss) per common share:
Loss from continuing operations attributable to Aimco (net of income attributable to preferred stockholders and participating securities)		$	(0.47	)		$	(0.98	)
Income from discontinued operations attributable to Aimco			0.15				0.15
Net loss attributable to Aimco common stockholders		$	(0.32	)		$	(0.83	)

The following table presents a reconciliation of the December 31, 2008 and June 30, 2009 carrying amounts for preferred noncontrolling interests in the Aimco Operating Partnership, consolidated equity and the related amounts of equity attributable to Aimco and noncontrolling interests:

		Temporary equity								Equity
		Preferred
		noncontrolling												Noncontrolling				Common
		interests in				Preferred stock								interests in				noncontrolling
		Aimco				subject to				Equity				consolidated real				interests in
		Operating				repurchase				attributable to				estate				Aimco Operating
		Partnership				agreement				Aimco				partnerships				Partnership				Total equity
Balance, December 31, 2008		$	88,148			$	—			$	1,414,977			$	363,672			$	—			$	1,778,649
Contributions			—				—				—				3,035				—				3,035
Dividends/distributions			(3,412	)			—				(37,864	)			(57,458	)			(924	)			(96,246	)
Conversions and repurchases of common units and shares			(1,016	)			—				1,305				—				(1,353	)			(48	)
Repurchase of preferred shares			—				—				(4,200	)			—				—				(4,200	)
Reclassification of preferred stock to temporary equity (Note 4)			—				30,000				(30,000	)			—				—				(30,000	)
Stock based compensation cost			—				—				7,153				—				—				7,153
Other			751				—				1,229				(3,369	)			(751	)			(2,891	)
Effect of changes in ownership			—				—				—				(307	)			—				(307	)
Change in accumulated other comprehensive loss			—				—				1,775				389				—				2,164
Net income (loss)			2,815				—				(42,979	)			5,422				(5,458	)			(43,015	)
Balance, June 30, 2009		$	87,286			$	30,000			$	1,311,396			$	311,384			$	(8,486	)		$	1,614,294

SFAS 160 does not amend the provisions of EITF Topic D-98, Classification and Measurement of Redeemable Securities, or EITF D-98, which addresses the classification and measurement of redeemable securities, including noncontrolling interests in a subsidiary; however, the FASB amended EITF D-98 in March 2008 to address the interaction of EITF D-98 with SFAS 160. Pursuant to EITF D-98, the Aimco Operating Partnership’s preferred OP Units, which are generally redeemable at the holders’ option and may be settled in cash or, at the Aimco Operating Partnership’s discretion, shares of Common Stock, will continue to be classified within temporary equity in our consolidated balance sheets.

Business Combinations

We adopted the provisions of FASB Statement of Financial Accounting Standards No. 141(R), Business Combinations — a replacement of FASB Statement No. 141, or SFAS 141(R), effective January 1, 2009. SFAS 141(R) applies to all transactions or events in which an entity obtains control of one or more businesses, including those effected without the transfer of consideration, for example by contract or through a lapse of minority veto rights. SFAS 141(R) requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition); establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires expensing of most transaction and restructuring costs.

We believe most operating real estate assets meet the revised definition of a business under SFAS 141(R). Accordingly, beginning in 2009, we expense transaction costs associated with acquisitions of operating real estate or interests therein when we consolidate the asset. SFAS 141(R) does not provide implementation guidance regarding the treatment of acquisition costs incurred prior to December 31, 2008, for acquisitions that do not close until 2009 when SFAS 141(R) is effective. The SEC has indicated any of the following three transition methods are acceptable, provided that the method chosen is disclosed and applied consistently:

1)

expense acquisition costs in 2008 when it is probable that the acquisition will not close in 2008;

2)

expense acquisition costs January 1, 2009, upon adoption of SFAS 141(R); or

3)

give retroactive treatment to the acquisition costs January 1, 2009, upon adoption of SFAS 141(R), by retroactively adjusting prior periods to record acquisition costs in the prior periods in which they were incurred, in accordance with Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections.

We elected to apply the third method and accordingly have retroactively adjusted our results of operations for the year ended December 31, 2008, by $3.5 million, which also resulted in a corresponding reduction to our December 31, 2008 equity balance. Approximately $0.1 million and $0.2 million of such acquisition costs were incurred during the three and six months ended June 30, 2008, respectively, and are reflected in investment management expenses in our accompanying condensed consolidated statements of income for those periods. These retroactive adjustments had no net effect on earnings per share amounts for the three and six months ended June 30, 2008.

