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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from          to
 Commission File Number 0-24497
 
 AIMCO Properties, L.P.
  Delaware
    
    84-1275621(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)4582 South Ulster Street Parkway, Suite 1100Denver, Colorado
    
    80237(Address of principal executive offices)
    
    (Zip Code)
 (303) 757-8101
 Not Applicable
 þ o
  o þ o
 o þ




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##### 



AIMCO PROPERTIES, L.P.
 TABLE OF CONTENTS
 FORM 10-Q
 PagePART I. FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsConsolidated Balance Sheets as of March 31, 2007 and December 31, 2006 (Unaudited)
    
    
    2Consolidated Statements of Income for the Three Months Ended March 31, 2007 and 2006
(Unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and
2006 (Unaudited)
    
    
    4Notes to Consolidated Financial Statements (Unaudited)
    
    
    5ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    28ITEM 4.
    
    Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    29ITEM 1A.
    
    Risk Factors
    
    
    29ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29ITEM 6.
    
    Exhibits
    
    
    30Signatures
    
    
    
    
    31Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906Agreement re: Disclosure of Long-Term Debt Instruments
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Unit Data)
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSReal estate:Land
    
    $
    2,450,066
    
    
    $
    2,408,175Buildings and improvements
    
    
    9,612,545
    
    
    
    9,450,277Total real estate
    
    
    12,062,611
    
    
    
    11,858,452Less accumulated depreciation
    
    
    (2,945,747
    )
    
    
    (2,835,101
    )Net real estate
    
    
    9,116,864
    
    
    
    9,023,351Cash and cash equivalents
    
    
    257,160
    
    
    
    229,824Restricted cash
    
    
    314,734
    
    
    
    347,076Accounts receivable
    
    
    66,439
    
    
    
    85,772Accounts receivable from affiliates
    
    
    25,590
    
    
    
    20,763Deferred financing costs
    
    
    75,579
    
    
    
    73,130Notes receivable from unconsolidated real estate partnerships
    
    
    40,278
    
    
    
    40,641Notes receivable from non-affiliates
    
    
    135,481
    
    
    
    139,352Notes receivable from Aimco
    
    
    14,201
    
    
    
    14,016Investment in unconsolidated real estate partnerships
    
    
    35,329
    
    
    
    37,869Other assets
    
    
    195,328
    
    
    
    202,686Deferred income tax assets, net
    
    
    2,719
    
    
    
    Assets held for sale
    
    
    39,865
    
    
    
    88,611Total assets
    
   $
    10,319,567
    
    
    $
    10,303,091LIABILITIES AND PARTNERS CAPITALProperty tax-exempt bond financing
    
    $
    946,348
    
    
    $
    936,082Property loans payable
    
    
    5,529,828
    
    
    
    5,265,698Term loans
    
    
    400,000
    
    
    
    400,000Credit facility
    
    
    130,000
    
    
    
    140,000Other borrowings
    
    
    60,557
    
    
    
    67,660Total indebtedness
    
    
    7,066,733
    
    
    
    6,809,440Accounts payable
    
    
    31,347
    
    
    
    54,972Accrued liabilities and other
    
    
    281,654
    
    
    
    409,991Deferred income
    
    
    134,761
    
    
    
    142,701Security deposits
    
    
    45,920
    
    
    
    43,919Deferred income tax liabilities, net
    
    
    
    
    
    
    4,379Liabilities related to assets held for sale
    
    
    27,734
    
    
    
    86,885Total liabilities
    
    
    7,588,149
    
    
    
    7,552,287Minority interest in consolidated real estate partnerships
    
    
    212,017
    
    
    
    213,202Partners capital:Preferred OP units
    
    
    917,013
    
    
    
    902,755General Partner and Special Limited Partner
    
    
    1,193,460
    
    
    
    1,220,326Limited Partners
    
    
    433,946
    
    
    
    439,903High performance units
    
    
    (17,944
    )
    
    
    (18,308
    )Investment in Aimco Class A Common Stock
    
    
    (7,074
    )
    
    
    (7,074
    )Total partners capital
    
    
    2,519,401
    
    
    
