Use these links to rapidly review the documentAIMCO PROPERTIES, L.P. FORM 10-Q INDEX



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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Form 10-Q

|(Mark One) |                                                                                         
|---------- | ----------------------------------------------------------------------------------------
|ý          | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 
|           | FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004                                            
|           | OR                                                                                      
|o          | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|           | FOR THE TRANSITION PERIOD
FROM                             TO                           

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Commission File Number 0-24497

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AIMCO Properties, L.P.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization)                                |  | 84-1275621(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 ý    No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes ý    No o

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The number of Partnership Common Units outstanding as of July 30, 2004: 103,293,742



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AIMCO PROPERTIES, L.P.        FORM 10-Q        INDEX



|                              |  |                                                                                                         |  | Page
|----------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION |  |                                                                                                        
|ITEM 1.                       |  | Financial Statements                                                                                    |  |     
|                              |  | Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003                       |  | 2   
|                              |  | Consolidated Statements of Income for the Three and Six Months Ended June 30, 2004 and 2003 (unaudited) |  | 3   
|                              |  | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003 (unaudited)       |  | 4   
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                  |  | 5   
|ITEM 2.                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                   |  | 18  
|ITEM 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                              |  | 31  
|ITEM 4.                       |  | Controls and Procedures                                                                                 |  | 31  
|PART II. OTHER INFORMATION    |  |                                                                                                        
|ITEM 1.                       |  | Legal Proceedings                                                                                       |  | 32  
|ITEM 2.                       |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                        |  | 32  
|ITEM 6.                       |  | Exhibits and Reports on Form 8-K                                                                        |  | 33  
|Signatures                    |  | 34                                                                                                     

1

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AIMCO PROPERTIES, L.P.  CONSOLIDATED BALANCE SHEETS  (In Thousands)

|                                                              |                                                | June 30, 2004                           |            | December 31, 2003 |           
|------------------------------------------------------------- | ---------------------------------------------- | --------------------------------------- | ---------- | ----------------- | ----------
|
|ASSETS                                                        |                                                |                                         |            |                   |           
|Real estate:                                                  |                                                |                                         |            |                   |           
|                                                              | Land                                           |                                         | $          | 2,177,716         |           
|                                                              | Buildings and improvements                     |                                         |            | 8,746,119         |           
|                                                              |                                                |                                         |            |                   |           
|Total real estate                                             |                                                |                                         | 10,923,835 |                   |           
|                                                              | Less accumulated depreciation                  |                                         |            | (1,975,786        | )         
|                                                              |                                                |                                         |            |                   |           
|                                                              |                                                | Net real estate                         |            |                   | 8,948,049 
|                                                              |                                                |                                         |            |                   |           
|Cash and cash equivalents                                     |                                                |                                         | 90,619     |                   |           
|Restricted cash                                               |                                                |                                         | 285,586    |                   |           
|Accounts receivable                                           |                                                |                                         | 58,703     |                   |           
|Accounts receivable from affiliates                           |                                                |                                         | 69,357     |                   |           
|Deferred financing costs                                      |                                                |                                         | 74,159     |                   |           
|Notes receivable from unconsolidated real estate partnerships |                                                |                                         | 143,685    |                   |           
|Notes receivable from non-affiliates                          |                                                |                                         | 59,933     |                   |           
|Notes receivable from Aimco                                   |                                                |                                         | 12,269     |                   |           
|Investment in unconsolidated real estate partnerships         |                                                |                                         | 179,261    |                   |           
|Other assets                                                  |                                                |                                         | 343,850    |                   |           
|Assets held for sale                                          |                                                |                                         | 105,289    |                   |           
|                                                              |                                                |                                         |            |                   |           
|                                                              |                                                | Total assets                            |            | $                 | 10,370,760
|                                                              |                                                |                                         |            |                   |           
|LIABILITIES AND PARTNERS' CAPITAL                             |                                                |                                         |            |                   |           
|Secured tax-exempt bond financing                             |                                                | $                                       | 1,229,367  |                   | $         
|Secured notes payable                                         |                                                |                                         | 4,541,102  |                   |           
|Mandatorily redeemable preferred securities                   |                                                |                                         | 15,019     |                   |           
|Term loans                                                    |                                                |                                         | 343,000    |                   |           
|Credit facility                                               |                                                |                                         | 285,600    |                   |           
|                                                              |                                                |                                         |            |                   |           
|                                                              |                                                | Total indebtedness                      |            |                   | 6,414,088 
|                                                              |                                                |                                         |            |                   |           
|Accounts payable                                              |                                                |                                         | 40,965     |                   |           
|Accrued liabilities and other                                 |                                                |                                         | 407,384    |                   |           
|Deferred income                                               |                                                |                                         | 31,245     |                   |           
|Security deposits                                             |                                                |                                         | 40,615     |                   |           
|Deferred income taxes payable                                 |                                                |                                         | 18,235     |                   |           
|Liabilities related to assets held for sale                   |                                                |                                         | 83,871     |                   |           
|                                                              |                                                |                                         |            |                   |           
|                                                              |                                                | Total liabilities                       |            |                   | 7,036,403 
|                                                              |                                                |                                         |            |                   |           
|Minority interest in consolidated real estate partnerships    |                                                |                                         | 211,287    |                   |           
|Partners' capital:                                            |                                                |                                         |            |                   |           
|                                                              | Preferred units                                |                                         |            | 1,048,774         |           
|                                                              | General Partner and Special Limited Partner    |                                         |            | 1,825,760         |           
|                                                              | Limited Partners                               |                                         |            | 268,673           |           
|                                                              | High performance units                         |                                         |            | (10,755           | )         
|                                                              | Less: Investment in Aimco Class A Common Stock |                                         |            | (9,382            | )         
|                                                              |                                                |                                         |            |                   |           
|                                                              |                                                | Total partners' capital                 |            |                   | 3,123,070 
|                                                              |                                                |                                         |            |                   |           
|                                                              |                                                | Total liabilities and partners' capital |            | $                 | 10,370,760
|                                                              |                                                |                                         |            |                   |           

See
notes to consolidated financial statements.

2

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AIMCO PROPERTIES, L.P.  CONSOLIDATED STATEMENTS OF INCOME  (In Thousands, Except Per Unit Data)  (Unaudited)

|                                                                                                                 |                                                                           | For the Three Months
Ended June 30, |         | For the Six Months
Ended June 30, |  
|---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | ----------------------------------- | ------- | --------------------------------- | -
|
|REVENUES:                                                                                                        |                                                                           |                                     |         |                                   |  
|Rental and other property revenues                                                                               |                                                                           | $                                   | 361,001 |                                   | $
|Property management revenues, primarily from affiliates                                                          |                                                                           |                                     | 9,371   |                                   |  
|Activity fees and asset management revenues, primarily from affiliates                                           |                                                                           |                                     | 9,820   |                                   |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|                                                                                                                 | Total revenues                                                            |                                     |         | 380,192                           |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|EXPENSES:                                                                                                        |                                                                           |                                     |         |                                   |  
|Property operating expenses                                                                                      |                                                                           |                                     | 167,704 |                                   |  
|Property management expenses                                                                                     |                                                                           |                                     | 1,989   |                                   |  
|Activity and asset management expenses                                                                           |                                                                           |                                     | 4,716   |                                   |  
|Depreciation and amortization                                                                                    |                                                                           |                                     | 93,216  |                                   |  
|General and administrative expenses                                                                              |                                                                           |                                     | 18,407  |                                   |  
|Other income, net                                                                                                |                                                                           |                                     | (589    | )                                 |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|                                                                                                                 | Total expenses                                                            |                                     |         | 285,443                           |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Operating income                                                                                                 |                                                                           |                                     | 94,749  |                                   |  
|Interest income                                                                                                  |                                                                           |                                     | 7,690   |                                   |  
|Provision for losses on notes receivable                                                                         |                                                                           |                                     | (1,180  | )                                 |  
|Interest expense                                                                                                 |                                                                           |                                     | (96,372 | )                                 |  
|Deficit distributions to minority partners                                                                       |                                                                           |                                     | (2,650  | )                                 |  
|Equity in losses of unconsolidated real estate partnerships                                                      |                                                                           |                                     | (1,038  | )                                 |  
|Impairment loss on investment in unconsolidated real estate partnerships                                         |                                                                           |                                     | (1,881  | )                                 |  
|Gain on dispositions of real estate related to unconsolidated entities and other                                 |                                                                           |                                     | 2,097   |                                   |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Income before minority interest, discontinued operations and cumulative effect of change in accounting principle |                                                                           |                                     | 1,415   |                                   |  
|Minority interest in consolidated real estate partnerships                                                       |                                                                           |                                     | 3,652   |                                   |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Income from continuing operations                                                                                |                                                                           |                                     | 5,067   |                                   |  
|Income from discontinued operations, net                                                                         |                                                                           |                                     | 10,149  |                                   |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Income before cumulative effect of change in accounting principle                                                |                                                                           |                                     | 15,216  |                                   |  
|Cumulative effect of change in accounting principle                                                              |                                                                           |                                     |        |                                   |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Net income                                                                                                       |                                                                           |                                     | 15,216  |                                   |  
|Net income attributable to preferred unitholders                                                                 |                                                                           |                                     | 23,743  |                                   |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Net income (loss) attributable to common unitholders                                                             |                                                                           | $                                   | (8,527  | )                                 | $
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Earnings (loss) per common unit  basic:                                                                         |                                                                           |                                     |         |                                   |  
|                                                                                                                 | Income (loss) from continuing operations (net of preferred distributions) |                                     | $       | (0.18                             | )
|                                                                                                                 | Income from discontinued operations                                       |                                     |         | 0.10                              |  
|                                                                                                                 | Cumulative effect of change in accounting principle                       |                                     |         |                                  |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|                                                                                                                 | Net income (loss) attributable to common unitholders                      |                                     | $       | (0.08                             | )
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Earnings (loss) per common unit  diluted:                                                                       |                                                                           |                                     |         |                                   |  
|                                                                                                                 | Income (loss) from continuing operations (net of preferred distributions) |                                     | $       | (0.18                             | )
|                                                                                                                 | Income from discontinued operations                                       |                                     |         | 0.10                              |  
|                                                                                                                 | Cumulative effect of change in accounting principle                       |                                     |         |                                  |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|                                                                                                                 | Net income (loss) attributable to common unitholders                      |                                     | $       | (0.08                             | )
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Weighted average common units outstanding                                                                        |                                                                           |                                     | 104,156 |                                   |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Weighted average common units and equivalents outstanding                                                        |                                                                           |                                     | 104,156 |                                   |  
|                                                                                                                 |                                                                           |                                     |         |                                   |  
|Distributions declared per common unit                                                                           |                                                                           | $                                   | 0.60    |                                   | $
|                                                                                                                 |                                                                           |                                     |         |                                   |  

See notes to consolidated financial statements.