Participating Securities

We adopted the provisions of FASB FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities, or the FSP, effective January 1, 2009. The FSP clarifies that unvested share-based payment awards that participate in dividends similar to shares of common stock or common partnership units should be treated as participating securities. The FSP affects the computation of basic and diluted earnings per share for unvested restricted stock awards and shares purchased pursuant to officer stock loans, which serve as collateral for such loans, both of which entitle the holders to dividends. Refer to Note 6, which details our calculation of earnings per share and the effect of participating securities on earnings per share. We do not expect the FSP to have a material effect on future earnings per share amounts.

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 over the term of the related debt. The interest rate cap agreements effectively limit our exposure to interest rate risk by providing a ceiling on the underlying variable interest rate.

At June 30, 2009 and December 31, 2008, we had interest rate swaps with an aggregate notional amount of $52.3 million, and recorded fair values of $0.8 million and $2.6 million, respectively, reflected in other assets and accrued liabilities and other in our condensed consolidated balance sheets. At June 30, 2009, these interest rate swaps had a weighted average term of 11.6 years. In accordance with FASB Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, or SFAS 133, 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, 2009 and 2008, we recognized changes in fair value of $1.7 million and $0.1 million, respectively, of which $2.2 million and $0.1 million resulted in an adjustment to consolidated equity. We recognized $0.4 million of ineffectiveness as an adjustment of interest expense during the six months ended June 30, 2009 and we recognized no ineffectiveness during the six months ended June 30, 2008. Our consolidated comprehensive loss for the three and six months ended June 30, 2009, totaled $5.8 million and $38.0 million, respectively, and consolidated comprehensive income for the three and six months ended June 30, 2008, totaled $343.6 million and $319.4 million, respectively, before the effects of noncontrolling interests. If the forward rates at June 30, 2009 remain constant, we estimate that during the next twelve months, we would reclassify into earnings approximately $1.4 million of the unrealized losses in accumulated other comprehensive income.

From time to time, we enter 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 a 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 an interest in 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.

In accordance with SFAS 133, 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. We evaluate the effectiveness of these fair value hedges at the end of each reporting period and recognize an adjustment of interest expense as a result of any ineffectiveness.

As of June 30, 2009 and December 31, 2008, we had borrowings payable subject to total rate of return swaps with aggregate outstanding principal balances of $418.9 million and $421.7 million, respectively. At June 30, 2009, the weighted average fixed receive rate under the total return swaps was 6.8% and the weighted average variable pay rate was 1.1%, 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, 2009 and December 31, 2008, is discussed further below.

Fair Value Measurements

We adopted the provisions of FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements, or SFAS 157, that apply both to recurring and nonrecurring fair value measurements of financial assets and liabilities effective January 1, 2008, and the provisions that apply to fair value measurements of non-financial assets and liabilities effective January 1, 2009, and at those times determined no transition adjustments were required.

The table below presents (in thousands) the amounts at December 31, 2008 and June 30, 2009 (and the changes in fair value between such dates) for significant items measured in our consolidated balance sheets at fair value, as defined in SFAS 157. Certain of these fair value measurements are based on significant unobservable inputs classified within Level 3 of the SFAS 157 valuation hierarchy. 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, such fair value measurements typically include, in addition to the unobservable or Level 3 inputs, observable inputs 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.

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

In addition to the amounts in the table above, during the three and six months ended June 30, 2009, we recognized $19.7 million and $16.9 million, respectively, of net provisions for operating real estate impairment losses (including amounts in discontinued operations) to reduce the carrying amounts of certain real estate properties to their estimated fair value (or fair value less estimated costs to sell). We estimate the fair value of real estate using income and market valuation techniques using information such as broker estimates, purchase prices for recent transactions on comparable assets and net operating income capitalization analyses using observable and unobservable inputs such as capitalization rates, asset quality grading, geographic location analysis, and local supply and demand observations. Based on the significance of the unobservable inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy.