    2,537,602Total liabilities and partners capital
    
    $
    10,319,567
    
    
    $
    10,303,091
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AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Unit Data)
(Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006REVENUES:Rental and other property revenues
    
    $
    417,036
    
    
    $
    390,311Property management revenues, primarily from affiliates
    
    
    2,096
    
    
    
    3,030Activity fees and asset management revenues
    
    
    11,630
    
    
    
    9,539Total revenues
    
    
    430,762
    
    
    
    402,880OPERATING EXPENSES:Property operating expenses
    
    
    196,671
    
    
    
    183,397Property management expenses
    
    
    1,206
    
    
    
    492Activity and asset management expenses
    
    
    5,654
    
    
    
    4,898Depreciation and amortization
    
    
    123,990
    
    
    
    105,709General and administrative expenses
    
    
    21,586
    
    
    
    20,237Other expenses (income), net
    
    
    2,191
    
    
    
    3,989Total operating expenses
    
    
    351,298
    
    
    
    318,722Operating income
    
    
    79,464
    
    
    
    84,158Interest income
    
    
    9,792
    
    
    
    8,263Provision for losses on notes receivable
    
    
    (1,543
    )
    
    
    (262
    )Interest expense
    
    
    (106,007
    )
    
    
    (97,276
    )Deficit distributions to minority partners, net
    
    
    (1,270
    )
    
    
    (2,102
    )Equity in losses of unconsolidated real estate partnerships
    
    
    (2,986
    )
    
    
    (1,863
    )Recoveries of real estate impairment losses, net
    
    
    
    
    
    
    987Gain on dispositions of unconsolidated real estate and other
    
    
    20,422
    
    
    
    9,696Income (loss) before minority interest and discontinued operations
    
    
    (2,128
    )
    
    
    1,601Minority interest in consolidated real estate partnerships
    
    
    (5,731
    )
    
    
    5,402Income (loss) from continuing operations
    
    
    (7,859
    )
    
    
    7,003Income from discontinued operations, net
    
    
    35,857
    
    
    
    86,615Net income
    
    
    27,998
    
    
    
    93,618Net income attributable to preferred unitholders
    
    
    18,130
    
    
    
    26,973Net income attributable to common unitholders
    
    $
    9,868
    
    
    $
    66,645Earnings (loss) per common unit  basic:Loss from continuing operations (net of preferred distributions)
    
    $
    (0.25
    )
    
    $
    (0.19
    )Income from discontinued operations
    
    
    0.34
    
    
    
    0.82Net income attributable to common unitholders
    
    $
    0.09
    
    
    $
    0.63Earnings (loss) per common unit  diluted:Loss from continuing operations (net of preferred distributions)
    
    $
    (0.25
    )
    
    $
    (0.19
    )Income from discontinued operations
    
    
    0.34
    
    
    
    0.82Net income attributable to common unitholders
    
    $
    0.09
    
    
    $
    0.63Weighted average common units outstanding
    
    
    105,872
    
    
    
    105,501Weighted average common units and equivalents outstanding
    
    
    105,872
    
    
    
    105,501Distributions declared per common unit
    
    $
    0.00
    
    
    $
    0.00
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AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    27,998
    
    
    $
    93,618Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    123,990
    
    
    
    105,709Discontinued operations
    
    
    (36,173
    )
    
    
    (104,486
    )Other adjustments
    
    
    (16,058
    )
    
    
    9,928Net changes in operating assets and operating liabilities
    
    
    (15,010
    )
    
    
    8,278Net cash provided by operating activities
    
    
    84,747
    
    
    
    113,047CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of real estate
    
    
    (77,095
    )
    
    
    Capital expenditures
    
    
    (121,306
    )
    
    
    (112,603
    )Proceeds from dispositions of real estate
    
    
    64,540
    
    
    
    382,741Change in funds held in escrow from tax-free exchanges
    
    
    25,710
    
    
    
    Cash from newly consolidated properties
    
    
    
    
    
    
    22,432Purchases of general and limited partnership interests and other assets
    
    
    (11,997
    )
    