3

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AIMCO PROPERTIES, L.P.  CONSOLIDATED STATEMENTS OF CASH FLOWS  (In Thousands) (Unaudited)

|                                                                                                             |                                                                                                 | For the Six Months
Ended June 30,                                                |                                                                        
|------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | -----------------------------------------------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                        |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             | Net income                                                                                      |                                                                                  | $                                                                      
|                                                                                                             | Adjustments to reconcile net income to net cash provided by operating activities:               |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 | Depreciation and amortization                                                    |                                                                        
|                                                                                                             |                                                                                                 | Deficit distributions to minority partners                                       |                                                                        
|                                                                                                             |                                                                                                 | Equity in losses of unconsolidated real estate partnerships                      |                                                                        
|                                                                                                             |                                                                                                 | Gain on dispositions of real estate related to unconsolidated entities and other |                                                                        
|                                                                                                             |                                                                                                 | Impairment loss on investment in unconsolidated real estate partnerships         |                                                                        
|                                                                                                             |                                                                                                 | Cumulative effect of change in accounting principle                              |                                                                        
|                                                                                                             |                                                                                                 | Minority interest in consolidated real estate partnerships                       |                                                                        
|                                                                                                             |                                                                                                 | Discontinued operations:                                                         |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  | Depreciation and amortization                                          
|                                                                                                             |                                                                                                 |                                                                                  | Recovery of deficit distributions to minority partners                 
|                                                                                                             |                                                                                                 |                                                                                  | Gain on dispositions of real estate, net of minority partners' interest
|                                                                                                             |                                                                                                 |                                                                                  | Impairment loss on real estate assets sold or held for sale            
|                                                                                                             |                                                                                                 |                                                                                  | Minority interest in consolidated real estate partnerships             
|                                                                                                             |                                                                                                 | Changes in operating assets and operating liabilities:                           |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  | Deferred income taxes                                                  
|                                                                                                             |                                                                                                 |                                                                                  | Accounts receivable                                                    
|                                                                                                             |                                                                                                 |                                                                                  | Accounts payable, accrued liabilities and other                        
|                                                                                                             |                                                                                                 |                                                                                  | Other assets                                                           
|                                                                                                             |                                                                                                 |                                                                                  | Other                                                                  
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                        |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             | Purchases of real estate                                                                        |                                                                                  |                                                                        
|                                                                                                             | Capital expenditures                                                                            |                                                                                  |                                                                        
|                                                                                                             | Purchases of non-real estate assets                                                             |                                                                                  |                                                                        
|                                                                                                             | Proceeds from dispositions of real estate                                                       |                                                                                  |                                                                        
|                                                                                                             | Cash from newly consolidated properties                                                         |                                                                                  |                                                                        
|                                                                                                             | Purchases of general and limited partnership interests and other assets                         |                                                                                  |                                                                        
|                                                                                                             | Originations of notes receivable primarily from unconsolidated real estate partnerships         |                                                                                  |                                                                        
|                                                                                                             | Proceeds from repayment of notes receivable                                                     |                                                                                  |                                                                        
|                                                                                                             | Proceeds from sale of investments and other assets                                              |                                                                                  |                                                                        
|                                                                                                             | Cash paid in connection with merger/acquisition related costs                                   |                                                                                  |                                                                        
|                                                                                                             | Distributions received from Aimco                                                               |                                                                                  |                                                                        
|                                                                                                             | Distributions received from investments in unconsolidated real estate partnerships              |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                        |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             | Proceeds from secured notes payable borrowings                                                  |                                                                                  |                                                                        
|                                                                                                             | Principal repayments on secured notes payable                                                   |                                                                                  |                                                                        
|                                                                                                             | Proceeds from tax-exempt bond financing                                                         |                                                                                  |                                                                        
|                                                                                                             | Principal repayments on tax-exempt bond financing                                               |                                                                                  |                                                                        
|                                                                                                             | Net borrowings (paydowns) on term loans and revolving credit facility                           |                                                                                  |                                                                        
|                                                                                                             | Payment of loan costs                                                                           |                                                                                  |                                                                        
|                                                                                                             | Proceeds from issuance (redemption) of mandatorily redeemable preferred securities              |                                                                                  |                                                                        
|                                                                                                             | Proceeds from issuance of common units, High Performance Units and exercise of options/warrants |                                                                                  |                                                                        
|                                                                                                             | Proceeds from issuance of preferred units                                                       |                                                                                  |                                                                        
|                                                                                                             | Redemption of preferred units                                                                   |                                                                                  |                                                                        
|                                                                                                             | Principal repayments received on notes due on common units purchases                            |                                                                                  |                                                                        
|                                                                                                             | Repurchase and redemption of common units                                                       |                                                                                  |                                                                        
|                                                                                                             | Contributions from minority interest                                                            |                                                                                  |                                                                        
|                                                                                                             | Payment of distributions to minority interest                                                   |                                                                                  |                                                                        
|                                                                                                             | Payment of distributions to General Partner and Special Limited Partner                         |                                                                                  |                                                                        
|                                                                                                             | Payment of distributions to Limited Partners                                                    |                                                                                  |                                                                        
|                                                                                                             | Payment of distributions to High Performance Units                                              |                                                                                  |                                                                        
|                                                                                                             | Payment of preferred unit distributions                                                         |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                         |                                                                                                 |                                                                                  | (20,979                                                                
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                             |                                                                                                 |                                                                                  | 96,983                                                                 
|NET CHANGE IN CASH AND CASH EQUIVALENTS INCLUDED WITHIN ASSETS HELD FOR SALE FROM BEGINNING TO END OF PERIOD |                                                                                                 |                                                                                  | 14,615                                                                 
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                   |                                                                                                 | $                                                                                | 90,619                                                                 
|                                                                                                             |                                                                                                 |                                                                                  |                                                                        

See notes to consolidated financial statements.

4

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AIMCO PROPERTIES, L.P.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  June 30, 2004  (Unaudited)

NOTE 1Organization

AIMCO Properties, L.P., a Delaware limited partnership, or the Partnership, and together with its consolidated subsidiaries and other controlled entities, the
Company, was formed on May 16, 1994 to conduct the business of acquiring, redeveloping, leasing, and managing multifamily apartment properties. Our securities include Partnership Common Units,
or common OP Units, Partnership Preferred Units, or preferred OP Units, and High Performance Partnership Units, or High Performance Units, which are collectively referred to as "OP Units." Apartment
Investment and Management Company, or Aimco, is the owner of our general partner, AIMCO-GP, Inc., or the General Partner, and special limited partner,
AIMCO-LP, Inc., or the Special Limited Partner. The General Partner and Special Limited Partner hold common OP Units and are the primary holders of outstanding preferred OP Units.
"Limited Partners" refers to individuals or entities that are our limited partners, other than Aimco, the General Partner or the Special Limited Partner, and own common OP Units or preferred OP Units.
Generally, after holding the common OP Units for one year, the Limited Partners have the right to redeem their common OP Units for cash, subject to our prior right to acquire some or all of the common
OP Units tendered for redemption in exchange for shares of Aimco Class A Common Stock. Common OP Units redeemed for Aimco Class A Common Stock are generally on a
one-for-one basis (subject to antidilution adjustments). Preferred OP Units and High Performance Units may or may not be redeemable based on their respective terms, as provided
for in the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P. as amended, or the Partnership Agreement.

We,
through our operating divisions and subsidiaries, hold substantially all of Aimco's assets and manage the daily operations of Aimco's business and assets. Aimco is required to
contribute all proceeds from offerings of its securities to us. In addition, substantially all of Aimco's assets must be owned through the Partnership; therefore, Aimco is generally required to
contribute all assets acquired to us. In exchange for the contribution of offering proceeds or assets, Aimco receives additional
interests in us with similar terms (e.g., if Aimco contributes proceeds of a preferred stock offering, Aimco (through the General Partner and Special Limited Partner) receives preferred OP Units with
terms substantially similar to the preferred securities issued by Aimco).

Aimco
frequently consummates transactions for our benefit. For legal, tax or other business reasons, Aimco may hold title or ownership of certain assets until they can be transferred to
us. However, we have a controlling financial interest in substantially all of Aimco's assets in the process of transfer to us. As of June 30, 2004, we owned or managed 1,578 apartment
properties containing 278,011 apartment units located in 47 states, the District of Columbia and Puerto Rico. We serve approximately one million residents per year.

As
of June 30, 2004, we:



At
June 30, 2004, we had outstanding 103,261,789 common OP Units, 39,446,977 preferred OP Units and 2,379,084 High Performance Units (includes only those units that have met the
required measurement benchmarks and are dilutivesee Note 6).

Except
as the context otherwise requires, "we," "our," "us" and the "Company" refer to the Partnership, the Partnership's consolidated corporate subsidiaries and consolidated real estate
partnerships, collectively. Except as the context otherwise requires, "Aimco" refers to Aimco and Aimco's consolidated corporate subsidiaries and consolidated real estate partnerships, collectively.

5

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NOTE 2Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and
disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2004.

The
balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by
generally accepted accounting principles for complete financial statements.

For
further information, refer to the financial statements and notes thereto included in AIMCO Properties, L.P.'s Annual Report on Form 10-K for the year ended
December 31, 2003. Certain 2003 financial statement amounts have been reclassified to conform to the 2004 presentation, including certain intercompany eliminations and the treatment of
discontinued operations.

The
accompanying consolidated financial statements include the accounts of the Partnership, its consolidated corporate subsidiaries and consolidated real estate partnerships. Pursuant to
a Management and Contribution Agreement between the Partnership and Aimco, we have acquired, in exchange for interests in the Partnership, the economic benefits of subsidiaries of Aimco in which we do
not have an interest, and Aimco has granted us a right of first refusal to acquire such subsidiaries' assets for no additional consideration. Pursuant to the agreement, Aimco has also granted us
certain rights with respect to assets of such subsidiaries. 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 limited partner in a limited partnership or a member in a limited liability company. Interests held in consolidated real estate partnerships by limited partners other
than us are reflected as minority interest in consolidated real estate partnerships. All significant intercompany balances and transactions have been eliminated in consolidation. The assets of
consolidated real estate partnerships owned or controlled by Aimco or us generally are not available to pay creditors of Aimco or the Partnership.

We
reflect partners' interests in consolidated real estate partnerships as minority interest in consolidated real estate partnerships. Minority interest in consolidated real estate
partnerships represents the non-controlling partners' share of the underlying net assets of our consolidated real estate partnerships. When these consolidated real estate partnerships make
cash distributions to partners in excess of their minority interest balances, we record a charge equal to the minority partners' excess of distributions over their minority interest balances, even
though there is no economic effect or cost. We classify this charge in the consolidated statements of income as deficit distributions to minority partners. We allocate to minority partners losses
until such time as such losses exceed the minority partners' capital account balances, in which case, we recognize 100% of the losses when the partnership is in a deficit equity position, even though
there is no economic effect or cost. Approximately $1.2 million and $2.5 million in depreciation related net losses were charged to operations for the three and six months ended
June 30, 2004, respectively, and approximately $0.5 million and $1.7 million in depreciation related net losses were charged to operations for the three and six months ended
June 30, 2003, respectively.

NOTE 3Acquisitions and Joint Ventures

On May 26, 2004, we completed the acquisition of five contiguous apartment properties located in New York City on the Upper East Side of Manhattan,
containing an aggregate of 72 units, for a total purchase price of $14.5 million. We funded the acquisition primarily through the assumption of mortgage debt of approximately
$9.3 million and tax-free exchange funds.

On
May 19, 2004, we completed the acquisition of a property located in Fall River, Massachusetts, containing 240 units, for a total purchase price of $19.0 million. We
funded the acquisition primarily through the assumption of mortgage debt of approximately $10.0 million and tax-free exchange funds.

On
January 30, 2004, Aimco completed the acquisition of The Palazzo at Park La Brea located in Los Angeles California, a mid-rise apartment community with 521 units,
for $162.9 million, which included $0.5 million in transaction costs. The Palazzo at Park La Brea is the second of three phases recently completed as part of the Park

6

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La
Brea development. Aimco paid approximately $69.7 million in cash and was required to repay existing construction loan financing of approximately $92.7 million. The repayment of
existing mortgage indebtedness was primarily funded through a non-recourse, long-term, variable rate, partially amortizing property note of $88.1 million, with an
interest rate of 1.50% over 30-day LIBOR.

In
order to fund the acquisition of The Palazzo at Park La Brea, we loaned $69.7 million to Aimco in exchange for a note receivable, which we refer to as The Palazzo at Park La
Brea Note. The note bears interest at the rate of 5.25% per annum, with interest payments due on December 31 of each year, with all unpaid principal and interest due on December 31,
2014. Upon completion of the purchase, Aimco contributed the assets and liabilities of The Palazzo at Park La Brea to us in exchange for 2,787,111 Class Twelve Partnership Preferred Units, or the
Class Twelve Preferred Units. The Class Twelve Preferred Units pay distributions of $1.3125 per unit on December 31 of each year, with the first distribution being prorated from the date of
issuance. Aimco repaid The Palazzo at Park La Brea Note with the proceeds from the issuance of Class U Cumulative Preferred Stock (see Note 6).

Additionally
during the first quarter, we completed the acquisition of a three-property portfolio located in New York City, containing an aggregate of 75 units, for a total purchase
price of $17.8 million. The acquisition was primarily funded through non-recourse, long-term, fixed rate, partially amortizing property notes totaling
$12.2 million, with interest rates of 5.38%.

GE Joint Venture

On December 30, 2003 we entered into an equity financing with GE Real Estate in the form of a joint venture, which we refer to the as the GE JV. In
March 2004, we contributed to the GE JV interests in an additional four of our apartment properties with a total of 900 units, and GE Real Estate contributed cash of which we received
approximately $11.0 million before transaction costs and funding of reserves. The four apartment properties we contributed had an agreed upon transaction value of approximately
$36.0 million and mortgage debt of approximately $21.0 million that was assumed by the GE JV. We have a 25% managing member interest in the GE JV and GE Real Estate has a 75%
non-managing member interest. As a result of our control over day-to-day operations, we continue to consolidate the properties contributed to the GE JV in our
consolidated financial statements and did not recognize any gain as a result of this transaction. GE Real Estate's interest in these net assets through the GE JV is included in minority interest in
consolidated real estate partnerships.

