##### Table of Contents



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 September 30, 2006
 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 0-24497
 AIMCO Properties, L.P.
  Delaware
    
    84-1275621(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)4582 South Ulster Street Parkway, Suite 1100Denver, Colorado
    
    80237(Address of principal executive offices)
    
    (Zip Code)
 (303) 757-8101
 Not Applicable
 þ o
 o þ o
 o þ




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##### Table of Contents



AIMCO PROPERTIES, L.P.
 TABLE OF CONTENTS
 FORM 10-Q
 PagePART I. FINANCIAL INFORMATIONITEM 1. Financial StatementsConsolidated Balance Sheets as of September 30, 2006 (Unaudited) and December 31, 2005
    
    
    2Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2006 and 2005 (Unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005 (Unaudited)
    
    
    4Notes to Consolidated Financial Statements (Unaudited)
    
    
    5ITEM 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20ITEM 3.Quantitative and Qualitative Disclosures about Market Risk
    
    
    35ITEM 4.Controls and Procedures
    
    
    35PART II. OTHER INFORMATIONITEM 1.Legal Proceedings
    
    
    36ITEM 1A.Risk Factors
    
    
    36ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36ITEM
6.Exhibits
    
    
    37Signatures
    
    
    38Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906Agreement Re: Disclosure of Long-Term Debt Instruments
 1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED BALANCE SHEETS
 (In Thousands, Except Unit Data)
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSReal estate:Land
    
    $
    2,340,744
    
    
    $
    2,233,630Buildings and improvements
    
    
    9,690,408
    
    
    
    8,255,582Total real estate
    
    
    12,031,152
    
    
    
    10,489,212Less accumulated depreciation
    
    
    (2,894,315
    )
    
    
    (2,097,461
    )Net real estate
    
    
    9,136,837
    
    
    
    8,391,751Cash and cash equivalents
    
    
    182,283
    
    
    
    161,730Restricted cash
    
    
    348,320
    
    
    
    283,955Accounts receivable
    
    
    56,569
    
    
    
    59,888Accounts receivable from affiliates
    
    
    24,534
    
    
    
    43,070Deferred financing costs
    
    
    75,173
    
    
    
    64,873Notes receivable from unconsolidated real estate partnerships
    
    
    46,937
    
    
    
    177,200Notes receivable from non-affiliates
    
    
    52,124
    
    
    
    23,760Notes receivable from Aimco
    
    
    13,836
    
    
    
    13,299Investment in unconsolidated real estate partnerships
    
    
    53,540
    
    
    
    166,687Other assets
    
    
    233,185
    
    
    
    216,789Deferred income tax assets, net
    
    
    
    
    
    
    9,835Assets held for sale
    
    
    11,163
    
    
    
    418,921Total assets
    
    $
    10,234,501
    
    
    $
    10,031,758LIABILITIES AND PARTNERS CAPITALProperty tax-exempt bond financing
    
    $
    1,036,582
    
    
    $
    1,035,584Property loans payable
    
    
    5,197,393
    
    
    
    4,404,699Term loans
    
    
    400,000
    
    
    
    400,000Credit facility
    
    
    155,000
    
    
    
    217,000Total indebtedness
    
    
    6,788,975
    
    
    
    6,057,283Accounts payable
    
    
    39,280
    
    
    
    34,381Accrued liabilities and other
    
    
    406,306
    
    
    
    423,633Deferred income
    
    
    158,156
    
    
    
    46,837Security deposits
    
    
    44,623
    
    
    
    37,577Deferred income tax liabilities, net
    
    
    3,934
    
    
    
    Liabilities related to assets held for sale
    
    
    958
    
    
    
    267,937Total liabilities
    
    
    7,442,232
    
    
    
    6,867,648Minority interest in consolidated real estate partnerships
    
    
    216,149
    
    
    
    218,708Partners capital:Preferred units
    
    
    919,299
    
    
    
    1,183,620General Partner and Special Limited Partner
    
    
    1,258,239
    
    
    
    1,570,046Limited Partners
    
    
    425,513
    
    
    
    301,452High Performance Units
    
    
    (19,627
    )
    
    
    (16,307
    )Investment in Aimco Class A Common Stock
    
    
    (7,304
    )
    
    
    (7,997
    )Notes receivable from Aimco
    
    
    
    
    
    
    (85,412
    )Total partners capital
    
    
    2,576,120
    
    
    
    2,945,402Total liabilities and partners capital
    
    $
    10,234,501
    
    
    $
    10,031,758
  2




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AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (In Thousands, Except Per Unit Data)
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005REVENUES:Rental and other property revenues
    
    $
    422,602
    
    
    $
    354,262
    
    
    $
    1,245,679
    
    
    $
    1,025,891Property management revenues, primarily from affiliates
    
    
    2,599
    
    
    
    6,094
    
    
    
    9,221
    
    
    
    18,684Activity fees and asset management revenues, primarily from affiliates
    
    
    10,470
    
    
    
    8,018
    
    
    
    32,143
    
    
    
    22,715Total revenues
    
    
    435,671
    
    
    
    368,374
    
    
    
    1,287,043
    
    
    
    1,067,290EXPENSES:Property operating expenses
    
    
    194,749
    
    
    
    169,181
    
    
    