    
    (5,170
    )Originations of notes receivable from unconsolidated real estate partnerships
    
    
    (4,322
    )
    
    
    (209
    )Proceeds from repayment of notes receivable
    
    
    13,244
    
    
    
    1,662Distributions received from investments in unconsolidated real estate partnerships
    
    
    3,864
    
    
    
    4,740Other investing activities
    
    
    (2,746
    )
    
    
    (1,895
    )Net cash provided by (used in) investing activities
    
    
    (110,108
    )
    
    
    291,698CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from property loans
    
    
    460,552
    
    
    
    361,073Principal repayments on property loans
    
    
    (222,084
    )
    
    
    (339,275
    )Proceeds from tax exempt bonds
    
    
    42,675
    
    
    
    Principal repayments on tax-exempt bond financing
    
    
    (31,935
    )
    
    
    (18,610
    )Net repayments on revolving credit facility
    
    
    (10,000
    )
    
    
    (175,000
    )Redemption of preferred units
    
    
    
    
    
    
    (113,250
    )Repurchases of Class A Common Units
    
    
    (111,612
    )
    
    
    Proceeds from Aimco Class A Common Stock option exercises
    
    
    52,507
    
    
    
    38,867Payment of distributions to minority interest
    
    
    (15,149
    )
    
    
    (19,648
    )Payment of distributions to General Partner and Special Limited Partner
    
    
    (58,388
    )
    
    
    (57,491
    )Payment of distributions to Limited Partners
    
    
    (4,654
    )
    
    
    (5,572
    )Payment of distributions to preferred units
    
    
    (20,243
    )
    
    
    (25,587
    )Payment of distributions on High Performance Units
    
    
    (1,455
    )
    
    
    (1,439
    )Other financing activities
    
    
    (27,517
    )
    
    
    13,784Net cash provided by (used in) financing activities
    
    
    52,697
    
    
    
    (342,148
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    27,336
    
    
    
    62,597CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    229,824
    
    
    
    161,730CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    257,160
    
    
    $
    224,327
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AIMCO PROPERTIES, L.P.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2007
(Unaudited)
 Note 1  Organization
     
    
    owned an equity interest in and consolidated 160,986 units in 696 properties (which we
refer to as consolidated), of which 160,268 units were also managed by us;
    
    owned an equity interest in and did not consolidate 11,591 units in 100 properties
(which we refer to as unconsolidated), of which 5,466 units were also managed by us; and
    
    provided services or managed, for third-party owners, 41,104 units in 441 properties,
primarily pursuant to long-term agreements (including 37,579 units in 401 properties for
which we provide asset management services only, and not also property management
services), although in certain cases we may indirectly own generally less than one percent
of the operations of such properties through a partnership syndication or other fund.
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Note 2  Basis of Presentation
   Principles of Consolidation
   Adoption of FIN 48
 Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109
  6




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Use of Estimates
   Accounting for the Impairment or Disposal of Long-Lived
Assets,
 Note 3  Commitments and Contingencies
 Commitments
    Tax Credit Arrangements
  Legal Matters
    7




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Conditional
Asset Retirement Obligations
       8




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Note 4  Partners Capital
     9




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Note 5  Discontinued Operations and Assets Held for Sale
   Three Months EndedMarch 31,2007
    
    
    2006Rental and other property revenues
    
    $
    5,549
    
    
    $
    38,912Property operating expense
    
    
    (3,037
    )
    
    
    (20,341
    )Depreciation and amortization
    
    
    (1,509
    )
    
    
    (10,492
    )Other (expenses) income, net
    
    
    (748
    )
    
    
    (1,608
    )Operating income
    
    
    255
    
    
    
    6,471Interest income
    
    
    49
    
    
    
    280Interest expense
    
    
    (1,965
    )
    
    
    (8,171
    )Gain on extinguishment of debt
    
    
    22,852
    
    
    
    Minority interest in consolidated real estate partnerships
    
    
    99
    
    
    
    1,195Income (loss) before gain on dispositions of real estate,
impairment losses, deficit distributions to minority
partners and income
    