We believe that the aggregate fair value of our cash and cash equivalents, receivables, payables and short-term secured debt approximates their aggregate carrying value at June 30, 2009 and December 31, 2008, 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 $151.1 million and $161.6 million at June 30, 2009 and December 31, 2008, respectively, as compared to their carrying amounts of $155.9 million and $162.5 million. The estimated aggregate fair value of our consolidated debt (including amounts reported in liabilities related to assets held for sale) was approximately $6.6 billion and $6.7 billion at June 30, 2009 and December 31, 2008, respectively, as compared to aggregate carrying amounts of $6.6 billion and $6.8 billion. The fair values of our derivative instruments at June 30, 2009 and December 31, 2008 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 $86.3 million of our notes receivable at June 30, 2009, are collateralized by properties 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 collateralize the notes.

At June 30, 2009, we had total rate of return swap positions with two financial institutions totaling $419.3 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 this 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.

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.

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. A summary report related to the 2007 examination has not yet been issued. We do not expect the 2006 proposed adjustments or the 2007 examination to have any material effect on our unrecognized tax benefits, financial condition or results of operations.

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, 2009 and December 31, 2008, we had nine and 38 properties, with an aggregate of 2,381 and 8,978 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,
		2009				2008
Real estate, net		$	98,029			$	385,394
Other assets			2,700				6,490
Assets held for sale		$	100,729			$	391,884
Property debt		$	71,709			$	237,903
Other liabilities			861				7,429
Liabilities related to assets held for sale		$	72,570			$	245,332

During the six months ended June 30, 2009, we sold 29 properties with an aggregate of 6,597 units and during the year ended December 31, 2008, we sold 151 consolidated properties with an aggregate of 37,202 units. For the three and six months ended June 30, 2009 and 2008, discontinued operations includes the results of operations for the periods prior to the date of sale for all properties sold or classified as held for sale as of June 30, 2009.

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, 2009 and 2008 (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Rental and other property revenues		$	13,721			$	103,429			$	31,496			$	211,288
Property operating expenses			(8,020	)			(52,543	)			(19,314	)			(105,803	)
Depreciation and amortization			(3,776	)			(20,853	)			(8,654	)			(50,266	)
Real estate impairment losses			(14,760	)			(6,536	)			(11,396	)			(6,536	)
Other expenses, net			(2,533	)			(2,009	)			(3,945	)			(2,742	)
Operating (loss) income			(15,368	)			21,488				(11,813	)			45,941
Interest income			7				185				66				782
Interest expense			(1,773	)			(17,765	)			(5,524	)			(37,558	)
(Loss) income before gain on dispositions of real estate and income tax			(17,134	)			3,908				(17,271	)			9,165
Gain on dispositions of real estate			58,615				375,623				63,165				380,387
Income tax expense			(1,338	)			(15,892	)			(1,157	)			(15,584	)
Income from discontinued operations, net		$	40,143			$	363,639			$	44,737			$	373,968
Income from discontinued operations attributable to:
Noncontrolling interests in consolidated real estate partnerships		$	(21,007	)		$	(53,802	)		$	(25,121	)		$	(58,173	)
Noncontrolling interests in Aimco Operating Partnership			(1,476	)			(25,840	)			(1,512	)			(26,337	)
Total noncontrolling interests			(22,483	)			(79,642	)			(26,633	)			(84,510	)
Aimco		$	17,660			$	283,997			$	18,104			$	289,458

Gain on dispositions of real estate is reported net of incremental direct costs incurred in connection with the transaction, including any prepayment penalties incurred upon repayment of mortgage loans collateralized by the property being sold. Such prepayment penalties totaled $11.6 million and $11.7 million for the three and six months ended June 30, 2009, respectively, and $23.8 million and $25.1 million for the three and six months ended June 30, 2008, 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 during the three and six months ended June 30, 2009, we included $3.0 million of goodwill related to our real estate segment in the carrying amounts of the properties in determining the gain or loss on such disposals. The amounts of goodwill allocated to these properties were based on the relative fair values of the properties disposed of and the retained portions of the reporting units to which the goodwill was allocated. During 2008, we did not allocate any goodwill to disposals as real estate properties were not considered businesses under then applicable GAAP.

Gain on Dispositions of Unconsolidated Real Estate and Other

During the three months ended June 30, 2009, we recognized approximately $3.2 million of gains on the disposition of an interest in an unconsolidated real estate partnership and approximately $0.6 million of gains related to properties sold by unconsolidated real estate partnerships.