    571,895
    
    
    
    480,704Property management expenses
    
    
    984
    
    
    
    1,928
    
    
    
    3,627
    
    
    
    5,674Activity and asset management expenses
    
    
    1,073
    
    
    
    2,778
    
    
    
    6,744
    
    
    
    7,697Depreciation and amortization
    
    
    126,112
    
    
    
    103,717
    
    
    
    352,624
    
    
    
    287,648General and administrative expenses
    
    
    25,262
    
    
    
    23,095
    
    
    
    72,769
    
    
    
    65,663Other expenses (income), net
    
    
    (30
    )
    
    
    330
    
    
    
    9,843
    
    
    
    5,717Total expenses
    
    
    348,150
    
    
    
    301,029
    
    
    
    1,017,502
    
    
    
    853,103Operating income
    
    
    87,521
    
    
    
    67,345
    
    
    
    269,541
    
    
    
    214,187Interest income
    
    
    7,760
    
    
    
    8,607
    
    
    
    22,987
    
    
    
    25,179Recovery of (provision for) losses on notes receivable
    
    
    46
    
    
    
    (206
    )
    
    
    (718
    )
    
    
    1,352Interest expense
    
    
    (105,889
    )
    
    
    (90,700
    )
    
    
    (309,396
    )
    
    
    (261,318
    )Deficit distributions to minority partners, net
    
    
    (14,072
    )
    
    
    (2,849
    )
    
    
    (20,129
    )
    
    
    (5,719
    )Equity in losses of unconsolidated real estate partnerships
    
    
    (169
    )
    
    
    (552
    )
    
    
    (2,606
    )
    
    
    (1,871
    )Recovery of (impairment losses) related to real estate partnerships
    
    
    (158
    )
    
    
    (1,178
    )
    
    
    813
    
    
    
    (1,709
    )Gain on dispositions of real estate related to unconsolidated entities
and other
    
    
    7,641
    
    
    
    8,387
    
    
    
    21,397
    
    
    
    13,670Loss before minority interest and discontinued operations
    
    
    (17,320
    )
    
    
    (11,146
    )
    
    
    (18,111
    )
    
    
    (16,229
    )Minority interest in consolidated real estate partnerships
    
    
    (23,622
    )
    
    
    3,839
    
    
    
    (18,098
    )
    
    
    7,379Loss from continuing operations
    
    
    (40,942
    )
    
    
    (7,307
    )
    
    
    (36,209
    )
    
    
    (8,850
    )Income from discontinued operations, net
    
    
    12,866
    
    
    
    37,343
    
    
    
    141,771
    
    
    
    72,238Net income (loss)
    
    
    (28,076
    )
    
    
    30,036
    
    
    
    105,562
    
    
    
    63,388Net income attributable to preferred unitholders
    
    
    23,441
    
    
    
    24,655
    
    
    
    72,354
    
    
    
    74,356Net income (loss) attributable to common unitholders
    
    $
    (51,517
    )
    
    $
    5,381
    
    
    $
    33,208
    
    
    $
    (10,968
    )Earnings (loss) per common unit  basic:Loss from continuing operations (net of preferred distributions)
    
    $
    (0.61
    )
    
    $
    (0.31
    )
    
    $
    (1.02
    )
    
    $
    (0.80
    )Income from discontinued operations
    
    
    0.13
    
    
    
    0.36
    
    
    
    1.33
    
    
    
    0.70Net income (loss) attributable to common unitholders
    
    $
    (0.48
    )
    
    $
    0.05
    
    
    $
    0.31
    
    
    $
    (0.10
    )Earnings (loss) per common unit  diluted:Loss from continuing operations (net of preferred distributions)
    
    $
    (0.61
    )
    
    $
    (0.31
    )
    
    $
    (1.02
    )
    
    $
    (0.80
    )Income from discontinued operations
    
    
    0.13
    
    
    
    0.36
    
    
    
    1.33
    
    
    
    0.70Net income (loss) attributable to common unitholders
    
    $
    (0.48
    )
    
    $
    0.05
    
    
    $
    0.31
    
    
    $
    (0.10
    )Weighted average common units outstanding
    
    
    106,260
    
    
    
    104,585
    
    
    
    106,032
    
    
    
    104,469Weighted average common units and equivalents outstanding
    
    
    106,260
    
    
    
    104,585
    
    
    
    106,032
    
    
    
    104,469Distributions declared per common unit
    
    $
    0.60
    
    
    $
    0.60
    
    
    $
    1.20
    
    
    $
    1.80
  3




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AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In Thousands, Unaudited)
 Nine MonthsEnded September 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    105,562
    
    
    $
    63,388Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    352,624
    
    
    
    287,648Discontinued operations
    
    
    (167,068
    )
    
    
    (77,558
    )Other adjustments
    
    
    50,847
    
    
    
    12,179Net changes in operating assets and operating liabilities
    
    
    52,056
    
    
    
    (7,979
    )Net cash provided by operating activities
    
    
    394,021
    
    
    
    277,678CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of real estate
    
    
    (63,240
    )
    
    
    (158,584
    )Capital expenditures
    
    
    (366,887
    )
    
    
    (324,046
    )Proceeds from dispositions of real estate
    
    
    639,924
    
    
    