NOTE 4Mandatorily Redeemable Preferred Securities

In April 2003, Aimco sold 4,000,000 shares of floating rate Class S Cumulative Redeemable Preferred Stock, or the Class S Preferred Stock,
through a private placement to an institutional investor. The proceeds were contributed to the Partnership in exchange for Class S Partnership Preferred Units, or the Class S Preferred
Units. On January 30, 2004, Aimco redeemed 1,015,228 shares of the Class S Preferred Stock at a redemption price of $24.625 per share. Additionally, on March 26, 2004, with
proceeds from the issuance of the 7.75% Class U Cumulative Preferred Stock (see Note 6), Aimco redeemed the remaining 2,984,772 shares of the Class S Preferred Stock at a
redemption price of $24.75 per share. Concurrently with these redemptions, we redeemed for cash 1,015,228 and 2,984,772 Class S
Preferred Units, respectively. In accordance with Statement of Financial Accounting Standards No. 150,Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity, or SFAS 150, for the six months ended June 30, 2004, we recorded to interest expense approximately $0.8 million of
distributions paid on the Class S Preferred Units and $0.4 million resulting from a redemption value adjustment on February 1, 2004.

NOTE 5Commitments and Contingencies

Commitments

In connection with the March 11, 2002 acquisition of Casden Properties, Inc., or Casden, which included the merger of Casden into Aimco, and the
merger of a subsidiary of Aimco into another real estate investment trust affiliated with Casden, all of which we collectively refer to as the Casden Merger, we and Aimco have commitments to:



7

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Guarantees

In the ordinary course of business, we provide various guarantees that are covered by the provisions of Financial Accounting Standards Board, or FASB,
Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others,or FIN 45. These guarantees include: (i) standby letters of credit, which we may provide to enhance credit or guarantee our performance under contractual
obligations; (ii) limited guarantees, which we may provide to certain of our lenders and that may require us to provide funds to maintain a required loan-to-value ratio;
and (iii) guarantees in connection with our syndication of historical and affordable housing tax credits, which we may provide to make available additional funding to cover operating cash flow
deficiencies, cover shortfalls related to the delivery of tax credits and cover financing shortfalls related to project development. These guarantees have varying expiration dates ranging from less
than one year to fourteen years. The fair values of these guarantees issued after December 31, 2002 (effective date under FIN 45), are not material to our financial statements.

Legal

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 liability insurance, and none of which we expect to have a material adverse effect on our consolidated financial condition or results of operations taken as a whole.



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 affect on our consolidated financial condition or results of operations taken as a whole.



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. 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

8

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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, 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 disposal 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.



As
previously disclosed, Aimco has been named as a defendant in lawsuits that have alleged personal injury 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 a national policy and procedures to prevent or eliminate mold from our properties and believe that our measures will eliminate, or at least minimize, the effects that mold could 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 or results of
operations taken as a whole.



As
previously disclosed, Aimco and four of its affiliated partnerships are defendants in a lawsuit brought by the City Attorney for the City and County of San Francisco ("CCSF") alleging
violations of residential housing codes, unlawful business practices and unfair competition. The City Attorney asserts civil penalties from $500 to $1,000 per day for each affected unit, as well as
other statutory and equitable relief. Aimco has filed a cross-complaint against CCSF, its Department of Building Inspections ("DBI") and certain of its employees, alleging constitutional violations
arising out of its arbitrary and discriminatory application of its codes, and other tortious conduct. Effective May 3, 2004, Aimco and the four affiliated partnerships entered into a settlement
agreement with CCSF, DBI and certain DBI employees, subject to certain conditions subsequent that must be satisfied no later than November 1, 2004 in order for the settlement agreement to
become effective. The conditions subsequent include (a) approval by the Board of Supervisors of CCSF, (b) the negotiation by Aimco of a new Memorandum of Understanding with the U.S.
Department of Housing and Urban Development permitting Aimco to complete a renovation of the four properties in the Hunters Point area that were the subject of CCSF's lawsuit, (c) certain
repairs to nine apartment units, (d) an agreement between CCSF and Aimco and the four affiliated partnerships relative to improved public safety in the immediate vicinity of the properties, and
(e) an order from the Court staying the litigation until either the above conditions are satisfied or the settlement is terminated, which order was entered May 5, 2004. If the settlement
becomes effective, Aimco intends to complete a renovation of the properties. We do not believe that the ultimate outcome will have a material adverse effect on our consolidated financial condition or
results of operations taken as a whole.



As
previously disclosed, National Program Services, Inc. and Vito Gruppuso (collectively "NPS") were insurance agents who sold to Aimco property insurance issued by National Union
Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union"). The financial failure of NPS resulted in defaults under two agreements by which NPS indemnified Aimco from losses relating to the
matters described below. As a result of such defaults Aimco had a $16.7 million insurance-related receivable that was subsequently reduced to $6.7 million following Aimco's settlement
with Lumbermens Mutual Casualty Company ("Lumbermens") and an insurance agency. In addition, Aimco has pending litigation against National Union, First Capital Group, a New York based insurance
wholesaler, NPS and other agents of National Union, for a refund of at least $10 million of the prepaid premium plus other damages. The contingent liabilities arising from the NPS defaults also
resulted in litigation against us by Cananwill, Inc. ("Cananwill"), a premium funding company, regarding an alleged balance due of $5.7 million on a premium finance agreement that funded
premium payments made to National Union. Aimco is also a plaintiff in litigation against Cananwill and Combined Specialty Insurance Company, formerly known as Virginia

9

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Surety
Company, Inc., alleging Cananwill's conversion of $1.6 million of unearned premium belonging to Aimco and misapplication of such funds to the alleged debt asserted in the lawsuit
initiated by Cananwill. The matter in which Aimco is a plaintiff has been stayed by the court pending resolution of the action filed by Cananwill against us. The previously disclosed litigation
brought by WestRMWest Risk Markets, Ltd. ("WestRM") against XL Reinsurance America, Inc. ("XL"), Greenwich Insurance Company ("Greenwich") and Lumbermens in
which Aimco has been made a third party defendant continues. During the second quarter, a summary judgment was entered against defendants XL and Greenwich. Similarly, the previously disclosed
litigation brought by Highlands Insurance Company ("Highlands") against Cananwill, XL, Greenwich and us also continues. In those cases in which Aimco is a defendant, Aimco believes that it has
meritorious defenses to assert, and will vigorously defend itself against claims brought against it. In addition, Aimco will vigorously prosecute its own claims. Although the outcome of any claim or
matter in litigation is uncertain, we do not believe that we will incur any material loss in connection with the insurance-related receivable or that the ultimate outcome of these separate but related
matters will have a material adverse effect on our consolidated financial condition or results of operations taken as a whole.



As
previously disclosed, on August 8, 2003, we were served with a complaint in the United States District Court, District of Columbia alleging that we willfully violated the Fair
Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. On March 5, 2004, the plaintiffs filed an amended complaint also
naming NHP Management Company, an affiliate of ours. The complaint attempts to bring a collective action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District
of Columbia. Specifically, the plaintiffs contend that we failed to compensate maintenance workers for time that they were required to be "on-call." Additionally, the complaint alleges
that we failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call." We have filed an answer to the amended
complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, we do not believe that the
ultimate outcome will have a material adverse effect on our consolidated financial condition or results of operations taken as a whole.



As
previously disclosed, the Central Regional Office of the United States Securities and Exchange Commission is conducting a formal investigation relating to certain matters. We believe
the areas of investigation include Aimco's miscalculated monthly net rental income figures in third quarter 2003, forecasted guidance, accounts payable, rent concessions, vendor rebates, and
capitalization of expenses and payroll. Aimco is cooperating fully. We do not believe that the ultimate outcome will have a material adverse effect on our consolidated financial condition or results
of operations taken as a whole.

NOTE 6Partners' Capital

Preferred OP Units

On April 21, 2004, Aimco redeemed for cash all 3,999,662 outstanding shares of the 9.0% Class P Convertible Cumulative Preferred Stock, or the
Class P Preferred Stock, for a total redemption price of $25.0375 per share, which included a redemption price of $25 per share, and $0.0375 per share of
accumulated and unpaid dividends through April 20, 2004. Concurrently, we redeemed all of the Class P Partnership Preferred Units at a price per unit equal to the redemption price per
share of the Class P Preferred Stock.

On
March 24, 2004, Aimco sold 8,000,000 shares of 7.75% Class U Cumulative Preferred Stock, par value $0.01 per share, or the Class U Preferred Stock, in a
registered public offering generating net proceeds of approximately $193.7 million. Proceeds of $69.8 million were paid by Aimco to us to repay The Palazzo at Park La Brea Note (see
Note 3) and concurrently 2,787,111 Class Twelve Preferred Units were converted into 2,787,111 Class U Partnership Preferred Units, or the Class U Preferred Units. The remaining
net proceeds were contributed by Aimco to us in exchange for 5,212,889 Class U Preferred Units. We used approximately $74.0 million of the net proceeds to redeem the floating rate
Class S Preferred Units (see Note 4) and the remainder to pay down our revolving credit facility, and redeem Class P Partnership Preferred Units on April 21, 2004 as
discussed above. The Class U Preferred Units have substantially the same terms as the shares of Class U Preferred Stock. Holders of the Class U Preferred Stock are entitled to
receive quarterly dividend payments of $0.484375 per share, equivalent to $1.9375 per share on an annual

10

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basis,
or 7.75% of the $25 per share liquidation preference. Class U Preferred Stock is senior to Aimco Class A Common Stock as to dividends and liquidation. Upon any liquidation,
dissolution or winding up of Aimco, before payments of dividends/distributions by Aimco are made to any holders of Aimco Class A Common Stock or common OP Units, the holders of the
Class U Preferred Stock and Class U Preferred Units are entitled to receive a liquidation preference of $25 per share/unit, plus accumulated, accrued and unpaid dividends/distributions.
Each share of Class U Preferred Stock is redeemable at Aimco's option beginning March 24, 2009 for cash in the amount of $25 per share, plus all accrued and unpaid dividends, if any, to
the date fixed for redemption. Distributions will be made on the Class U Preferred Units at the same time and in the same amount as dividends on the Class U Preferred Stock.

Common OP Units

During the three and six months ended June 30, 2004, we completed tender offers for limited partnership interests resulting in the issuance of
approximately 12,000 and 24,000 common OP Units, respectively. During the three and six months ended June 30, 2003, we completed tender offers for limited partnership interests resulting in the
issuance of approximately 6,000 and 23,000 common OP Units, respectively.

During
the three and six months ended June 30, 2004, approximately 304,000 and 662,000 common OP Units, respectively, were tendered for redemption and acquired by Aimco in
exchange for shares of
Aimco Class A Common Stock. During the three and six months ended June 30, 2003, approximately 9,000 and 84,000 common OP Units, respectively, were tendered for redemption and acquired
by Aimco in exchange for shares of Aimco Class A Common Stock. During the three and six months ended June 30, 2004, approximately 2,000 and 5,000 common OP Units, respectively, were
redeemed in exchange for cash. During the three and six months ended June 30, 2003, approximately 19,000 and 24,000 common OP units were redeemed in exchange for cash.

In
addition, during the three and six months ended June 30, 2004, approximately 429,000 and 480,000 restricted shares of Aimco Class A Common Stock, respectively, were issued to
certain officers and employees, compared to approximately 219,000 and 232,000 for the three and six months ended June 30, 2003. The issuance of restricted stock was recorded at the fair market
value of the Aimco Class A Common Stock on the date of issuance. Concurrently, we issued to Aimco the same number of common OP Units.

On
February 18, 19 and 24, 2004, Aimco purchased on the open market 30,000, 60,000 and 20,000 shares of Aimco Class A Common Stock, respectively, at an average price per
share of approximately $32.03, $32.17 and $31.26, respectively. Concurrently, we purchased 30,000, 60,000 and 20,000 common OP Units from Aimco.

On
February 24, 2004, Aimco completed the purchase of 287,272 shares of Aimco Class A Common Stock from the representatives of the plaintiffs in the litigation known as In
re Real Estate Associates v. Casden et al, or the REAL Litigation. Aimco paid in cash an aggregate of approximately $9.1 million to the representatives of the plaintiffs for the shares, or
$31.60 per share. The plaintiffs received these shares from Alan I. Casden on December 30, 2003 pursuant to the previously disclosed Stipulation of Settlement with the plaintiffs and their
counsel relating to the REAL Litigation and the previously disclosed Settlement Agreement with the prior shareholders of Casden Properties, Inc., National Partnership Investments Corp., or
NAPICO, which we acquired in the Casden Merger, and Aimco. Concurrently, we purchased 287,727 common OP Units from Aimco.