During the six months ended June 30, 2009, we recognized approximately $11.8 million of gains on the disposition of interests in unconsolidated real estate partnerships, of which $8.6 million relates to our receipt in 2009 of additional proceeds related to our disposition during 2008 of an interest in an unconsolidated real estate partnership. We additionally recognized approximately $2.8 million of gains related to properties sold by unconsolidated real estate partnerships and the disposal of undeveloped land parcels during the six months ended June 30, 2009.

NOTE 4 — Other Significant Transactions

Restructuring Costs

In connection with 2008 property sales and an expected reduction in redevelopment and transactional activities, during the three months ended December 31, 2008, we initiated an organizational restructuring program that included reductions in workforce and related costs, reductions in leased corporate facilities and abandonment of certain redevelopment projects and business pursuits. This restructuring effort resulted in a restructuring charge of $22.8 million, which consisted of: severance costs of $12.9 million; unrecoverable lease obligations of $6.4 million related to space that we will no longer use; and the write-off of deferred transaction costs totaling $3.5 million associated with certain acquisitions and redevelopment opportunities that we will no longer pursue. We completed the workforce reductions by March 31, 2009. In connection with the completion of the workforce reductions, we reversed approximately $1.7 million of excess severance costs. During the six months ended June 30, 2009, we abandoned additional leased corporate facilities and redevelopment projects, which resulted in an additional restructuring charge of approximately $1.7 million. As of June 30, 2009, the only remaining accrual associated with the restructuring activity is a $6.1 million estimate for unrecoverable lease obligations, which will be paid over the remaining terms of the affected leases.

The net effect of the severance related reversal and the additional 2009 abandonments had an insignificant effect on earnings for the six months ended June 30, 2009, and is included in other expense, net in our consolidated statement of income. The amounts related to our restructuring charges have not been allocated to our reportable segments based on the methods used to evaluate segment performance.

Amended Credit Facility

On May 1, 2009, we entered into a Sixth Amendment to our Amended and Restated Senior Secured Credit Agreement with a syndicate of financial institutions, which we refer to as the Credit Agreement. The Sixth Amendment provides for a reduction in the aggregate amount of commitments and loans under the Credit Agreement from $985.0 million, comprised of a $350.0 million term loan and $635.0 million of revolving loan commitments to $530.0 million, comprised of a $350.0 million term loan and $180.0 million of revolving loan commitments. Pursuant to the Sixth Amendment, our revolving credit facility matures May 1, 2011, and may be extended for an additional year, subject to certain conditions, including payment of a 45.0 basis point fee on the total revolving commitments, and repayment of the entire $350.0 million term loan by February 1, 2011.

Partial Repurchase of Series A Community Reinvestment Act Perpetual Preferred Stock

In June 2009, we entered into an agreement to repurchase $36.0 million in liquidation preference of our Series A Community Reinvestment Act Preferred Stock, or CRA Preferred Stock, at a 30% discount to the redemption value. Pursuant to this agreement, the holder of the CRA Preferred Stock may require us to repurchase 12 shares, or $6.0 million in liquidation preference, of CRA Preferred Stock for $4.2 million on June 30, 2009, and an additional 60 shares, or $30.0 million in liquidation preference, of CRA Preferred Stock over the next three years, for $21.0 million. If required, these additional repurchases will be for up to $10.0 million in liquidation preference in May 2010, 2011 and 2012.

In June 2009, we were required to complete the first repurchase under this agreement. In accordance with Emerging Issues Task Force Topic D-42, The Effect on the Calculation of Earnings Per Share for the Redemption or Induced Conversion of Preferred Stock, or EITF Topic D-42, the $1.8 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, is reflected as a reduction of net income attributable to preferred stockholders for purposes of calculating earnings per share for the three and six months ended June 30, 2009.

Based on the holder’s ability to require us to repurchase an additional 60 shares of CRA Preferred Stock pursuant to this agreement, at June 30, 2009, we reclassified into temporary equity $30.0 million in liquidation preference of CRA Preferred Stock, or the maximum redemption value of such preferred stock.