    390,808Cash from newly consolidated properties
    
    
    22,432
    
    
    
    2,211Purchases of non-real estate related corporate assets
    
    
    (5,738
    )
    
    
    (11,090
    )Purchases of general and limited partnership interests and other assets
    
    
    (12,516
    )
    
    
    (85,267
    )Originations of notes receivable from unconsolidated real estate partnerships
    
    
    (8,062
    )
    
    
    (28,042
    )Proceeds from repayment of notes receivable
    
    
    6,074
    
    
    
    16,402Distributions received from investments in unconsolidated real estate partnerships
    
    
    11,764
    
    
    
    40,824Other investing activities
    
    
    (13,419
    )
    
    
    (13,442
    )Net cash provided by (used in) investing activities
    
    
    210,332
    
    
    
    (170,226
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from property loans
    
    
    882,854
    
    
    
    550,243Principal repayments on property loans
    
    
    (798,008
    )
    
    
    (452,310
    )Principal repayments on tax-exempt bond financing
    
    
    (33,541
    )
    
    
    (40,431
    )Net borrowings (repayments) on term loans and revolving credit facility
    
    
    (62,000
    )
    
    
    263,300Redemption of mandatorily redeemable preferred securities
    
    
    
    
    
    
    (15,019
    )Proceeds from issuance of preferred units, net
    
    
    12,105
    
    
    
    Redemption of preferred units
    
    
    (286,750
    )
    
    
    (31,250
    )Repurchases of common units
    
    
    (100,000
    )
    
    
    Proceeds from Class A Common Stock option exercises
    
    
    62,288
    
    
    
    898Originations of notes receivable from Aimco
    
    
    
    
    
    
    (85,412
    )Repayment of notes receivable from Aimco
    
    
    85,412
    
    
    
    Principal repayments received on notes due on common unit purchases
    
    
    21,529
    
    
    
    11,245Contributions from minority interest
    
    
    3,075
    
    
    
    25,453Payment of distributions to minority interest
    
    
    (82,670
    )
    
    
    (26,266
    )Payment of distributions to General Partner and Special Limited Partner
    
    
    (174,225
    )
    
    
    (170,660
    )Payment of distributions to Limited Partners
    
    
    (15,728
    )
    
    
    (16,278
    )Payment of distributions to holders of High Performance Units
    
    
    (4,293
    )
    
    
    (4,283
    )Payment of distributions to preferred unitholders
    
    
    (65,685
    )
    
    
    (70,578
    )Other financing activities
    
    
    (28,163
    )
    
    
    (11,811
    )Net cash used in financing activities
    
    
    (583,800
    )
    
    
    (73,159
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    20,553
    
    
    
    34,293CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    161,730
    
    
    
    105,343CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    182,283
    
    
    $
    139,636
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AIMCO PROPERTIES, L.P.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 September 30, 2006
 (Unaudited)
 Note 1  Organization
     
    
    owned an equity interest in and consolidated 167,305 units in 721 properties (which we
refer to as consolidated), of which 166,802 units were also managed by us;
    
    owned an equity interest in and did not consolidate 14,644 units in 109 properties
(which we refer to as unconsolidated), of which 8,799 units were also managed by us; and
    
    provided services or managed, for third-party owners, 42,888 units in 460 properties,
primarily pursuant to long-term agreements (including 39,278 units in 418 properties for
which we provide asset management services only, and not also property management
services), although 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.
  5




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Note 2  Basis of Presentation
   Principles of Consolidation
  Consolidation of Variable Interest Entities
 Adoption of EITF 04-5
 Determining Whether a General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights
 6




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Increase(Decrease)Real estate, net
    
    $
    665,793Accounts and notes receivable from affiliates
    
    
    (150,057
    )Investment in unconsolidated real estate partnerships
    
    
    (64,419
    )All other assets
    
    
    122,545Total assets
    
    $
    573,862Total indebtedness
    
    $
    521,711All other liabilities
    
    
    81,950Minority interest in consolidated real estate partnerships
    
    
    53,258Partners capital
    
    
    (83,057
    )Total liabilities and partners capital
    
    $
    573,862
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2006
    
    
    2006Revenues
    
    $
    40,317
    
    
    $
    120,658Operating expenses
    
    
    28,512
    
    
    
    86,000Operating income
    
    
    11,805
    
    
    
    34,658Interest expense
    
    
    (8,505
    )
    
    
    (25,096
    )Interest income
    
    
    973
    
    
    
    2,703Income (loss) before minority interest
    
    $
    4,273
    
    
    $
    12,265
  7




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Stock-Based Compensation
   Accounting for Stock-Based Compensation, Accounting for Stock-Based CompensationTransition and
Disclosurean amendment of FASB Statement No. 123, Accounting for Stock Issued to Employees
 Share-Based Payment
   8




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Nine Months Ended September 30,2006
    
    
    2005Weighted average fair value of options granted during the period
    
    $
    5.23
    
    
    $
    3.57Assumptions:Risk-free interest rate
    
    
    4.58
    %
    
    
    4.10
    %Expected dividend yield
    
    
    5.58
    %
    
    
    6.31
    %Expected volatility
    
    
    20.15
    %
    
    
    19.00
    %Weighted average expected life of options
    
    6.5 years
    
    5.0 years
  Weighted
    
    
    Weighted
    
    
    AggregateAverage
    
    
    Average
    
    
    IntrinsicOptions
    
    
    Exercise
    
    
    Contractual
    
    
    Value(thousands)
    