Additionally,
in connection with the previously disclosed Settlement Agreement and the indemnification agreement we have with the Casden sellers, we have notes receivable from Alan I.
Casden for an aggregate total of $35 million. Pursuant to the Settlement Agreement and the indemnification agreement, these notes can be satisfied with an aggregate total of approximately
804,000 shares of Aimco Class A Common Stock (including shares to cover interest that will accrue

11

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over
the terms of the notes), which shares will be valued at $47 per share. In the event shares of Aimco Class A Common Stock are used to satisfy these obligations, we will record contingent
consideration to the extent the fair value of Aimco Class A Common Stock is less than $47 per share at that date.



On April 30, 2004, Aimco stockholders approved the sale of up to 5,000 Class VII High Performance Partnership Units, or the Class VII Units,
for which the valuation period began on January 1, 2004 and will end on December 31, 2006. On June 18, 2004, we issued 2,892 Class VII Units to a limited liability company
owned by a limited number of employees for an aggregate offering price of approximately $530,000. Additional Class VII Units (up to the 5,000 maximum) may be issued in future periods.

Additionally,
at June 30, 2004, we had outstanding 4,398 Class V High Performance Partnership Units, or the Class V Units, for which the valuation period began on
January 1, 2002 and will end on December 31, 2004. Additionally, we had outstanding 5,000 Class VI High Performance Partnership Units, or the Class VI Units, for which the
valuation period began on January 1, 2003 and will end on December 31, 2005. At June 30, 2004, we did

12

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not
meet the required measurement benchmarks for the Class V Units, Class VI Units or Class VII Units. Therefore, as of June 30, 2004 such High Performance Units have no
dilutive effect.

NOTE 7Stock-Based Compensation

Aimco, from time to time, issues stock options. Upon exercise of the stock options, Aimco must contribute to us the proceeds received in exchange for the same
number of common OP Units as shares of Aimco Class A Common Stock issued in connection with the exercised stock options. Therefore, the following disclosures are made pertaining to Aimco's
stock options.

Effective
January 1, 2003, Aimco adopted the accounting provisions of Statement of Financial Accounting Standards No. 123,Accounting for
Stock-Based Compensation,or SFAS 123, as amended by Statement of Financial Accounting Standards No. 148,Accounting for Stock-Based
CompensationTransition and Disclosurean amendment of FASB Statement No. 123,or SFAS 148, and applied the prospective method set forth
in SFAS 148 with respect to the transition. Under this method, Aimco now applies the fair value recognition provisions of SFAS 123 to all employee awards granted, modified, or settled on
or after January 1, 2003, which has resulted in compensation expense being recorded based on the fair value of the stock options. Prior to January 1, 2003, Aimco followed Accounting
Principles Board Opinion No. 25,Accounting for Stock
Issued to Employees, or APB 25, and related interpretations in accounting. Under APB 25, because the exercise price of Aimco's employee stock options and warrants equaled the
market price of the underlying stock on the date of grant, no compensation expense was recognized. For purposes of the pro forma disclosures below, the estimated fair values for all awards made prior
to January 1, 2003 are amortized over the respective vesting period for each such option and are shown as expense as if SFAS 123 had been applied to all such awards.

The
following table illustrates the effect on net income (loss) and earnings (loss) per unit if the fair value based method had been applied to all outstanding and unvested awards in
each period presented. Our pro forma information for the three and six months ended June 30, 2004 and 2003 is as follows (in thousands, except per unit data):

|                                                                                                                 |                         | Three Months Ended
June 30, |        | Six Months Ended
June 30, |  
|---------------------------------------------------------------------------------------------------------------- | ----------------------- | --------------------------- | ------ | ------------------------- | -
|
|Net income (loss) attributable to common unitholders, as reported                                                |                         | $                           | (8,527 | )                         | $
|Add: Stock-based employee compensation expense included in reported net income                                   |                         |                             |        |                           |  
|                                                                                                                 | Restricted stock awards |                             |        | 1,290                     |  
|                                                                                                                 | Stock options           |                             |        | 411                       |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards: |                         |                             |        |                           |  
|                                                                                                                 | Restricted stock awards |                             |        | (1,290                    | )
|                                                                                                                 | Stock options           |                             |        | (1,582                    | )
|                                                                                                                 |                         |                             |        |                           |  
|Pro forma net income (loss) attributable to common unitholders                                                   |                         | $                           | (9,698 | )                         | $
|                                                                                                                 |                         |                             |        |                           |  
|Basic earnings (loss) per common unit:                                                                           |                         |                             |        |                           |  
|                                                                                                                 | Reported                |                             | $      | (0.08                     | )
|                                                                                                                 | Pro forma               |                             | $      | (0.09                     | )
|Diluted earnings (loss) per common unit:                                                                         |                         |                             |        |                           |  
|                                                                                                                 | Reported                |                             | $      | (0.08                     | )
|                                                                                                                 | Pro forma               |                             | $      | (0.09                     | )

The
effects of applying SFAS 123 in calculating pro forma income attributable to common unitholders and pro forma basic and diluted earnings per unit may not necessarily be
indicative of the effects of applying SFAS 123 to future years' earnings.

13

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NOTE 8Discontinued Operations and Assets Held for Sale

At June 30, 2004, we had seven properties with an aggregate of 1,751 units classified as held for sale. For the three and six months ended June 30,
2004 and 2003, we included the results of operations of these properties in discontinued operations. During the six months ended June 30, 2004, we sold 20 properties with an aggregate of 4,119
units. For the three and six months ended June 30, 2004 and 2003, we also included in discontinued operations the results of operations of these 20 properties before the sale and the related
gain/loss on sale. During the year ended December 31, 2003, we sold 72 properties with an aggregate of 18,291 units. For the three and six months ended June 30, 2003, we also included in
discontinued operations the results of operations of these 72 properties before the sale and the related gain/loss on sale.

The
following is a summary of the components of income from discontinued operations for the three and six months ended June 30, 2004 and 2003 (dollars in thousands):

|                                                                        |  | For the Three Months
Ended June 30, |        | For the Six Months
Ended June 30, |  
|----------------------------------------------------------------------- |  | ----------------------------------- | ------ | --------------------------------- | -
|
|Rental and other property revenues                                      |  | $                                   | 6,858  |                                   | $
|Property operating expense                                              |  |                                     | (3,285 | )                                 |  
|                                                                        |  |                                     |        |                                   |  
|Net operating income                                                    |  |                                     | 3,573  |                                   |  
|                                                                        |  |                                     |        |                                   |  
|Other expenses, net                                                     |  |                                     | (85    | )                                 |  
|Depreciation and amortization                                           |  |                                     | (849   | )                                 |  
|Interest expense                                                        |  |                                     | (2,075 | )                                 |  
|Interest income                                                         |  |                                     | 19     |                                   |  
|Minority interest in consolidated real estate partnerships              |  |                                     | (95    | )                                 |  
|                                                                        |  |                                     |        |                                   |  
|Income from operations                                                  |  |                                     | 488    |                                   |  
|Gain on dispositions of real estate, net of minority partners' interest |  |                                     | 10,225 |                                   |  
|Impairment loss on real estate assets sold or held for sale             |  |                                     | (477   | )                                 |  
|Recovery of deficit distributions to minority partners                  |  |                                     | 5      |                                   |  
|Income tax arising from disposals                                       |  |                                     | (92    | )                                 |  
|                                                                        |  |                                     |        |                                   |  
|Income from discontinued operations                                     |  | $                                   | 10,149 |                                   | $
|                                                                        |  |                                     |        |                                   |  

We
are currently marketing for sale certain real estate properties that are inconsistent with our long-term investment strategy. We expect that all properties classified as
held for sale will sell within one year from the date classified as held for sale. Assets classified as held for sale of $105.3 million at June 30, 2004 include real estate with a net
book value of $90.2 million and restricted cash and other assets of $15.1 million. Liabilities related to assets classified as held for sale of $83.9 million at June 30,
2004 include mortgage debt of $78.8 million. Assets classified as held for sale of $243.9 million at December 31, 2003 include real estate net book value of $207.4 million,
represented by 27 properties with 5,870 units that were classified as assets held for sale during 2003 and 2004. Liabilities related to assets classified as held for sale of $168.0 million at
December 31, 2003 include mortgage debt of $159.1 million. The estimated proceeds, less anticipated costs to sell certain of these assets, were less than the net book value, and
therefore we recorded impairments of $0.5 million for the three and six months ended June 30, 2004, respectively, and impairments of $2.7 million and $7.9 million for the
three and six months ended June 30, 2003, respectively. We are also marketing for sale properties other than those described above, both consolidated and unconsolidated that are not accounted
for as assets held for sale because they do not meet the required criteria.

14

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NOTE 9Earnings Per Unit

We calculate earnings per unit based on the weighted average number of common OP Units, common OP Unit equivalents and dilutive convertible securities outstanding
during the period. The following table illustrates the calculation of basic and diluted earnings per unit for the three and six months ended June 30, 2004 and 2003 (in thousands, except per
unit data):

|                                                                                                                |                                                                           | For the Three Months Ended June 30, |         | For the Six Months
Ended June 30, |  
|--------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | ----------------------------------- | ------- | --------------------------------- | -
|
|Numerator:                                                                                                      |                                                                           |                                     |         |                                   |  
|Income from continuing operations                                                                               |                                                                           | $                                   | 5,067   |                                   | $
|Less net income attributable to preferred unitholders                                                           |                                                                           |                                     | (23,743 | )                                 |  
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Numerator for basic and diluted earnings per common unit  Income (loss) from continuing operations             |                                                                           | $                                   | (18,676 | )                                 | $
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Income from discontinued operations                                                                             |                                                                           | $                                   | 10,149  |                                   | $
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Cumulative effect of change in accounting principle                                                             |                                                                           | $                                   |        |                                   | $
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Net income                                                                                                      |                                                                           | $                                   | 15,216  |                                   | $
|Less net income attributable to preferred unitholders                                                           |                                                                           |                                     | (23,743 | )                                 |  
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Numerator for basic and diluted earnings per common unit  Net income (loss) attributable to common unitholders |                                                                           | $                                   | (8,527  | )                                 | $
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Denominator:                                                                                                    |                                                                           |                                     |         |                                   |  
|Denominator for basic earnings per unit  weighted average number of common units outstanding                   |                                                                           |                                     | 104,156 |                                   |  
|Effect of dilutive securities:                                                                                  |                                                                           |                                     |         |                                   |  
|Dilutive potential common units                                                                                 |                                                                           |                                     |        |                                   |  
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Denominator for diluted earnings per common unit                                                                |                                                                           |                                     | 104,156 |                                   |  
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Earnings (loss) per common unit:                                                                                |                                                                           |                                     |         |                                   |  
|Basic earnings (loss) per common unit:                                                                          |                                                                           |                                     |         |                                   |  
|                                                                                                                | Income (loss) from continuing operations (net of preferred distributions) |                                     | $       | (0.18                             | )
|                                                                                                                | Income from discontinued operations                                       |                                     |         | 0.10                              |  
|                                                                                                                | Cumulative effect of change in accounting principle                       |                                     |         |                                  |  
|                                                                                                                |                                                                           |                                     |         |                                   |  
|                                                                                                                | Net income (loss) attributable to common unitholders                      |                                     | $       | (0.08                             | )
|                                                                                                                |                                                                           |                                     |         |                                   |  
|Diluted earnings (loss) per common unit:                                                                        |                                                                           |                                     |         |                                   |  
|                                                                                                                | Income (loss) from continuing operations (net of preferred distributions) |                                     | $       | (0.18                             | )
|                                                                                                                | Income from discontinued operations                                       |                                     |         | 0.10                              |  
|                                                                                                                | Cumulative effect of change in accounting principle                       |                                     |         |                                  |  
|                                                                                                                |                                                                           |                                     |         |                                   |  
|                                                                                                                | Net income (loss) attributable to common unitholders                      |                                     | $       | (0.08                             | )
|                                                                                                                |                                                                           |                                     |         |                                   |  

All
of our convertible preferred OP Units are anti-dilutive on an "as converted" basis, therefore, we deduct all of the distributions payable on the convertible preferred OP
Units to arrive at the numerator and no additional units are included in the denominator. We have excluded from diluted earnings per unit the common OP Unit equivalents related to approximately
12.5 million and 12.1 million of vested and unvested stock options, units issued for non-recourse notes receivable, and restricted stock awards for the three and six months
ended June 30, 2004, respectively, and approximately 11.8 million and 10.7 million for the three and six months ended June 30, 2003, respectively, because their effect
would be anti-dilutive. For purposes of calculating diluted earnings per unit in accordance with Statement on Financial Accounting Standards No. 128, Earnings per Share,we treat the unvested
portion of restricted shares as common OP Unit equivalents.