Common Stock Repurchases

Our Board of Directors has, from time to time, authorized us to repurchase shares of our outstanding capital stock. During the six months ended June 30, 2009, we did not repurchase any shares of Common Stock. During the six months ended June 30, 2008, we repurchased 12,655,582 shares of Common Stock for cash totaling $323.5 million. We also paid cash totaling $28.7 million in January 2008 to settle repurchases of Common Stock in December 2007. As of June 30, 2009, we were authorized to repurchase approximately 19.3 million additional shares.

Information Technology Hardware/Software Write-off

During the six months ended June 30, 2008, we reassessed our approach to communication technology needs at our properties, which resulted in the discontinuation of an infrastructure project and a $4.8 million write-off of related hardware and capitalized internal and consulting costs included in other assets. The write-off, which is net of estimated sales proceeds, is included in other expense, net. During the six months ended June 30, 2008, we additionally recorded a $1.0 million write off of certain software and hardware assets that are no longer consistent with our information technology strategy. This write-off is included in depreciation and amortization.

NOTE 5 —Commitments and Contingencies

Commitments

In connection with our redevelopment and capital improvement activities, we have commitments of approximately $19.5 million related to construction projects, most of which we expect to incur during the remainder of 2009. 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 $5.3 million in second mortgage loans on certain properties in West Harlem in New York City. In certain circumstances, we also could be required to acquire the properties for cash and/or assumption of first mortgage debt totaling approximately $149.0 million to $216.0 million, in addition to amounts funded and committed under the related loan agreement.

We have a $30.0 million obligation under a sale-leaseback arrangement which we account for as a financing in our consolidated balance sheets. Under the terms of the sale-leaseback arrangement, the other party to this arrangement has the right to require us to purchase its interests in the partnership that owns the properties under lease, thus effectively requiring us to repay the obligation. Such put option expires on December 3, 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.

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 FASB Interpretation No. 47, Conditional Asset Retirement Obligations. 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, 2009, 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 per Share

We calculate earnings per share based on the weighted average number of shares of Common Stock, common stock equivalents and dilutive convertible securities outstanding during the period. The following table illustrates the calculation of basic and diluted earnings per share for the three and six months ended June 30, 2009 and 2008 (in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Numerator:
Loss from continuing operations		$	(47,769	)		$	(20,684	)		$	(84,937	)		$	(54,674	)
Loss (income) from continuing operations attributable to noncontrolling interests			11,665				(7,358	)			23,854				(3,479	)
Income attributable to preferred stockholders			(11,477	)			(13,670	)			(24,643	)			(27,878	)
Income attributable to participating securities			—				(3,145	)			—				(2,497	)
Numerator for basic and diluted earnings per share:
Loss from continuing operations attributable to Aimco (net of income attributable to preferred stockholders and participating securities)		$	(47,581	)		$	(44,857	)		$	(85,726	)		$	(88,528	)
Income from discontinued operations		$	40,143			$	363,639			$	44,737			$	373,968
Income from discontinued operations attributable to noncontrolling interests			(22,483	)			(79,642	)			(26,633	)			(84,510	)
Income from discontinued operations attributable to Aimco		$	17,660			$	283,997			$	18,104			$	289,458
Net (loss) income		$	(7,626	)		$	342,955			$	(40,200	)		$	319,294
Income attributable to noncontrolling interests			(10,818	)			(87,000	)			(2,779	)			(87,989	)
Income attributable to preferred stockholders			(11,477	)			(13,670	)			(24,643	)			(27,878	)
Income attributable to participating securities			—				(3,145	)			—				(2,497	)
Numerator for basic and diluted earnings per share:
Net (loss) income attributable to Aimco common stockholders		$	(29,921	)		$	239,140			$	(67,622	)		$	200,930
Denominator:
Denominator for basic and diluted earnings per share — weighted average number of shares of Common Stock outstanding			115,510				123,484				115,304				125,723
Effect of dilutive securities:
Dilutive potential common shares			—				—				—				—
Denominator for diluted earnings per share			115,510				123,484				115,304				125,723
Earnings (loss) per common share:
Basic and diluted earnings (loss) per common share:
Loss from continuing operations attributable to Aimco (net of income attributable to preferred stockholders)		$	(0.41	)		$	(0.36	)		$	(0.74	)		$	(0.70	)
Income from discontinued operations attributable to Aimco			0.15				2.30				0.15				2.30
Net (loss) income attributable to Aimco common stockholders		$	(0.26	)		$	1.94			$	(0.59	)		$	1.60