    
    Price
    
    
    Term
    
    
    (thousands)Outstanding at January 1, 2006
    
    
    11,054
    
    
    $
    38.78Granted
    
    
    692
    
    
    
    43.15Exercised
    
    
    (1,617
    )
    
    
    38.41Forfeited
    
    
    (316
    )
    
    
    39.38Outstanding at September 30, 2006
    
    
    9,814
    
    
    $
    39.13
    
    
    4.4 years
    
    $
    149,853Exercisable at September 30, 2006
    
    
    7,712
    
    
    $
    39.24
    
    
    3.5 years
    
    $
    117,002
   Nine Months EndedSeptember 30, 2006WeightedAverageShares
    
    
    Grant-Date(thousands)
    
    
    Fair ValueUnvested at January 1, 2006
    
    
    882
    
    
    $
    35.08Granted
    
    
    565
    
    
    
    43.92Vested
    
    
    (223
    )
    
    
    35.11Forfeited
    
    
    (158
    )
    
    
    35.32Unvested at September 30, 2006
    
    
    1,066
    
    
    $
    39.73
  9




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Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2005
    
    
    2005Net income (loss) attributable to common unitholders, as reported
    
    $
    5,381
    
    
    $
    (10,968
    )Add stock-based employee compensation expense included in
reported net income:Restricted stock awards
    
    
    2,157
    
    
    
    6,239Stock options
    
    
    466
    
    
    
    1,389Deduct total stock-based employee compensation expense
determined under fair value based method for all awards:Restricted stock awards
    
    
    (2,157
    )
    
    
    (6,239
    )Stock options
    
    
    (877
    )
    
    
    (2,631
    )Pro forma net income (loss) attributable to common unitholders
    
    $
    4,970
    
    
    $
    (12,210
    )Basic earnings (loss) per common unit:Reported
    
    $
    0.05
    
    
    $
    (0.10
    )Pro forma
    
    $
    0.05
    
    
    $
    (0.12
    )Diluted earnings (loss) per common unit:Reported
    
    $
    0.05
    
    
    $
    (0.10
    )Pro forma
    
    $
    0.05
    
    
    $
    (0.12
    )
 Tax Credit Arrangements
   10




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Increase (Decrease) in Net IncomeThree Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2006
    
    
    2006Revenues
    
    $
    (580
    )
    
    $
    (1,542
    )Operating expenses
    
    
    4,184
    
    
    
    3,054Minority interest in consolidated real estate partnerships
    
    
    (19,554
    )
    
    
    (9,030
    )Net decrease in net income
    
    $
    (15,950
    )
    
    $
    (7,518
    )
 Use of Estimates
   Accounting for the Impairment or Disposal of Long-Lived
Assets,
 11




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Note 3  Commitments and Contingencies
 Commitments
   Tax Credit Arrangements
  Legal Matters
      Conditional
Asset Retirement Obligations
 12




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13




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Note 4  Partners Capital
 Preferred OP Units
       Common OP Units
   14




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Stock-Based
Compensation
  High Performance Units
    Note 5  Discontinued Operations and Assets Held for Sale
  15




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Rental and other property revenues
    
    $
    2,876
    
    
    $
    42,620
    
    
    $
    33,800
    
    
    $
    141,287Property operating expense
    
    
    (1,881
    )
    
    
    (23,274
    )
    
    
    (18,438
    )
    
    
    (73,776
    )Depreciation and amortization
    
    
    (549
    )
    
    
    (9,284
    )
    
    
    (8,088
    )
    
    
    (37,934
    )Other (expenses) income, net
    
    
    60
    
    
    
    (495
    )
    
    
    (3,307
    )
    
    
    (1,587
    )Operating income
    
    
    506
    
    
    
    9,567
    
    
    
    3,967
    
    
    
    27,990Interest income
    
    
    57
    
    
    
    128
    
    
    
    335
    
    
    
    426Interest expense
    
    
    (646
    )
    
    
    (8,838
    )
    
    
    (7,475
    )
    
    
    (30,887
    )Minority interest in consolidated real estate
partnerships
    
    
    1,189
    
    
    
    23
    
    
    
    2,454
    
    
    
    1,733Income (loss) before gain on dispositions of
real state, impairment losses, deficit
distributions to minority partners and income tax
    
    
    1,106
    
    
    
    880
    
    
    
    (719
    )
    
    
    (738
    )Gain on dispositions of real estate, net of
minority partners interest
    
    
    11,647
    
    
    
    43,758
    
    
    
    154,180
    
    
    
    80,316Recovery of impairment losses (impairment losses)
on real estate assets sold or held for sale
    
    
    131
    
    
    
    (6,208
    )
    
    
    123
    
    
    
    (8,395
    )Recovery of deficit distributions to minority
partners
    
    
    2,193
    
    
    
    543
    
    
    
    18,384
    
    
    
    3,904Income tax arising from dispositions
    
    
    (2,211
    )
    
    
    (1,630
    )
    
    
    (30,197
    )
    