15

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NOTE 10Business Segments

We have two reportable segments: real estate (owning and operating apartments) and investment management business (providing property management, syndication
based activities, and other services relating to the apartment business to third parties and affiliates). We own and operate properties throughout the United States and Puerto Rico that generate
rental and other property related income through the leasing of apartment units to a diverse base of residents. We separately evaluate the performance of each of our properties. However, because each
of our properties has similar economic characteristics, the properties have been aggregated into a single apartment communities, or real estate, segment. All real estate revenues are from external
customers and no real estate revenues are generated from transactions with other segments. No single resident or related group of residents contributed 10% or more of total revenues during the three
and six months ended June 30, 2004 and 2003. A significant portion of the revenues earned in the investment management business are from transactions with affiliates in the real estate segment.

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 segment performance. Our chief operating decision maker
is comprised of several members of our executive management team who use several generally accepted industry financial measures to assess the performance of the business including net operating
income, free cash flow, funds from operations, and adjusted funds from operations. In 2004, the chief operating decision maker has emphasized net operating income as a key measurement of segment
profit or loss. Accordingly, below we disclose net operating income for each of our segments. Net operating income is defined as segment revenues (after the elimination of intersegment revenues) less
direct segment operating expenses. In 2003, we reported free cash flow as the primary basis for measurement of segment profit or loss. Certain reclassifications have been made to the 2003 amounts to
conform to the 2004 presentation. These reclassifications primarily represent presentation changes related to discontinued operations and intercompany eliminations.

The
following table presents revenues and net operating income for the three and six months ended June 30, 2004 and 2003, from these segments, and reconciles net operating income
of reportable segments to operating income as reported in the Consolidated Statements of Income (in thousands):

|                                                                                   |                                     | For the Three Months
Ended June 30,  |         | For the Six Months
Ended June 30, |        
|---------------------------------------------------------------------------------- | ----------------------------------- | ------------------------------------ | ------- | --------------------------------- | -------
|
|Revenues:                                                                          |                                     |                                      |         |                                   |        
|                                                                                   | Real estate segment                 |                                      | $       | 361,001                           |        
|                                                                                   | Investment management segment:      |                                      |         |                                   |        
|                                                                                   |                                     | Gross revenues                       |         |                                   | 35,604 
|                                                                                   |                                     | Elimination of intersegment revenues |         |                                   | (16,413
|                                                                                   |                                     |                                      |         |                                   |        
|                                                                                   |                                     | Net revenues after elimination       |         |                                   | 19,191 
|                                                                                   |                                     |                                      |         |                                   |        
|Total revenues of reportable segments                                              |                                     | $                                    | 380,192 |                                   | $      
|                                                                                   |                                     |                                      |         |                                   |        
|Net operating income:                                                              |                                     |                                      |         |                                   |        
|                                                                                   | Real estate segment                 |                                      | $       | 193,297                           |        
|                                                                                   | Investment management segment       |                                      |         | 12,486                            |        
|                                                                                   |                                     |                                      |         |                                   |        
|Total net operating income of reportable segments                                  |                                     |                                      | 205,783 |                                   |        
|Reconciliation of net operating income of reportable segments to operating income: |                                     |                                      |         |                                   |        
|                                                                                   | Depreciation and amortization       |                                      |         | (93,216                           | )      
|                                                                                   | General and administrative expenses |                                      |         | (18,407                           | )      
|                                                                                   | Other (expenses) income, net        |                                      |         | 589                               |        
|                                                                                   |                                     |                                      |         |                                   |        
|Operating income                                                                   |                                     | $                                    | 94,749  |                                   | $      
|                                                                                   |                                     |                                      |         |                                   |        

16

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|ASSETS (in thousands)                    |                           | June 30, 2004 |           | December 31, 2003
|---------------------------------------- | ------------------------- | ------------- | --------- | -----------------
|Total assets for reportable segments (1) |                           | $             | 9,969,010 |                  
|Corporate and other assets               |                           |               | 401,750   |                  
|                                         |                           |               |           |                  
|                                         | Total consolidated assets |               | $         | 10,370,760       
|                                         |                           |               |           |                  

---

NOTE 11Recent Accounting Developments

FASB Interpretation No. 46

As of March 31, 2004, we adopted FASB Interpretation No. 46 (revised December 2003),Consolidation of Variable
Interest Entities,or FIN 46, and applied its requirements to all entities in which we hold a variable interest. FIN 46 addresses the consolidation by business enterprises of
variable interest entities. 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.

Upon
adoption of FIN 46, we determined that we were the primary beneficiary of 27 previously unconsolidated and five previously consolidated VIEs. These VIEs consisted of partnerships
that are engaged, directly or indirectly, in the ownership and management of 29 apartment properties with 3,478 units. The initial consolidation of the previously unconsolidated entities as of
March 31, 2004 resulted in an increase in our consolidated total assets (primarily real estate), liabilities (primarily indebtedness) and minority interest of approximately
$113.5 million, $90.6 million and $26.8 million, respectively. We recorded a charge of approximately $4.0 million for the cumulative effect on retained earnings resulting
from the adoption of FIN 46. This charge is attributable to our recognition of cumulative losses allocable to minority interests that would otherwise have resulted in minority interest deficits.

As
of June 30, 2004, we were the primary beneficiary of 34 consolidated VIEs which owned 31 apartment properties with 4,012 units. Substantially all of the assets of each
consolidated VIE are collateral for the VIE's obligations. The creditors of the consolidated VIEs do not have recourse to our general credit. As of June 30, 2004, we also held variable
interests in 65 VIEs for which we were not the primary beneficiary. Those 65 VIEs consist primarily of partnerships, in which we acquired an interest prior to the adoption of FIN 46, that are engaged,
directly or indirectly, in the ownership and management of 72 apartment properties with 7,754 units. We are involved with those VIEs as a non-controlling equity holder, lender, management
agent, or through other contractual relationships. 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 $35.3 million at June 30, 2004. We may be subject to additional losses to the extent of any financial support that we voluntarily provide in the future.

We
do not expect that the ongoing effects of FIN 46 will be material to our consolidated financial condition or results of operations taken as a whole.

NOTE 12Related Party Notes Receivable

In exchange for the sale of certain real estate assets to Aimco in December 2000, we received notes receivable, which we refer to as the Notes, totaling
$10.1 million. The Notes bear interest at the rate of 5.7% per annum. Of the $10.1 million total, $7.6 million is due upon demand, and the remainder is due in scheduled
semi-annual payments with all unpaid principal and interest due on December 31, 2010. At June 30, 2004, the balance of the Notes totaled $12.3 million, which includes
accrued and unpaid interest.

17

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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 including, without limitation: national and local economic conditions; the general level of interest rates; 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; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and
possible environmental liabilities, including costs 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 its 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, 2003 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

We are engaged in the ownership, acquisition, management and redevelopment of apartment properties. Our property operations are characterized by diversification
of product, location and price point. As of June 30, 2004, we owned or managed 1,578 apartment properties containing 278,011 units located in 47 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: Funds From Operations, or FFO, less spending
for Capital Replacements; same store property operating results; net operating income; net operating income less spending for Capital Replacements; financial coverage ratios; and leverage as shown on
our balance sheet. These terms are defined and 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; unemployment rates; single-family and multifamily housing starts; and
interest rates.

Because
our operating results depend primarily on income from our properties, the supply and demand for apartments substantially influences our results. Additionally, the level of
expenses required to operate and maintain our properties and the pace and price at which we redevelop, acquire and dispose of our apartment properties can 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.

We
have grown rapidly over the past decade, and during the past three years our growth has moderated. In the first and second quarters of 2004, the apartment industry continued to face a
challenging operating environmentunemployment, job growth at a pace slower than anticipated, low interest rates and an abundant supply of housing alternatives. In addition, we experienced
greater difficulty as compared to our peers because our property operating systems and structure were not as effective as our peers in meeting the challenges presented by the apartment markets. In
response, we are adjusting our business strategies to compete successfully in challenging times and to be ready to maximize our opportunities as the economy improves.

In
first and second quarters of 2004, we continued to address property operations and those efforts will continue throughout the remainder of 2004. We have focused on a number of areas
related to improving operations, including those related to resident selection, marketing, pricing, operating cost
management and customer satisfaction. Our focus on resident selection is designed to make our communities more desirable places to live and

18

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work,
which drives better financial performance from higher and more stable occupancy levels, increased pricing power and reduced costs. Although, we still have a number of steps to take to build
revenue through increased occupancy with residents that meet our financial stability standards, we believe that our improvement efforts are working. In combination, our initiatives are resulting in
improved customer service, better pricing decisions, increased resident quality, a focus on sales and marketing and a higher standard of employee satisfaction. These initiatives have resulted in a
positive trend in certain operating results and are the foundation for long-term benefits that we expect to realize beginning in the second half of 2004 and beyond. In part, these
initiatives have also resulted in improved asset quality, and we will continue to seek opportunities to reinvest in our properties through capital expenditures and to manage our portfolio through
property sales and acquisitions.

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

Results of Operations

Overview



We recognized net income of $15.2 million and net loss attributable to common unitholders of $8.5 million for the three months ended June 30,
2004, compared to net income of $66.7 million and net
income attributable to common unitholders of $39.0 million for the three months ended June 30, 2003, a decrease of $51.5 million and $47.5 million, respectively. These
decreases were principally due to:



These
decreases were partially offset by:





We recognized net income of $30.9 million and net loss attributable to common unitholders of $15.0 million for the six months ended June 30,
2004, compared to net income of $91.9 million and net income attributable to common unitholders of $38.8 million for the six months ended June 30, 2003, a decrease of
$61.0 million and $53.8 million, respectively. These decreases were principally due to:



These
decreases were partially offset by:



19

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The
following paragraphs discuss these and other items affecting our results of operations in more detail.

Rental Property Operations

Our operating income is primarily generated from the operations of our consolidated properties. The principal components within our total consolidated property
operations are: consolidated same store properties, which consist of all conventional properties that were owned, stabilized and consolidated for
all periods presented; and other consolidated entities, which include acquisition, newly consolidated, affordable and redevelopment properties.

The
following table summarizes the overall performance of our consolidated properties for the three and six months ended June 30, 2004 and 2003 (in thousands):

|                                   |  | For the Three Months
Ended June 30, |         | For the Six Months
Ended June 30,
|---------------------------------- |  | ----------------------------------- | ------- | ---------------------------------
|
|Rental and other property revenues |  | $                                   | 361,001 |                                  
|Property operating expenses        |  |                                     | 167,704 |                                  
|                                   |  |                                     |         |                                  
|Net operating income               |  | $                                   | 193,297 |                                  
|                                   |  |                                     |         |                                  

For
the three months ended June 30, 2004, compared to the three months ended June 30, 2003, net operating income for our consolidated property operations decreased by
$9.7 million, or 4.8%. This decrease was principally due to a $15.9 million decrease in consolidated same store net operating income. See further discussion of same store results under
the heading "Conventional Same Store Property Operating Results." This decrease was offset by a $3.2 million increase related to operations of acquisition properties, which were principally
comprised of The Palazzo at Park La Brea, three properties purchased in 2004 and three properties purchased in 2003. The decrease was further offset by a $5.1 million increase related to
operations of newly consolidated properties, which are properties that had been previously unconsolidated and accounted for by the equity method (ten properties that
were first consolidated in 2003 and 31 properties first consolidated in 2004, which includes 25 properties that were consolidated due to the implementation of FIN 46).

For
the six months ended June 30, 2004, compared to the six months ended June 30, 2003, net operating income for our consolidated property operations decreased by
$15.1 million, or 3.8%. This decrease was principally due to a $24.1 million decrease in consolidated same store net operating income. See further discussion of same store results under
the heading "Conventional Same Store Property Operating Results." This decrease was offset by a $6.8 million increase related to operations of newly consolidated properties and a
$6.0 million increase related to operations of acquisition properties.