As of June 30, 2009 and 2008, the common share equivalents that could potentially dilute basic earnings per share in future periods totaled 10.9 million and 10.6 million, respectively. These securities, representing stock options, have been excluded from the earnings per share computations for the three and six months ended June 30, 2009 and 2008, because their effect would have been anti-dilutive. Participating securities, representing unvested restricted stock and shares purchased pursuant to officer loans, receive dividends similar to shares of common stock and totaled 0.8 million and 1.3 million at June 30, 2009 and 2008, respectively. The effect of participating securities is reflected in basic and diluted earnings 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 5.9% to 9.6% per annum per unit, or equal to the dividends paid on Common Stock based on the conversion terms. As of June 30, 2009, a total of 3.2 million preferred OP Units were outstanding with redemption values of $86.4 million and were redeemable for approximately 9.8 million shares of Common Stock or cash at our option.

NOTE 7 — Recent Accounting Developments

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R), or SFAS 167, which is effective for fiscal years beginning after November 15, 2009 and introduces a more qualitative approach to evaluating VIEs for consolidation. SFAS 167 requires a company to perform an analysis to determine whether its variable interests gives 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, SFAS 167 requires a company to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed. SFAS 167 requires continuous reassessment of primary beneficiary status rather than periodic, event-driven assessments as previously required, and incorporates expanded disclosure requirements. We have not yet determined the effect that SFAS 167 will have on our consolidated financial statements.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162, or SFAS 168, which is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Upon the effective date of SFAS 168, the FASB Accounting Standards Codification, or the Codification, will become the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission, or SEC, under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. Following SFAS 168, the FASB will issue Accounting Standards Updates that serve to update the Codification. We do not anticipate that SFAS 168 will have a significant effect on our financial statements.

NOTE 8 — Business Segments

Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, or SFAS 131, requires that segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing such segments’ performance. Our chief operating decision maker, as defined by SFAS 131, uses various generally accepted industry financial measures to assess the performance of the business, including: Net Asset Value, or NAV, which is the estimated fair value of our assets, net of debt; Funds From Operations, or FFO; Adjusted Funds From Operations, or AFFO, which is FFO less spending for Capital Replacements; same store property operating results; net operating income; net operating income less spending for capital replacements, or Free Cash Flow; changes in NAV plus cash dividends, or Economic Income; 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.

We have two reportable segments: real estate and investment management.

Real Estate Segment

Our real estate segment owns and operates properties that generate rental and other property-related income through the leasing of apartment units to a diverse base of residents. Our real estate segment’s net operating income also includes income from property management services performed for unconsolidated partnerships and unrelated parties.

Investment Management Segment

Our investment management segment includes portfolio strategy, capital allocation, joint ventures, tax credit syndication, acquisitions, dispositions and other transaction activities. Within our owned portfolio, we refer to these activities as “Portfolio Management,” and their benefit is seen in property operating results and in investment gains. For affiliated partnerships, we refer to these activities as “Asset Management,” for which we are separately compensated through fees paid by third party investors. The expenses of this segment consist primarily of the costs of departments that perform these activities. These activities are conducted in part by our taxable subsidiaries, and the related net operating income may be subject to income taxes. Our investment management segment’s operating results also include gains on dispositions of non-depreciable assets, accretion of loan discounts resulting from transactional activities and certain other income in arriving at income (loss) from continuing operations for the segment.

The following tables present the revenues, net operating income (loss) and income (loss) from continuing operations of our real estate and investment management segments for the three and six months ended June 30, 2009 and 2008 (in thousands):

										Corporate
										Not Allocated
						Investment				to Segments
		Real Estate				Management				and Certain
		Segment				Segment				Eliminations				Total
Three Months Ended June 30, 2009:
Rental and other property revenues		$	320,852			$	—			$	—			$	320,852
Property management revenues, primarily from affiliates			1,340				—				—				1,340
Asset management and tax credit revenues			—				13,091				(485	)			12,606
Total revenues			322,192				13,091				(485	)			334,798
Property operating expenses			142,914				—				—				142,914
Property management expenses			472				—				—				472
Investment management expenses			—				4,716				—				4,716
Depreciation and amortization (1)			—				—				122,198				122,198
Provision for operating real estate impairment losses (1)			—				—				4,988				4,988
General and administrative expenses			—				—				17,849				17,849
Other expenses, net			—				—				4,398				4,398
Total operating expenses			143,386				4,716				149,433				297,535
Net operating income (loss)			178,806				8,375				(149,918	)			37,263
Other items included in continuing operations (2)			—				1,750				(86,782	)			(85,032	)
Income (loss) from continuing operations		$	178,806			$	10,125			$	(236,700	)		$	(47,769	)