    
    (2,849
    )Income from discontinued operations
    
    $
    12,866
    
    
    $
    37,343
    
    
    $
    141,771
    
    
    $
    72,238
   16




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##### Table of Contents



Note 6  Earnings per Unit
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Loss from continuing operations
    
    $
    (40,942
    )
    
    $
    (7,307
    )
    
    $
    (36,209
    )
    
    $
    (8,850
    )Less net income attributable to preferred unitholders
    
    
    (23,441
    )
    
    
    (24,665
    )
    
    
    (72,354
    )
    
    
    (74,356
    )Numerator for basic and diluted earnings per unit
 Loss from continuing operations
    
    $
    (64,383
    )
    
    $
    (31,972
    )
    
    $
    (108,563
    )
    
    $
    (83,206
    )Income from discontinued operations
    
    $
    12,866
    
    
    $
    37,343
    
    
    $
    141,771
    
    
    $
    72,238Net income (loss)
    
    $
    (28,076
    )
    
    $
    30,036
    
    
    $
    105,562
    
    
    $
    63,388Less net income attributable to preferred unitholders
    
    
    (23,441
    )
    
    
    (24,665
    )
    
    
    (72,354
    )
    
    
    (74,356
    )Numerator for basic and diluted earnings per unit
 Net income (loss) attributable to common
unitholders
    
    $
    (51,517
    )
    
    $
    5,381
    
    
    $
    33,208
    
    
    $
    (10,968
    )Denominator:Denominator for basic earnings per unit  weighted
average number of units of common units outstanding:Common OP Units
    
    
    103,881
    
    
    
    102,206
    
    
    
    103,653
    
    
    
    102,090Class I HPUs
    
    
    2,379
    
    
    
    2,379
    
    
    
    2,379
    
    
    
    2,379Total common units
    
    
    106,260
    
    
    
    104,585
    
    
    
    106,032
    
    
    
    104,469Effect of dilutive securities:Dilutive potential common units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings per unit
    
    
    106,260
    
    
    
    104,585
    
    
    
    106,032
    
    
    
    104,469Earnings (loss) per common unit:Basic earnings (loss) per common unit:Loss from continuing operations (net of preferred
distibutions)
    
    $
    (0.61
    )
    
    $
    (0.31
    )
    
    $
    (1.02
    )
    
    $
    (0.80
    )Income from discontinued operations
    
    
    0.13
    
    
    
    0.36
    
    
    
    1.33
    
    
    
    0.70Net income (loss) attributable to common unitholders
    
    $
    (0.48
    )
    
    $
    0.05
    
    
    $
    0.31
    
    
    $
    (0.10
    )~~~~~      ~~~~~~~Diluted earnings (loss) per common unit:Loss from continuing operations (net of preferred
distributions)
    
    $
    (0.61
    )
    
    $
    (0.31
    )
    
    $
    (1.02
    )
    
    $
    (0.80
    )Income from discontinued operations
    
    
    0.13
    
    
    
    0.36
    
    
    
    1.33
    
    
    
    0.70Net income (loss) attributable to common unitholders
    
    $
    (0.48
    )
    
    $
    0.05
    
    
    $
    0.31
    
    
    $
    (0.10
    )
  17




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##### Table of Contents



Note 7  Business Segments
  Disclosures about Segments of an
Enterprise and Related Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Real estate segment
    
    $
    422,602
    
    
    $
    354,262
    
    
    $
    1,245,679
    
    
    $
    1,025,891Investment management segment:Gross revenues
    
    
    34,819
    
    
    
    34,255
    
    
    
    111,200
    
    
    
    101,312Elimination of intersegment revenues
    
    
    (21,750
    )
    
    
    (20,143
    )
    
    
    (69,836
    )
    
    
    (59,913
    )Net revenues after elimination
    
    
    13,069
    
    
    
    14,112
    
    
    
    41,364
    
    
    
    41,399Total revenues of reportable segments
    
    $
    435,671
    
    
    $
    368,374
    
    
    $
    1,287,043
    
    
    $
    1,067,290Net operating income:Real estate segment
    
    $
    227,853
    
    
    $
    185,081
    
    
    $
    673,784
    
    
    $
    545,187Investment management segment
    
    
    11,012
    
    
    
    9,406
    
    
    
    30,993
    
    
    
    28,028Total net operating income of
reportable segments
    
    
    238,865
    
    
    
    194,487
    
    
    
    704,777
    
    
    
    573,215Reconciliation of net operating income
of reportable segments to operating
income:Depreciation and amortization
    
    
    (126,112
    )
    
    
    (103,717
    )
    
    
    (352,624
    )
    
    
    (287,648
    )General and administrative expenses
    
    
    (25,262
    )
    
    
    (23,095
    )
    
    
    (72,769
    )
    
    
    (65,663
    )Other (expenses) income, net
    
    
    30
    
    
    
    (330
    )
    
    
    (9,843
    )
    
    
    (5,717
    )Operating income
    
    $
    87,521
    
    
    $
    67,345
    
    
    $
    269,541
    
    
    $
    214,187
 September 30,ASSETS:
    
    2006
    
    
    December 31, 2005Total assets for reportable segments (1)
    
    $
    9,981,572
    
    
    $
    9,659,327Corporate and other assets
    
    
    252,929
    
    
    