    
    21,290
    
    
    
    (225
    )Gain on dispositions of real estate, net of minority
partners interest
    
    
    15,633
    
    
    
    99,710Real estate impairment losses, net
    
    
    (843
    )
    
    
    (203
    )Recovery of deficit distributions (deficit distributions)
to
minority partners
    
    
    (59
    )
    
    
    14,276Income tax arising from dispositions
    
    
    (164
    )
    
    
    (26,943
    )Income from discontinued operations
    
    $
    35,857
    
    
    $
    86,615
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Note 6  Earnings per Unit
  Three Months EndedMarch 31,2007
    
    
    2006Numerator:Income (loss) from continuing operations
    
    $
    (7,859
    )
    
    $
    7,003Less net income attributable to preferred unitholders
    
    
    (18,130
    )
    
    
    (26,973
    )Numerator for basic and diluted earnings per unit  Loss from
continuing operations
    
    $
    (25,989
    )
    
    $
    (19,970
    )Income from discontinued operations
    
    $
    35,857
    
    
    $
    86,615Net income
    
    $
    27,998
    
    
    $
    93,618Less net income attributable to preferred unitholders
    
    
    (18,130
    )
    
    
    (26,973
    )Numerator for basic and diluted earnings per unit Net income
attributable to common unitholders
    
    $
    9,868
    
    
    $
    66,645Denominator:Denominator for basic earnings per unit  weighted average
number of common units outstanding:Common OP Units
    
    
    103,493
    
    
    
    103,122Class I HPUs
    
    
    2,379
    
    
    
    2,379Total common units
    
    
    105,872
    
    
    
    105,501Effect of dilutive securities:Dilutive potential common units
    
    
    
    
    
    
    Denominator for diluted earnings per unit
    
    
    105,872
    
    
    
    105,501Earnings (loss) per common unit:Basic earnings (loss) per common unit:Loss from continuing operations (net of preferred distributions)
    
    $
    (0.25
    )
    
    $
    (0.19
    )Income from discontinued operations
    
    
    0.34
    
    
    
    0.82Net income attributable to common unitholders
    
    $
    0.09
    
    
    $
    0.63Diluted earnings (loss) per common unit:Loss from continuing operations (net of preferred distributions)
    
    $
    (0.25
    )
    
    $
    (0.19
    )Income from discontinued operations
    
    
    0.34
    
    
    
    0.82Net income attributable to common unitholders
    
    $
    0.09
    
    
    $
    0.63
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Note 7  Business Segments
   Disclosures about Segments of an
Enterprise and Related Information
 12




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Three Months EndedMarch 31,2007
    
    
    2006Revenues:Real estate segment
    
    $
    419,132
    
    
    $
    393,341Asset management and transactions segment:Gross revenues
    
    
    13,653
    
    
    
    10,096Elimination of intersegment revenues
    
    
    (2,023
    )
    
    
    (557
    )Net revenues after elimination
    
    
    11,630
    
    
    
    9,539Total revenues of reportable segments
    
    $
    430,762
    
    
    $
    402,880Net
operating income:Real estate
segment
    
    $
    182,614
    
    
    $
    178,908Asset management and activity segment
    
    
    8,264
    
    
    
    10,480Total
segment net operating income of reportable segments
    
    
    190,878
    
    
    
    189,388Expenses
(income) generally excluded from segment net operating income:Depreciation and amortization
    
    
    (123,990
    )
    
    
    (105,709
    )General and administrative expenses
    
    
    (21,586
    )
    
    
    (20,237
    )Other (expenses) income, net
    
    
    (2,191
    )
    
    
    (3,988
    )Interest income
    
    
    9,792
    
    
    
    8,263Provision for losses on notes receivable
    
    
    (1,543
    )
    
    
    (262
    )Interest expense
    
    
    (106,007
    )
    
    
    (97,276
    )Deficit distribution to minority partners
    
    
    (1,270
    )
    
    
    (2,102
    )Equity in losses of unconsolidated real estate partnerships
    
    
    (2,986
    )
    