						Investment				Corporate
		Real Estate				Management				Not Allocated
		Segment				Segment				to Segments				Total
Three Months Ended June 30, 2008:
Rental and other property revenues		$	316,970			$	—			$	—			$	316,970
Property management revenues, primarily from affiliates			1,415				—				—				1,415
Asset management and tax credit revenues			—				38,175				—				38,175
Total revenues			318,385				38,175				—				356,560
Property operating expenses			141,213				—				—				141,213
Property management expenses			1,254				—				—				1,254
Investment management expenses			—				5,807				—				5,807
Depreciation and amortization (1)			—				—				105,642				105,642
General and administrative expenses			—				—				27,004				27,004
Other expenses, net			—				—				10,933				10,933
Total operating expenses			142,467				5,807				143,579				291,853
Net operating income (loss)			175,918				32,368				(143,579	)			64,707
Other items included in continuing operations (2)			—				(3,278	)			(82,113	)			(85,391	)
Income (loss) from continuing operations		$	175,918			$	29,090			$	(225,692	)		$	(20,684	)

										Corporate
										Not Allocated
						Investment				to Segments
		Real Estate				Management				and Certain
		Segment				Segment				Eliminations				Total
Six Months Ended June 30, 2009:
Rental and other property revenues		$	643,010			$	—			$	—			$	643,010
Property management revenues, primarily from affiliates			2,983				—				—				2,983
Asset management and tax credit revenues			—				23,029				(885	)			22,144
Total revenues			645,993				23,029				(885	)			668,137
Property operating expenses			292,108				—				—				292,108
Property management expenses			1,905				—				—				1,905
Investment management expenses			—				8,506				—				8,506
Depreciation and amortization (1)			—				—				240,914				240,914
Provision for operating real estate impairment losses (1)			—				—				5,498				5,498
General and administrative expenses			—				—				37,922				37,922
Other expenses, net			—				—				6,463				6,463
Total operating expenses			294,013				8,506				290,797				593,316
Net operating income (loss)			351,980				14,523				(291,682	)			74,821
Other items included in continuing operations (2)			—				2,546				(162,304	)			(159,758	)
Income (loss) from continuing operations		$	351,980			$	17,069			$	(453,986	)		$	(84,937	)

						Investment				Corporate
		Real Estate				Management				Not Allocated
		Segment				Segment				to Segments				Total
Six Months Ended June 30, 2008:
Rental and other property revenues		$	633,727			$	—			$	—			$	633,727
Property management revenues, primarily from affiliates			3,519				—				—				3,519
Asset management and tax credit revenues			—				51,027				—				51,027
Total revenues			637,246				51,027				—				688,273
Property operating expenses			294,945				—				—				294,945
Property management expenses			2,589				—				—				2,589
Investment management expenses			—				10,194				—				10,194
Depreciation and amortization (1)			—				—				204,659				204,659
General and administrative expenses			—				—				48,370				48,370
Other expenses, net			—				—				18,117				18,117
Total operating expenses			297,534				10,194				271,146				578,874
Net operating income (loss)			339,712				40,833				(271,146	)			109,399
Other items included in continuing operations (2)			—				(2,486	)			(161,587	)			(164,073	)
Income (loss) from continuing operations		$	339,712			$	38,347			$	(432,733	)		$	(54,674	)

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

		June 30,				December 31,
		2009				2008
Total assets for reportable segments(1)		$	8,562,584			$	9,041,795
Corporate and other assets			278,837				373,071
Total consolidated assets		$	8,841,421			$	9,414,866

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, including, without limitation, statements regarding the effect of acquisitions and redevelopments, our future financial performance, including our ability to maintain current or meet projected occupancy, rent levels and same store results, and the effect of government regulations. 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 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; national and local economic conditions; energy costs; the terms of governmental regulations that affect us and interpretations of those regulations; the competitive environment in which we operate; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for tenants in such markets; insurance risk; acquisition and development risks, including failure of such acquisitions to perform in accordance with projections; the timing of acquisitions and dispositions; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; 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, 2008, 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.