    372,431Total consolidated assets
    
    $
    10,234,501
    
    
    $
    10,031,758
 
 (1)
    
    Total assets for reportable segments include assets associated with both the real
estate and investment management business segments. 18




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##### Table of Contents



Note 8
 Recent Accounting Developments
  Accounting for Uncertainty in Income
Taxes
 19




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##### Table of Contents



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, our future financial performance and the effect of government
regulations. Actual results may differ materially from those described in the forward-looking
statements and will be affected by a variety of risks and factors that are beyond our control
including, without limitation: natural disasters such as hurricanes; national and local economic
conditions; the general level of interest rates; energy costs; the terms of governmental
regulations that affect us and interpretations of those regulations; the competitive environment in
which we operate; financing risks, including the risk that our cash flows from operations may be
insufficient to meet required payments of principal and interest; real estate risks, including
variations of real estate values and the general economic climate in local markets and competition
for tenants in such markets; acquisition and development risks, including failure of such
acquisitions to perform in accordance with projections; the timing of acquisitions and
dispositions; 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, Aimcos 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 risk factors described in our Annual Report on Form 10-K for the year ended December 31,
2005, 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 the Partnership) and the Partnerships consolidated corporate subsidiaries and
consolidated real estate partnerships, collectively.
 Executive Overview
      20




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##### Table of Contents



Results of Operations
 Overview
 Three months ended September 30, 2006 compared to three months ended September 30, 2005
  
    
    a decrease in income from discontinued operations, primarily related to lower net
gains on sales of real estate;
    
    an increase in interest expense, reflecting higher variable interest rates and
interest incurred by newly consolidated properties;
    
    an increase in depreciation expense, which relates primarily to newly consolidated
properties;
    
    a decrease in losses absorbed by minority interests, reflecting cumulative
adjustments to our ownership of certain tax credit partnerships and the effect of newly
consolidated partnerships; and
    
    an increase in deficit distributions to minority partners, which resulted primarily
from distributions of mortgage loan refinancing proceeds.
  Nine months ended September 30, 2006 compared to nine months ended September 30, 2005
  
    
    an increase in net operating income from property operations, which is primarily
attributable to operations of newly consolidated properties and improved operating
results of same store properties; and
    
    an increase in income from discontinued operations, primarily related to larger net
gains on sales of real estate.
   21




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##### Table of Contents



Rental Property Operations
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Rental and other property revenues
    
    $
    422,602
    
    
    $
    354,262
    
    
    $
    1,245,679
    
    
    $
    1,025,891Property operating expenses
    
    
    194,749
    
    
    
    169,181
    
    
    
    571,895
    
    
    
    480,704Net operating income
    
    $
    227,853
    
    
    $
    185,081
    
    
    $
    673,784
    
    
    $
    545,187
    22




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##### Table of Contents



Conventional Consolidated Same Store Property Operating Results
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Consolidated same store revenues
    
    $
    294,177
    
    
    $
    280,791
    
    
    $
    865,955
    
    
    $
    806,148Consolidated same store property operating
expenses
    
    
    123,317
    
    
    
    124,394
    
    
    
    365,548
    
    
    
    352,095Consolidated same store net operating income
    
    
    170,860
    
    
    
    156,397
    
    
    
    500,407
    
    
    
    454,053Adjustments to reconcile same store net
operating income to real estate segment net
operating income (1)
    
    
    56,993
    
    
    
    28,684
    
    
    
    173,377
    
    
    
    91,134Real estate segment net operating income
    
    $
    227,853
    
    
    $
    185,081
    
    
    $
    673,784
    
    
    $
    545,187Consolidated Same Store StatisticsProperties
    
    
    398
    
    
    
    398
    
    
    
    395
    
    
    
    395Apartment units
    
    
    117,368
    
    
    
    117,368
    
    
    
    116,869
    
    
    
    116,869Average physical occupancy
    
    
    94.2
    %
    
    
    93.2
    %
    
    
    94.3
    %
    
    
    92.5
    %Average rent/unit/month
    
    $
    817
    
    
    $
    785
    
    
    $
    802
    
    
    $
    775
 
 (1)
    
    Reflects property revenues and property operating expenses related to consolidated
properties other than same store properties (e.g., affordable, acquisition and
redevelopment properties) and casualty gains and losses.   Property Management
  23




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Property management revenues, primarily from affiliates
    
    $
    2,599
    
    
    $
    6,094
    
    
    $
    9,221
    
    
    $
    18,684Property management expenses
    
    
    984
    
    
    
    1,928
    
    
    
    3,627
    
    
    
    5,674Net operating income from property management
    
    $
    1,615
    
    
    $
    4,166
    
    
    $
    5,594
    
    
    $
    13,010
  Activity Fees and Asset Management
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Activity fees and asset management
revenues, primarily from affiliates
    
    $
    10,470
    
    
    $
    8,018
    
    
    $
    32,143
    
    
    $
    22,715Activity and asset management expenses
    
    
    1,073
    
    
    
    2,778
    
    
    
    6,744
    
    
    
    7,697Net operating income from activity
fees and asset management
    
    $
    9,397
    
    
    $
    5,240
    
    
    $
    25,399
    
    
    $
    15,018
   24




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##### Table of Contents



Depreciation and Amortization
   General and Administrative Expenses
   Other Expenses (Income), Net
    Interest Income
   25