20

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Conventional Same Store Property Operating Results

Same store operating results is a key indicator we use to assess the performance of our property operations and to understand the period over period operations of
a consistent portfolio of properties. We define "same store" properties as conventional properties in which our ownership interest exceeds 10% and the operations of which are stabilized for all
periods presented. To ensure comparability, the information for all periods shown is based on current period ownership. The following table summarizes the unaudited conventional rental property
operations on a "same store" basis (which is not in accordance with generally accepted accounting principles, or GAAP) and reconciles them to consolidated rental property operations (which is in
accordance with GAAP) described in the above comparative discussions (dollars in thousands):

|                                                                         |                                   | For the Three Months
Ended June 30, |         | For the Six Months
Ended June 30,
|------------------------------------------------------------------------ | --------------------------------- | ----------------------------------- | ------- | ---------------------------------
|
|Our share of same store revenues                                         |                                   | $                                   | 265,649 |                                  
|Our share of same store expenses                                         |                                   |                                     | 115,802 |                                  
|                                                                         |                                   |                                     |         |                                  
|Our share of same store net operating income                             |                                   | $                                   | 149,847 |                                  
|Adjustments to reconcile to real estate segment net operating income (1) |                                   |                                     | 43,450  |                                  
|                                                                         |                                   |                                     |         |                                  
|Real estate segment net operating income                                 |                                   | $                                   | 193,297 |                                  
|                                                                         |                                   |                                     |         |                                  
|Same Store Statistics                                                    |                                   |                                     |         |                                  
|                                                                         | Properties                        |                                     |         | 569                              
|                                                                         | Apartment units                   |                                     |         | 159,769                          
|                                                                         | Average physical occupancy        |                                     |         | 88.1%                            
|                                                                         | Average rent collected/unit/month |                                     | $       | 726                              

---

For
the three months ended June 30, 2004, compared to the three months ended June 30, 2003, our share of same store net operating income decreased $13.3 million, or
8.1%. Revenues decreased $9.3 million, or 3.4%, primarily due to lower occupancy (down 4.5%), offset by higher utility
reimbursements from residents and decreased bad debt. Expenses increased by $4.0 million, or 3.5%, primarily due to an increase of $4.9 million in compensation and benefit expense
related to a new employee health plan and increased staffing levels. This increase in expense was offset by a decrease of $1.0 million in property taxes and insurance costs.

For
the six months ended June 30, 2004, compared to the six months ended June 30, 2003, our share of same store net operating income decreased $20.1 million, or
6.3%. Revenues decreased $12.7 million, or 2.4%, primarily due to lower occupancy (down 3.1%), and slightly lower average rent (down $3 per unit), offset by higher utility reimbursements from
residents and decreased bad debt. Expenses increased by $7.3 million, or 3.4%, primarily due to: an increase of $9.2 million in compensation and benefit expense related to a new employee
health plan and increased staffing levels; and an increase of $1.8 million in utilities due to the increase in the cost of natural gas. These increases in expenses were offset by a decrease of
$2.3 million in turnover costs related to fewer new tenant move-ins in 2004 as compared to 2003; a decrease of $0.7 million in contract services and repairs and maintenance
primarily driven by lower snow removal expense; and a decrease of $1.2 million in property taxes and insurance costs.



We earn income from property management primarily from unconsolidated real estate partnerships for which we are the general partner. The income is primarily in
the form of fees generated through property management and other associated activities. Our revenue from property management decreases as we consolidate real estate

21

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partnerships
and the income generated is therefore eliminated in consolidation. We expect this trend to continue as we increase our ownership in more of these partnerships or otherwise determine that
consolidation is required by GAAP. Offsetting the revenue earned in property management are the direct expenses associated with property management.

The
following table summarizes the overall performance of our property management for the three and six months ended June 30, 2004 and 2003 (in thousands):

|                                                        |  | For the Three Months
Ended June 30, |       | For the Six Months
Ended June 30,
|------------------------------------------------------- |  | ----------------------------------- | ----- | ---------------------------------
|
|Property management revenues, primarily from affiliates |  | $                                   | 9,371 |                                  
|Property management expenses                            |  |                                     | 1,989 |                                  
|                                                        |  |                                     |       |                                  
|Net operating income from property management           |  | $                                   | 7,382 |                                  
|                                                        |  |                                     |       |                                  

For
the three months ended June 30, 2004, compared to the three months ended June 30, 2003, net operating income from property management decreased by $0.3 million,
or 3.9%. For the six months ended June 30, 2004, compared to the six months ended June 30, 2003, net operating income from property management decreased by $1.5 million, or 10.2%.
The decrease in both periods was principally a result of the consolidation of additional real estate partnerships, which required elimination of the fee income associated with these entities.



Activity fees are generated from transactional activity including dispositions, syndications, tax credit redevelopments and refinancings. These transactions occur
on varying timetables, thus the income generated may vary from period to period. Asset management income is from the financial management of properties, rather than management of
day-to-day property operations. Asset management income includes deferred asset management fees that are
recognized once a transaction has occurred. Offsetting the revenue earned in activity fees and asset management are the direct expenses associated with these activities.

The
following table summarizes the overall performance of our activity fees and asset management for the three and six months ended June 30, 2004 and 2003 (in thousands):

|                                                                       |  | For the Three Months
Ended June 30, |       | For the Six Months
Ended June 30,
|---------------------------------------------------------------------- |  | ----------------------------------- | ----- | ---------------------------------
|
|Activity fees and asset management revenues, primarily from affiliates |  | $                                   | 9,820 |                                  
|Activity and asset management expenses                                 |  |                                     | 4,716 |                                  
|                                                                       |  |                                     |       |                                  
|Net operating income from activity fees and asset management           |  | $                                   | 5,104 |                                  
|                                                                       |  |                                     |       |                                  

For
the three months ended June 30, 2004, compared to the three months ended June 30, 2003, net operating income from activity fees and asset management increased by
$4.0 million. This overall increase was principally a result of increased activity fees related to developer and disposition activities of $2.1 million and $1.2 million,
respectively, due to a greater number of transactions in the second quarter of 2004 as compared to the second quarter of 2003. Additionally, there was an increase of $2.9 million related to the
recognition of deferred asset management fees resulting from closed transactions. These increases were offset by higher expenses associated with these activities.

For
the six months ended June 30, 2004, compared to the six months ended June 30, 2003, net operating income from activity fees and asset management increased by
$6.0 million. This overall increase was principally a result of increased activity fees related to developer, refinancing and disposition activities of $3.4 million, $1.6 million
and $1.3 million, respectively, also due to a greater number of transactions in 2004 than in 2003. Additionally, there was an increase of $4.1 million related to the recognition of
deferred asset management fees resulting from closed transactions. These increases were offset by a $1.5 million decrease related to syndication fees and higher expenses associated with these
activities.

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Depreciation and Amortization

For the three months ended June 30, 2004, compared to the three months ended June 30, 2003, depreciation and amortization increased
$5.6 million, or 6.4%. This increase was principally due to $3.1 million and $1.3 million of additional depreciation related to the newly consolidated and acquisition properties,
respectively, as well as $1.0 million of increased depreciation related to the completion of certain redevelopment properties.

For
the six months ended June 30, 2004, compared to the six months ended June 30, 2003, depreciation and amortization increased $11.0 million, or 6.4%. This increase
was principally due to $4.6 million and $2.3 million of additional depreciation related to the newly consolidated and acquisition properties, respectively, as well as $2.8 million
of increased depreciation related to the completion of certain redevelopment properties.

General and Administrative Expenses

For the three months ended June 30, 2004, compared to the three months ended June 30, 2003, general and administrative expenses increased
$10.8 million. This increase was principally due to: $3.2 million in higher compensation and benefit expense related to increased staffing levels, a new employee health plan, and higher
variable compensation; $1.9 million favorable change in estimate in the second quarter of 2003 related to the collectibility of corporate receivables from unconsolidated partnerships;
$1.3 million in higher compliance costs and legal fees; $0.9 million of one-time executive recruitment and relocation costs; and $0.2 million of increased travel costs
incurred in connection with monthly regional operating center reviews.

For
the six months ended June 30, 2004, compared to the six months ended June 30, 2003, general and administrative expenses increased $19.7 million. This increase
was principally due to: $8.0 million in higher compensation and benefit expense related to increased staffing levels, a new employee health plan, and higher variable compensation;
$4.3 million in higher consulting, legal and compliance costs; $1.9 million favorable change in estimate in the second quarter of 2003 related to the collectibility of corporate
receivables from unconsolidated partnerships; a $1.0 million benefit in the first quarter of 2003 related to forfeited deposits on sales; and $0.8 million of one-time
executive recruitment and relocation costs.

Other Income, Net

Other income, net includes tax provision/benefit, risk management activities related to our unconsolidated partnerships and partnership expenses.

For
the three months ended June 30, 2004, compared to the three months ended June 30, 2003, other income decreased by $3.0 million or 83.5%. This decrease was
principally due to a $2.1 million decrease in risk operations primarily related to the write-off of certain insurance receivables in the second quarter of 2004 and additional loss
funding for prior year insurance programs, and $0.4 million related to a lower tax benefit recognized in the second quarter of 2004 as compared to the second quarter of 2003. In the three
months ended June 30, 2004, there was a tax benefit of $3.0 million recorded, as compared to $3.4 million in the three months ended June 30, 2003.

For
the six months ended June 30, 2004, compared to the six months ended June 30, 2003, other income decreased by $5.4 million, or 75.2%. This decrease was
principally due to a $6.3 million lower tax benefit recognized in 2004 as compared to 2003. In the six months ended June 30, 2004, there was a tax benefit of $6.6 million
recorded, as compared to $12.9 million in the six months ended June 30, 2003. During the six months ended June 30, 2003, there was an $8.0 million tax benefit related to
the reversal of a deferred income tax asset valuation allowance.

Interest Expense

For the three months ended June 30, 2004, compared to the three months ended June 30, 2003, interest expense, which includes the amortization of
deferred financing costs, increased $5.2 million, or 5.7%. This increase was principally due to: $5.0 million in additional interest on the debt related to the newly consolidated and
acquisition properties; a $2.3 million increase due to total higher average principal balances on our credit facility and term loans along with a 25 basis point increase in the LIBOR spread;
and a $2.4 million decrease in capitalized interest due to redevelopment properties being placed in service. These increases were partially offset by lower weighted average effective interest
rates on mortgage debt due to refinancings that occurred in 2003 and 2004.

23

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For
the six months ended June 30, 2004, compared to the six months ended June 30, 2003, interest expense, increased $9.4 million, or 5.2%. This increase was
principally due to: $7.7 million in additional interest on the debt related to the newly consolidated and acquisition properties; a $6.2 million decrease in capitalized interest due to
redevelopment properties being placed in service; and a $2.4 million increase due to total higher average principal balances on our credit facility and term loans along with a 25 basis point
increase in the LIBOR spread. These increases were partially offset by lower weighted average effective interest rates on mortgage debt due to refinancings that occurred in 2003 and 2004.

Minority Interest in Consolidated Real Estate Partnerships

For the three months ended June 30, 2004, compared to the three months ended June 30, 2003, minority interest in consolidated real estate
partnerships decreased $5.2 million. For the six months ended June 30, 2004, compared to the six months ended June 30, 2003, minority interest in consolidated real estate
partnerships decreased $7.3 million. The decreases in both periods were principally a result of decreased earnings caused by lower property operating results than in the prior year offset by
increases due to the minority interest partners' share of our joint venture with GE Real Estate.

Discontinued Operations

For properties accounted for as held for sale, the results of operations for properties sold during the period or designated as held for sale at the end of the
period are required to be classified as discontinued operations. The property-specific components of net earnings that are classified as discontinued operations include all property-related revenues
and operating expenses, depreciation expense recognized prior to the classification as held for sale, property-specific interest expense to the extent there is secured debt on the property and the
associated minority interest. In addition, any impairments on assets held for sale, and the net gain on the eventual disposal of properties held for sale are reported as discontinued operations.

For
the three months ended June 30, 2004 and 2003, income from discontinued operations totaled $10.1 million and $38.6 million, respectively, which includes income
from operations of $0.5 million and $2.9 million, respectively. For the six months ended June 30, 2004 and 2003, income from discontinued operations totaled $23.7 million
and $37.6 million, respectively, which includes income from operations of $0.1 million and $4.8 million, respectively. For the three and six months ended June 30, 2004, the
income from operations included 27 properties that were sold or classified as held for sale during 2004. For the three and six months ended June 30, 2003, the income from operations included 99
properties that were
sold or classified as held for sale in the first half of 2004 and all of 2003. Due to varying number of properties and the timing of sales, income (loss) from operations is not comparable period to
period.

During
the three months ended June 30, 2004, we sold ten properties, resulting in a net gain on sale of approximately $10.1 million (which is net of $0.1 million of
related taxes). During the three months ended June 30, 2003, we sold 13 properties, resulting in a net gain on sale of approximately $38.1 million (which is net of $3.0 million of
related taxes). Additionally, we recognized $0.5 million and $2.7 million in impairments on assets sold or held for sale in the three months ended June 30, 2004 and 2003,
respectively.

During
the six months ended June 30, 2004, we sold 20 properties, resulting in a net gain on sale of approximately $20.8 million (which is net of $0.8 million of
related taxes). During the six months ended June 30, 2003, we sold 22 properties, resulting in a net gain on sale of approximately $40.2 million (which is net of $4.3 million of
related taxes). Additionally, we recognized $0.5 million and $7.9 million in impairments on assets sold or held for sale in the six months ended June 30, 2003.

Gains
(losses) on properties sold are determined on a property-by-property basis and are not comparable period to period due to individual property differences.
We considered the properties sold, as well as the properties classified as held for sale, to be inconsistent with our long-term investment strategy. See Note 8 of the consolidated
financial statements for further information on discontinued operations.