Executive Overview

We are a self-administered and self-managed real estate investment trust, or REIT, engaged in the acquisition, ownership, management and redevelopment of apartment properties. Our property operations are characterized by diversification of product, location and price point. As of June 30, 2009, we owned or managed 950 apartment properties containing 154,511 units located in 44 states, the District of Columbia and Puerto Rico. Our primary sources of income and cash are rents associated with apartment leases.

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

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

During 2009, we are focused on serving customers effectively and efficiently; owning a continually improving portfolio diversified by geography and by activity; reducing leverage and financial risk; and simplifying the business model.

During the three and six months ended June 30, 2009 and 2008, as compared to the three and six months ended June 30, 2008, property operating income increased by 1.6% and 3.6%, respectively. Declines in conventional same store property operating income of 3.9% and 2.2% for the three and six months ended June 30, 2009, were more than offset by increases in property operating income related to our conventional redevelopment properties and affordable properties. In addition to focusing on property operating expense control, we have also been successful at reducing corporate general and administrative expenses. During the three and six months ended June 30, 2009, general and administrative expenses have been reduced by 34% and 22%, respectively, from the 2008 comparative periods.

Due to turmoil in capital markets, Aimco has focused on reducing refunding risk by accelerating refinancing of property loans maturing prior to 2012. At the beginning of the second quarter 2009, property debt maturing during 2009 through 2011 was $621.5 million. During the second quarter, through refinancing, repayment and property sales, Aimco reduced these maturities by $312.5 million. As of June 30, 2009, the balance of property debt maturing through 2011 totaled $309.0 million and was related to 20 loans. Of these loans, refunding risk is expected to be eliminated by the end of the third quarter 2009 with respect to all but five loans. The five remaining property loans total $234.5 million and are expected to be refinanced at maturity in 2011.

Our portfolio management strategy includes property dispositions and acquisitions aimed at concentrating our portfolio in our target markets, which are the largest 20 U.S. markets as measured by the total market value of institutional-grade apartment properties in a particular market (total market capitalization). We continue to increase our allocation of capital to well located properties within our target markets and are currently marketing for sale approximately $2.0 billion of conventional and affordable assets located primarily outside these target markets. During the six months ended June 30, 2009, we sold 30 properties (including one unconsolidated property), primarily outside these target markets, for gross proceeds of $374.4 million; proceeds net of transaction related costs and debt repayments were $125.2 million.

We expect the financial and economic conditions for the remainder of 2009 to continue to be very difficult and we will continue to evaluate our activities and organizational structure, and intend to adjust as necessary.

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

Results of Operations

Overview

Three and six months ended June 30, 2009 compared to June 30, 2008

We reported net loss attributable to Aimco of $18.4 million and net loss attributable to Aimco common stockholders of $29.9 million for the three months ended June 30, 2009, compared to net income attributable to Aimco of $256.0 million and net income attributable to Aimco common stockholders of $239.1 million for the three months ended June 30, 2008, decreases of $274.4 million and $269.0 million, respectively.

For the six months ended June 30, 2009, we reported net loss attributable to Aimco of $43.0 million and net loss attributable to Aimco common stockholders of $67.6 million, compared to net income attributable to Aimco of $231.3 million and net income attributable to Aimco common stockholders of $200.9 million for the six months ended June 30, 2008, decreases of $274.3 million and $268.5 million, respectively.

These decreases were principally due to the following items, all of which are discussed in further detail below:

•

a decrease in income from discontinued operations, primarily related to the volume of sales in 2008 and the related number of properties included in discontinued operations in 2008 as compared to 2009;

•

a decrease in asset management and tax credit revenues, primarily due to a reduction in promote income, which is income earned in connection with the disposition of properties owned by our consolidated joint ventures; and

•

an increase in depreciation and amortization expense, primarily related to completed redevelopments and capital expenditures.

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

•

a decrease in earnings allocable to noncontrolling interests, primarily due to a decrease in gains on sales in 2009 as compared to 2008;

•

a decrease in general and administrative expenses, primarily related to reductions in personnel and related expenses from our organizational restructuring initiated during the fourth quarter 2008; and

•

an increase in net operating income associated with property operations, primarily related to affordable properties and completed redevelopments.