---



##### Table of Contents



Preferred OP Units
 Interest Expense
   Gain on Dispositions of Real Estate Related to Unconsolidated Entities and Other
   Minority Interest in Consolidated Real Estate Partnerships
   26




---



##### Table of Contents



Income from Discontinued Operations, Net
      27




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##### Table of Contents



Critical Accounting Policies and Estimates
  Impairment of Long-Lived Assets
   
    
    the general economic climate;
    
    competition from other apartment communities and other housing options;
    
    local conditions, such as loss of jobs or an increase in the supply of apartments, that
might adversely affect apartment occupancy or rental rates;
    
    changes in governmental regulations and the related cost of compliance;
    
    increases in operating costs (including real estate taxes) due to inflation and other
factors, which may not be offset by increased rents;
    
    changes in tax laws and housing laws, including the enactment of rent control laws or
other laws regulating multifamily housing;
    
    changes in market capitalization rates; and
    
    the relative illiquidity of such investments.
  Notes Receivable and Interest Income Recognition
    28




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Allowance for Losses on Notes Receivable
   Capitalized Costs
   29




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Funds From Operations
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss) attributable to common unitholders (1)
    
    $
    (51,517
    )
    
    $
    5,381
    
    
    $
    33,208
    
    
    $
    (10,968
    )Adjustments:Depreciation and amortization (2)
    
    
    126,112
    
    
    
    103,717
    
    
    
    352,624
    
    
    
    287,648Depreciation and amortization related to non-real
estate assets
    
    
    (5,318
    )
    
    
    (4,276
    )
    
    
    (14,585
    )
    
    
    (12,591
    )Depreciation of rental property related to minority
partners interest (3)
    
    
    (5,543
    )
    
    
    (10,139
    )
    
    
    (19,101
    )
    
    
    (27,910
    )Depreciation of rental property related to minority
partners interest  adjustment (4)
    
    
    18,831
    
    
    
    
    
    
    
    7,377
    
    
    
    Depreciation of rental property related to
unconsolidated entities
    
    
    2,130
    
    
    
    5,038
    
    
    
    3,984
    
    
    
    15,627Gain on dispositions of real estate related to
unconsolidated entities and other
    
    
    (7,641
    )
    
    
    (8,387
    )
    
    
    (21,397
    )
    
    
    (13,670
    )Gain on dispositions of non-depreciable assets
    
    
    2,887
    
    
    
    1,657
    
    
    
    9,259
    
    
    
    2,449Deficit distributions to minority partners, net (5)
    
    
    14,072
    
    
    
    2,849
    
    
    
    20,129
    
    
    
    5,719Discontinued operations:Gain on dispositions of real estate, net of
minority partners interest (3)
    
    
    (11,647
    )
    
    
    (43,758
    )
    
    
    (154,180
    )
    
    
    (80,316
    )Depreciation of rental property, net of minority
partners interest (3)
    
    
    (466
    )
    
    
    8,337
    
    
    
    5,417
    
    
    
    33,148Recovery of deficit distributions to minority
partners, net (4)
    
    
    (2,193
    )
    
    
    (543
    )
    
    
    (18,384
    )
    
    
    (3,904
    )Income tax arising from disposals
    
    
    2,211
    
    
    
    1,630
    
    
    
    30,197
    
    
    
    2,849Preferred OP Unit distributions
    
    
    19,167
    
    
    
    24,655
    
    
    
    65,506
    
    
    
    73,233Redemption related preferred OP Unit issuance costs
    
    
    4,274
    
    
    
    
    
    
    
    6,848
    
    
    
    1,123Funds From Operations
    
    $
    105,359
    
    
    $
    86,161
    
    
    $
    306,902
    
    
    $
    272,437Preferred OP Unit distributions
    
    
    (19,167
    )
    
    
    (24,655
    )
    
    
    (65,506
    )
    
    
    (73,233
    )Redemption related preferred OP Unit issuance costs
    
    
    (4,274
    )
    
    
    
    
    
    
    (6,848
    )
    
    
    (1,123
    )Distributions on dilutive preferred OP Units
    
    
    19
    
    
    
    1,177
    
    
    
    2,384
    
    
    
    2,802Funds From Operations attributable to common
unitholders  diluted
    
    $
    81,937
    
    
    $
    62,683
    
    
    $
    236,932
    
    
    $
    200,883Weighted average number of common units, common unit
equivalents and dilutive preferred securities
outstanding:Common units and equivalents (6)
    
    
    110,156
    
    
    
    104,443
    
    
    
    108,353
    
    
    
    105,081Dilutive preferred OP Units
    
    
    27
    
    
    
    1,590
    
    
    
    2,410
    
    
    
    2,752Total
    
    
    110,183
    
    
    
    106,033
    
    
    
    110,763
    
    
    
    107,833
 30




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##### Table of Contents



Notes: (1)
    
    Represents the numerator for earnings per common unit, calculated in accordance with
GAAP.(2)
    