Cumulative Effect of Change in Accounting Principle

On March 31, 2004, we recorded a $4.0 million cumulative effect of change in accounting principle related to the implementation of FIN 46. This
charge is attributable to our recognition of cumulative losses allocable to

24

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minority
interest that would otherwise have resulted in minority interest deficits. See Note 11 of the consolidated financial statements for further information.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions. We believe that the following
critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Impairment of Long-Lived Assets

Real estate and other long-lived assets are recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances
indicate that the carrying amount of a property may be impaired, we make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the
property. If the carrying amount exceeds the aggregate undiscounted future cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the
property.

Real
estate investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of our real estate investments. These factors
include:



Any
adverse changes in these factors could cause an impairment in our long-lived assets, including real estate, goodwill and investments in unconsolidated real estate
partnerships. No impairment losses were recognized on held-for-use properties during the three and six months ended June 30, 2004 and 2003.

Allowance for Losses on Notes Receivable

We evaluate notes receivable for impairment by assessing the likelihood of collecting all amounts due according to the contractual terms of the related loan
agreement. For notes that are collateralized by real estate, our evaluation considers whether estimated cash flows from the operation and sale of the property are sufficient to pay principal and
interest as scheduled in the loan agreement. We establish an allowance for losses on notes receivable when we determine that it is probable that we will be unable to collect all amounts due. In such
instances, the amount of loss to be recognized is based on the estimated fair value of the collateral real estate. During the three and six months ended June 30, 2004, we identified and
recorded $1.2 million and $1.1 million in losses on notes receivable (net of recoveries), respectively, and during the three and six months ended June 30, 2003, we identified and
recorded $0.8 million and $1.5 million in losses on notes receivable (net of recoveries), respectively. We will continue to evaluate the collectibility of these notes, and we may adjust
related allowances in the future due to changes in market conditions and other factors.

Capitalized Costs

We capitalize direct and allocable indirect costs (including salaries, interest, real estate taxes and other costs) incurred in connection with redevelopment,
Capital Improvement and Capital Replacement activities. We charge to expense as incurred indirect costs that do not relate to the above activities,
including general and administrative expenses. The amounts capitalized depend on the volume and costs of such activities. Based on the level of capital spending during the six months ended
June 30, 2004, if capital activities had increased or decreased during the period by 10%, our income would have increased or decreased, respectively, by $2.2 million. See further
discussion under the heading "Capital Expenditures."

25

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Funds From Operations

Funds From Operations, or FFO, is a non-GAAP financial measure that we believe, when considered with the financial data determined in accordance with
GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or
maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers or other personal property. The Board of Governors of the National Association of Real
Estate Investment Trusts, or NAREIT, defines FFO as net income (loss), computed in accordance with GAAP, excluding gains and losses from extraordinary items, cumulative effect of change in accounting
principle, gains on dispositions of depreciable real estate related to unconsolidated entities and other, gains on dispositions of real estate from discontinued operations, net of related income
taxes, plus real estate related depreciation and amortization (excluding amortization of financing costs), including depreciation for unconsolidated real estate partnerships, joint ventures and
discontinued operations. We calculate FFO based on the NAREIT definition, as further adjusted for amortization of management contracts and deficit distributions to minority partners. We calculate FFO
(diluted) by subtracting redemption related preferred OP Unit issuance costs and distributions on preferred OP Units, adding back distributions on dilutive preferred securities and adding back the
interest expense on dilutive mandatorily redeemable convertible preferred securities. FFO should not be considered an alternative to net income or net cash flows from operating activities, as
calculated in accordance with GAAP, as an indication of our performance or as a measure of liquidity. FFO is not necessarily indicative of cash available to fund future cash needs. In addition,
although FFO is a measure used for comparability in assessing the performance of real estate investment trusts, there can be no assurance that our basis for computing FFO is comparable with that of
other real estate investment trusts. For the three and six months ended June 30, 2004 and 2003, our FFO is calculated as follows (amounts in thousands):

|                                                                                                           |                                                                                  | For the Three Months
Ended June 30,                                         |         | For the Six Months
Ended June 30, |        
|---------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------- | --------------------------------- | -------
|
|Net income (loss) attributable to common unitholders (1)                                                   |                                                                                  | $                                                                           | (8,527  | )                                 | $      
|Adjustments:                                                                                               |                                                                                  |                                                                             |         |                                   |        
|                                                                                                           | Depreciation and amortization                                                    |                                                                             |         | 93,216                            |        
|                                                                                                           | Depreciation and amortization related to non-real estate assets                  |                                                                             |         | (4,287                            | )      
|                                                                                                           | Depreciation of rental property related to minority partners' interest (2)       |                                                                             |         | (12,203                           | )      
|                                                                                                           | Depreciation of rental property related to unconsolidated entities               |                                                                             |         | 5,574                             |        
|                                                                                                           | Gain on dispositions of real estate related to unconsolidated entities and other |                                                                             |         | (2,097                            | )      
|                                                                                                           | Gain on disposition of land                                                      |                                                                             |         | 875                               |        
|                                                                                                           | Deficit distributions to minority partners                                       |                                                                             |         | 2,650                             |        
|                                                                                                           | Cumulative effect of change in accounting principle                              |                                                                             |         |                                  |        
|                                                                                                           | Discontinued operations:                                                         |                                                                             |         |                                   |        
|                                                                                                           |                                                                                  | Depreciation of rental property, net of minority partners' interest (2)     |         |                                   | 710    
|                                                                                                           |                                                                                  | Gain on dispositions of real estate, net of minority partners' interest (2) |         |                                   | (10,225
|                                                                                                           |                                                                                  | Recovery of deficit distributions to minority partners                      |         |                                   | (5     
|                                                                                                           |                                                                                  | Income tax arising from disposals                                           |         |                                   | 92     
|Preferred OP Unit distributions                                                                            |                                                                                  |                                                                             | 23,655  |                                   |        
|Redemption related preferred OP Unit issuance costs                                                        |                                                                                  |                                                                             | 88      |                                   |        
|                                                                                                           |                                                                                  |                                                                             |         |                                   |        
|Funds From Operations                                                                                      |                                                                                  | $                                                                           | 89,516  |                                   | $      
|Preferred OP Unit distributions                                                                            |                                                                                  |                                                                             | (23,655 | )                                 |        
|Redemption related preferred OP Unit issuance costs                                                        |                                                                                  |                                                                             | (88     | )                                 |        
|Distributions on dilutive preferred securities                                                             |                                                                                  |                                                                             | 1,059   |                                   |        
|Interest expense on dilutive mandatorily redeemable convertible preferred securities                       |                                                                                  |                                                                             |        |                                   |        
|                                                                                                           |                                                                                  |                                                                             |         |                                   |        
|Funds From Operations attributable to common unitholders  diluted                                         |                                                                                  | $                                                                           | 66,832  |                                   | $      
|                                                                                                           |                                                                                  |                                                                             |         |                                   |        
|Weighted average number of common OP Units and equivalents, and dilutive preferred securities outstanding: |                                                                                  |                                                                             |         |                                   |        
|                                                                                                           | Common OP Units and equivalents (3)                                              |                                                                             |         | 104,171                           |        
|                                                                                                           | Dilutive preferred securities                                                    |                                                                             |         | 1,794                             |        
|                                                                                                           |                                                                                  |                                                                             |         |                                   |        
|                                                                                                           |                                                                                  | Total                                                                       |         |                                   | 105,965
|                                                                                                           |                                                                                  |                                                                             |         |                                   |        

26

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Notes:



Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations either through the sale or maturity of existing assets or by the acquisition of
additional funds through working capital management. Both the coordination of asset and liability maturities and effective working capital management are important to the maintenance of liquidity. Our
primary source of liquidity is cash flow from our operations. Additional sources are proceeds from property sales and proceeds from refinancings of existing mortgage loans and borrowings under new
mortgage loans.

Our
principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, distributions paid to unitholders and
distributions paid to partners, and acquisitions of, and investments in, properties. We use our cash provided by operating activities to meet short-term liquidity needs. In the event that
the cash provided by operating activities no longer covers our short-term liquidity demands, we have additional means, such as short-term borrowing availability, proceeds from
property sales and refinancings, to help us meet our short-term liquidity demands. We use our outstanding revolving credit facility, which we refer to as the Revolver, for general
corporate purposes and to fund investments on an interim basis. We expect to meet our long-term liquidity requirements, such as debt maturities and property acquisitions, through
long-term borrowings, both secured and unsecured, the issuance of debt or equity securities (including OP Units), the sale of properties and cash generated from operations.

At
June 30, 2004, we had $93.4 million in cash and cash equivalents (including $2.8 million of cash and cash equivalents that is included within Assets Held for
Sale), a decrease of $21.0 million from December 31, 2003. At June 30, 2004, we had $290.1 million of restricted cash (including $4.5 million of restricted cash that
is included within Assets Held for Sale), primarily consisting of reserves and
escrows held by lenders for bond sinking funds, capital expenditures, property taxes and insurance. In addition, cash, cash equivalents and restricted cash are held by partnerships that are not
presented on a consolidated basis. The following discussion relates to changes in cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash
Flows.

Operating Activities

For the six months ended June 30, 2004, our net cash provided by operating activities of $166.0 million was primarily due to operating income from
our consolidated properties, which is determined by rental rates, occupancy levels and operating expenses related to our portfolio of properties. This was a decrease of $121.9 million as
compared to the six months ended June 30, 2003, driven by lower property operating results and changes in operating assets and liabilities. These changes primarily related to an increase in
restricted cash related to certain operating escrows, a decrease in accrued liabilities in relation to payment of accrued property taxes and interest and an increase in our prepaid insurance accounts
as a result of premiums paid. We intend for our net cash from operating activities to fund distributions paid to unitholders.

Investing Activities

For the six months ended June 30, 2004, our net cash used in investing activities of $107.9 million was primarily related to the acquisitions of The
Palazzo at Park La Brea and three other properties, as well as investments in our existing real estate assets through capital spending (see further discussion on capital expenditures under the heading
"Capital Expenditures"). These uses were offset by proceeds received from sales of properties.

Although
we hold all of our properties for investment, we sell properties when they do not meet our investment criteria or are located in areas that we believe do not justify continued
investment, when compared to alternative uses for our capital. In the six months ended June 30, 2004, we sold 20 consolidated properties and 26 unconsolidated properties. These properties were
sold for an aggregate sales price of $275.3 million. The

27

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consolidated
properties generated proceeds, after payment of transaction costs, of $112.4 million. Our share of the total net proceeds from the sale of the 46 properties, after repayment of
existing debt, payment of transaction costs and distributions to limited partners, was $93.3 million. These proceeds
were used to repay a portion of our outstanding short-term indebtedness and for other corporate purposes.

We
are currently marketing for sale certain real estate properties that are inconsistent with our long-term investment strategy. Additionally, from time to time, we may
market certain properties that are consistent with our long-term investment strategy but offer attractive pricing alternatives. Proceeds from 2004 dispositions are expected to be slightly
below the levels of 2003, and we plan to use such proceeds to reduce debt, fund capital expenditures on existing assets, fund property and partnership acquisitions, and for other operating needs and
corporate purposes.

Financing Activities

For the six months ended June 30, 2004, net cash used in financing activities of $79.1 million primarily related to payments on our secured notes
payable, payment of our distributions, repurchases of common OP Units and redemptions of mandatorily redeemable preferred securities and the Class P Partnership Preferred Units. These were
offset by proceeds from the issuance of Class U Partnership Preferred Units and borrowings on the Revolver (see notes to the consolidated financial statements for further details on these
activities).



At
June 30, 2004, we had $5.8 billion in consolidated mortgage debt outstanding as compared to $5.5 billion outstanding at December 31, 2003. During the six
months ended June 30, 2004, we refinanced or closed mortgage loans on 20 consolidated properties generating $123.7 million of proceeds from borrowings with a weighted average interest
rate of 4.22%. Our share of the net proceeds after repayment of existing debt, payment of transaction costs and distributions to limited partners, was $25.1 million. In addition, we closed
mortgage loans on 11 unconsolidated properties, with a weighted average interest rate of 3.76%, for net proceeds of $20.7 million, which proceeds are included in our distributions received from
investments in unconsolidated real estate partnerships, within investing activities. Our total net proceeds from these loans of $45.8 million were used to repay existing short-term
debt and for other corporate purposes. In 2004 we intend to continue to refinance mortgage debt to generate proceeds in amounts exceeding our scheduled amortizations and maturities.

During
the six months ended June 30, 2004, we closed mortgage loans totaling $100.3 million, with a weighted average interest rate of 2.94%, to finance the two acquisitions
that we completed in the first quarter.



Our
Revolver is comprised of a syndicate of financial institutions having aggregate lending commitments of $445 million. At June 30, 2004, the Revolver had an outstanding
principal balance of $285.6 million and an interest rate of 4.45% based on weighted average LIBOR contracts outstanding with various maturities plus 3.10%. The Revolver matures in
July 2005. The amount available under the Revolver at June 30, 2004 was $136.7 million (after giving effect to $22.7 million outstanding for undrawn letters of credit
issued under the Revolver). The maximum amount available for borrowing under the Revolver fluctuates based on established criteria defined therein and is typically the $445 million that has
been syndicated.

In
May 2003, we borrowed $250 million through a syndicated term loan, which we refer to as the Term Loan. The Term Loan matures in May 2008 and is repayable at our
option at any time without penalty. At June 30, 2004, the Term Loan had an outstanding principal balance of $250 million and an interest rate of 4.23% (based on a designated LIBOR rate
plus 3.10%). All financial covenant requirements of the Term Loan are the same as the Revolver and the term loan we entered into with a syndicate of financial institutions in connection with the
Casden Merger in March 2002, which we refer to as the Casden Loan. At June 30, 2004, the Casden Loan had an outstanding principal balance of $93.0 million and an interest rate of
4.21% (based on a designated LIBOR rate plus 3.10%). The Casden Loan matures in March 2005. At June 30, 2004, we were in compliance with all of our covenant requirements.

28

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Capital Expenditures

Effective January 1, 2004, all capital spending is classified as either Capital Replacements, which we refer to as CR, Capital Improvements, which we refer
to as CI, or redevelopment. These categories replace our prior capital spending categoriescapital replacements, capital enhancements, redevelopment, initial capital expenditures, and
disposition capital expenditures. We believe the new classifications will be simpler to apply, allow more discrete differentiation between categories, facilitate sound economic decisions, and assist
investors and analysts in better understanding our capital spending.

Non-redevelopment
capitalizable expenditures are apportioned between CR and CI based on the useful life of the capital item under consideration and the period we have owned
the
property (i.e., the portion that was consumed during our ownership of the item represents CR; the portion of the item that was consumed prior to our ownership represents CI).

For
the six months ended June 30, 2004, we spent a total of $30.5 million on Capital Replacements. These are expenditures that do not increase the value, profitability or
useful life of an asset from its original purchase condition, but represent the share of expenditures that are deemed to replace the consumed portion of acquired capital assets. For the six months
ended June 30, 2004, we spent a total of $26.1 million and $32.2 million, respectively, on Capital Improvements and redevelopment. CI expenditures represent all
non-redevelopment capital expenditures that are made to enhance the value, profitability or useful life of an asset from its original purchase condition, and redevelopment expenditures
represent expenditures that substantially upgrade the property.

The
table below details our share of actual spending, on both consolidated and unconsolidated real estate partnerships, for CR, CI and redevelopment for the six months ended
June 30, 2004 on a per unit and total dollar basis (based on approximately 158,000 ownership equivalent units), and reconciles it to our Consolidated Statement of Cash Flows for the same period
(in thousands, except per unit amounts).

|                                                                    |                                                                    | Actual Cost |         | Cost Per Unit
|------------------------------------------------------------------- | ------------------------------------------------------------------ | ----------- | ------- | -------------
|Capital Replacements:                                               |                                                                    |             |         |              
|Building interiors                                                  |                                                                    | $           | 6,895   |              
|                                                                    | Includes: hot water heaters, kitchen/bath, computers               |             |         |              
|Building exteriors                                                  |                                                                    |             | 4,929   |              
|                                                                    | Includes: roofs, exterior painting, electrical, plumbing           |             |         |              
|Landscaping and grounds                                             |                                                                    |             | 3,114   |              
|                                                                    | Includes: parking lot improvements, pool improvements              |             |         |              
|Turnover related                                                    |                                                                    |             | 10,412  |              
|                                                                    | Includes: carpet, vinyl, tile, appliance, and fixture replacements |             |         |              
|Capitalized payroll and other indirect costs                        |                                                                    |             | 5,119   |              
|                                                                    |                                                                    |             |         |              
|Total our share of Capital Replacements                             |                                                                    | $           | 30,469  |              
|                                                                    |                                                                    |             |         |              
|Capital Improvements:                                               |                                                                    |             |         |              
|                                                                    | Conventional                                                       |             |         | 19,551       
|                                                                    | Affordable                                                         |             |         | 6,515        
|                                                                    |                                                                    |             |         |              
|Total our share of Capital Improvements                             |                                                                    | $           | 26,066  |              
|                                                                    |                                                                    |             |         |              
|Redevelopment:                                                      |                                                                    |             |         |              
|                                                                    | Conventional                                                       |             |         | 25,605       
|                                                                    | Affordable                                                         |             |         | 6,589        
|                                                                    |                                                                    |             |         |              
|Total our share of redevelopment                                    |                                                                    | $           | 32,194  |              
|                                                                    |                                                                    |             |         |              
|Total our share of capital expenditures                             |                                                                    | $           | 88,729  |              
|                                                                    |                                                                    |             |         |              
|                                                                    | Plus minority partners' share of consolidated spending             |             |         | 19,416       
|                                                                    | Less our share of unconsolidated spending                          |             |         | (5,215       
|                                                                    |                                                                    |             |         |              
|Total capital expenditures per Consolidated Statement of Cash Flows |                                                                    | $           | 102,930 |              
|                                                                    |                                                                    |             |         |              

We
funded all of the above capital expenditures with cash provided by operating activities, working capital, and borrowings under the Revolver.

29

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Contractual Obligations

This table summarizes information regarding contractual obligations and commitments as of June 30, 2004 (amounts in thousands):

|                                            |  | Total |           | Less than
one year |   | 1  3
years |  | 3  5
years |           | More than
5 years
|------------------------------------------- |  | ----- | --------- | ------------------ | - | ----------- |  | ----------- | --------- | -----------------
|Scheduled long-term debt maturities         |  | $     | 5,770,469 |                    | $ | 142,128     |  | $           | 844,086   |                  
|Secured credit facility and term loans      |  |       | 628,600   |                    |   |            |  |             | 378,600   |                  
|Mandatorily redeemable preferred securities |  |       | 15,019    |                    |   |            |  |             |          |                  
|Leases for space occupied                   |  |       | 24,456    |                    |   | 5,874       |  |             | 10,692    |                  
|Development fee payments (1)                |  |       | 27,500    |                    |   | 5,000       |  |             | 20,000    |                  
|                                            |  |       |           |                    |   |             |  |             |           |                  
|Total                                       |  | $     | 6,466,044 |                    | $ | 153,002     |  | $           | 1,253,378 |                  
|                                            |  |       |           |                    |   |             |  |             |           |                  

---

Additionally,
in connection with the Casden Merger, we are committed to purchase two properties for minimum consideration of approximately $400 million, provide a
stand-by facility of $64.5 million in debt financing associated with development, and invest up to $50 million for a 20% limited liability company interest in Casden
Properties LLC. See Note 5 of the consolidated financial statements for detailed information on these commitments.

Future Capital Needs

In addition to the items set forth in "Contractual Obligations" above, we expect to fund any future acquisitions, redevelopment and Capital Improvements
principally with proceeds from property sales (including tax-free exchange proceeds), short-term borrowings, debt and equity financings and operating cash flows. In 2004, we
plan to commence as many as 40 redevelopments with average spending per project in the $2 million to $10 million range.

Off-Balance Sheet Arrangements

We own general and limited partner interests in unconsolidated real estate partnerships, which interests were acquired through portfolio acquisitions, direct
purchases and separate offers to other limited partners. Our total ownership interests in these unconsolidated real estate partnerships ranges from 1% to 50%. However, based on the provisions of the
related partnership agreements, which grant varying degrees of control, we are not deemed to have control of these partnerships sufficient to require or permit consolidation for accounting purposes.
The requirement or ability to consolidate a real estate partnership is affected by FIN 46 (see Note 11 of the consolidated financial statements). There are no lines of credit, side agreements,
or any other derivative financial instruments related to or between our unconsolidated real estate partnerships and us and no material exposure to financial guarantees (see Note 5 of the
consolidated financial statements). Accordingly, our maximum risk of loss related to these unconsolidated real estate partnerships is limited to the aggregate carrying amount of our investment in
the unconsolidated real estate partnerships and any outstanding notes receivable as reported in our consolidated financial statements.

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ITEM 3.Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk exposure relates to changes in interest rates. We are not subject to any foreign currency exchange rate risk or commodity price risk, or
any other material market rate or price risks. We use predominantly long-term, fixed-rate and self-amortizing non-recourse mortgage debt in order to
avoid the refunding and repricing risks of short-term borrowings. We use short-term debt financing and working capital primarily to fund short-term uses and
acquisitions and generally expect to refinance such borrowings with cash from operating activities, property sales proceeds, long-term debt or equity financings.

We
had $1,814.5 million of floating rate debt outstanding at June 30, 2004. Of the total floating rate debt, the major components were floating rate tax-exempt
bond financing ($855.7 million), floating rate secured notes ($330.2 million), the revolving credit facility ($285.6 million), and the term loans ($343.0 million). Based on
this level of debt, an increase in interest rates of 1% would result in our income and cash flows being reduced by $18.1 million on an annual basis. Historically, changes in
tax-exempt interest rates have been at a ratio less than 1:1 with changes in taxable interest rates. Floating rate tax-exempt bond financing is benchmarked against the BMA
Index, which since 1981 has averaged 52.4% of the 10-year Treasury Yield. If this relationship continues, an increase in interest rates of 1% (0.52% in tax-exempt interest
rates) would result in our income and cash flows being reduced by $14.1 million on an annual basis. At June 30, 2004, we had $4,584.6 million of fixed-rate debt
outstanding. As of June 30, 2003, based on our level of floating rate debt of $1,397.7 million, an increase in interest rates of 1% would have resulted in our income and cash flows being
reduced by $14.0 million on an annual basis. The potential reduction of income and cash flows due to an increase in interest rates increased $4.1 million for 2004 compared to 2003, as a
result of the additional debt related to our acquisitions and newly consolidated properties.

We
believe that the fair value of our floating rate secured tax-exempt bond debt and floating rate secured long-term debt as of June 30, 2004 approximate
their carrying values.

ITEM 4.Controls and Procedures

The Partnership's management, with the participation of the chief executive officer and chief financial officer of the General Partner, who are the equivalent of
the Partnership's chief executive officer and chief financial officer, respectively, has evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on
such evaluation, the chief executive officer and chief financial officer of the General Partner, who are the equivalent of the Partnership's chief executive officer and chief financial officer,
respectively, have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, the
information required to be disclosed in the reports that we file or submit under the Exchange Act.

In
addition, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange
Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

31

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PART II. OTHER INFORMATION

ITEM 1.Legal Proceedings

See Note 5 in the consolidated financial statements in this Form 10-Q for information regarding legal proceedings, which information is
incorporated by reference in this Item 1.

ITEM 2.Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

(c) We completed tender offers for limited partnership interests resulting in the issuance of approximately 12,000 common OP Units for the three months ended
June 30, 2004.

On
June 18, 2004, we issued 2,892 Class VII Units to a limited liability company owned by a limited number of employees for an aggregate offering price of approximately
$530,000. Additional Class VII Units (up to the 5,000 maximum authorized) may be issued in future periods. In the event of a change of control of Aimco, holders of the Class VII Units,
subject to certain restrictions, may require us to redeem all or a portion of such units in exchange for a cash payment per unit equal to their market value at the time of redemption. Our obligation
to pay the redemption price is subject to the prior right of Aimco to acquire such units in exchange for an equal number of shares of Aimco Class A Common Stock (subject to certain
adjustments).

All
of the foregoing issuances were made in private placement transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

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ITEM 6.Exhibits and Reports on Form 8-K



|EXHIBIT NO. |  |                                                                                                                                                                                                                                                          
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1        |  | Fortieth Amendment to Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P. (Exhibit 10.1 to Aimco's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 is
incorporated herein by this reference)
|31.1        |  | Certification of equivalent 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 2002                                                               
|31.2        |  | Certification of equivalent 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 2002                                                               
|32.1        |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                   
|32.2        |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                   
|99.1        |  | Agreement re: disclosure of long-term debt instruments                                                                                                                                                                                                   

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None.

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AIMCO PROPERTIES, L.P.        SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

| |  | AIMCO PROPERTIES, L.P. By: AIMCO-GP, Inc., its general partner
| |  | --------------------------------------------------------------
| |  | By:                                                           
| |  | By:                                                           

Date:
August 9, 2004

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