    Includes amortization of management contracts where we are the general partner. Such
management contracts were established in certain instances where we acquired a general
partner interest in either a consolidated or an unconsolidated partnership. Because the
recoverability of these management contracts depends primarily on the operations of the
real estate owned by the limited partnerships, we believe it is consistent with the White
Paper to add back such amortization, as the White Paper directs the add-back of
amortization of assets uniquely significant to the real estate industry.(3)
    
    Minority partners interest, means minority interest in our consolidated real estate
partnerships.(4)
    
    Represents prior period depreciation of certain tax credit redevelopment properties
that Aimco included in an adjustment to minority interest in real estate partnerships for
the three months ended September 30, 2006 (see Note 2 to the consolidated financial
statements in Item 1). This prior period depreciation is added back to determine FFO in
accordance with the NAREIT White Paper.(5)
    
    In accordance with GAAP, deficit distributions to minority partners are charges
recognized in our income statement when cash is distributed to a non-controlling partner in
a consolidated real estate partnership in excess of the positive balance in such partners
capital account, which is classified as minority interest on our balance sheet. We record
these charges for GAAP purposes even though there is no economic effect or cost. Deficit
distributions to minority partners occur when the fair value of the underlying real estate
exceeds its depreciated net book value because the underlying real estate has appreciated
or maintained its value. As a result, the recognition of expense for deficit distributions
to minority partners represents, in substance, either (a) our recognition of depreciation
previously allocated to the non-controlling partner or (b) a payment related to the
non-controlling partners share of real estate appreciation. Based on White Paper guidance
that requires real estate depreciation and gains to be excluded from FFO, we add back
deficit distributions and subtract related recoveries in our reconciliation of net income
to FFO.(6)
    
    Represents the denominator for earnings per common unit  diluted, calculated in
accordance with GAAP, plus additional common share equivalents that are dilutive for FFO. Liquidity and Capital Resources
    Operating Activities
  31




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Investing Activities
        32




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Actual Cost
    
    
    Cost Per UnitCapital Replacements Detail:Building and grounds
    
    $
    18,061
    
    
    $
    130Turnover related
    
    
    31,184
    
    
    
    225Capitalized site payroll and indirect costs and other
    
    
    10,889
    
    
    
    79Our share of Capital Replacements
    
    $
    60,134
    
    
    $
    434Capital Replacements:Conventional
    
    $
    54,845
    
    
    $
    456Affordable
    
    
    5,289
    
    
    
    290Our share of Capital Replacements
    
    
    60,134
    
    
    $
    434Capital Improvements:Conventional
    
    
    59,854
    
    
    $
    497Affordable
    
    
    12,640
    
    
    
    694Our share of Capital Improvements
    
    
    72,494
    
    
    $
    524Casualties:Conventional
    
    
    26,206Affordable
    
    
    2,121Our share of casualties
    
    
    28,327Redevelopment:Conventional
    
    
    113,836Affordable
    
    
    49,803Our share of redevelopment
    
    
    163,639Our share of capital expenditures
    
    
    324,594Plus minority partners share of consolidated spending
    
    
    44,884Less our share of unconsolidated spending
    
    
    (2,591
    )Capital expenditures per consolidated statement of cash flows
    
    $
    366,887
   Financing Activities
    33




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##### Table of Contents



Preferred OP Units
   Future Capital Needs
  34




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
 ITEM 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  35




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Unregistered Sales of Equity Securities.
    Repurchases of Equity Securities.
  Maximum NumberTotal Number of
    
    of Units thatTotal
    
    
    Average
    
    
    Units Purchased as
    
    May Yet BeNumber
    
    
    Price
    
    
    Part of Publicly
    
    Purchased Under theof Units
    
    
    Paid
    
    
    Announced Plans
    
    Plans or ProgramsFiscal period
    
    Purchased
    
    
    per Unit
    
    
    or Programs
    
    (1)July 1 - July 31, 2006
    
    
    36,857
    
    
    $
    43.56
    
    
    N/A
    
    N/AAugust 1 - August 31, 2006
    
    
    609,584
    
    
    $
    50.68
    
    
    N/A
    
    N/ASeptember 1 - September
30, 2006
    
    
    1,338,554
    
    
    $
    52.13
    
    
    N/A
    
    N/ATotal
    
    
    1,984,994
    
    
    $
    51.53
    
    
    N/A
 
 (1)
    
    The terms of our Partnership Agreement do not provide for a maximum number of Units
that may be repurchased, and other than the express terms of our Partnership Agreement we
have no publicly announced plans or programs of repurchase 36




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##### Table of Contents



Distribution Payments.
 
 ITEM 6. Exhibits
   31.1
    
    Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200299.1
    
    Agreement re: disclosure of long-term debt instruments
 37




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##### Table of Contents



AIMCO PROPERTIES, L.P.
 
 SIGNATURES
  AIMCO PROPERTIES L.P.By: AIMCO GP, Inc., its general partnerBy:
    
    /s/ THOMAS M. HERZOGThomas M. HerzogExecutive Vice President andChief Financial Officer(duly authorized officer andprincipal financial officer)By:
    
    /s/ ROBERT Y. WALKER, IVRobert Y. Walker, IVExecutive Vice President andChief Accounting Officer
  38




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##### Table of Contents



Exhibit Index
  31.1
    
    Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200299.1
    
    Agreement re: disclosure of long-term debt instruments