    
    (1,863
    )Recoveries of real estate impairment losses, net
    
    
    
    
    
    
    987Gain on dispositions of unconsolidated real estate and
other
    
    
    20,422
    
    
    
    9,696Minority interest
    
    
    (5,731
    )
    
    
    5,403Less
portions of excluded items included in segment net operating income:Other expenses (income), net
    
    
    6,419
    
    
    
    (1,952
    )Interest income
    
    
    (1,758
    )
    
    
    (139
    )Gain on sale of non-real estate assets
    
    
    
    
    
    
    (5,700
    )Minority interest in consolidated real estate operations
    
    
    34,195
    
    
    
    36,040Equity in unconsolidated real estate operations
    
    
    (2,503
    )
    
    
    (3,546
    )Income (loss) from continuing operations
    
    $
    (7,859
    )
    
    $
    7,003
  March 31,
    
    
    December 31,ASSETS:
    
    2007
    
    
    2006Total assets for reportable segments (1)
    
    $
    10,060,309
    
    
    $
    10,018,017Corporate and other assets
    
    
    259,258
    
    
    
    285,074Total consolidated assets
    
    $
    10,319,567
    
    
    $
    10,303,091
 
 (1)
    
    Total assets for reportable segments include assets associated with both the real
estate and asset management and transactions business segments. 13




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Note 8  Transactions Involving VMS National Properties Joint Venture
    Note 9  Asset Impairments
   Note 10  Recent Accounting Developments
 Fair
Value Measurements,
 The
Fair Value Option for Financial Asset and Financial Liabilities,
 14




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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 and redevelopments, our future financial performance, including our
ability to maintain current or meet projected occupancy levels, rent levels and same store results, and
the effect of government regulations. Actual results may differ materially from those described in
the forward-looking statements and will be affected by a variety of risks and factors that are
beyond our control including, without limitation: natural disasters such as hurricanes; national
and local economic conditions; the general level of interest rates; energy costs; the terms of
governmental regulations that affect us and interpretations of those regulations; the competitive
environment in which we operate; financing risks, including the risk that our cash flows from
operations may be insufficient to meet required payments of principal and interest; real estate
risks, including variations of real estate values and the general economic climate in local markets
and competition for residents in such markets; acquisition and development risks, including failure
of such acquisitions to perform in accordance with projections; the timing of acquisitions and
dispositions; litigation, including costs associated with prosecuting or defending claims and any
adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that
may be incurred due to necessary remediation of contamination of properties presently owned or
previously owned by us. In addition, our current and continuing qualification as a real estate
investment trust involves the application of highly technical and complex provisions of the
Internal Revenue Code and depends on our ability to meet the various requirements imposed by the
Internal Revenue Code, through actual operating results, distribution levels and diversity of stock
ownership. Readers should carefully review our financial statements and the notes thereto, as well
as the risk factors described in our Annual Report on Form 10-K for the year ended December 31,
2006, 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
      16




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Results of Operations
 Overview
 Three months ended March 31, 2007 compared to three months ended March 31, 2006
  
    
    a decrease in income from discontinued operations, primarily related to lower net gains
on sales of real estate;
    
    an increase in depreciation expense, reflecting depreciation on newly acquired
properties and recent capital projects, as well as adjustments to accelerate depreciation
on certain properties; and
    
    an increase in interest expense, reflecting higher loan principal balances resulting
from refinancings and acquisitions.
  
    
    an increase in net operating income from property operations, which is primarily
attributable to improved operating results of same store properties; and
    
    recognition of deferred debt extinguishment gains in connection with the refinancing of
certain mortgage loans that had been restructured in a 1997 bankruptcy settlement.
  Rental Property Operations
   Three Months EndedMarch 31,2007
    
    
    2006Rental and other property revenues
    
    $
    417,036
    
    
    $
    390,311Property operating expenses
    
    
    196,671
    
    
    
    183,397Net operating income
    
    $
    220,365
    
    
    $
    206,914
    17




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006Consolidated same store revenues
    
    $
    296,485
    
    
    $
    282,168Consolidated same store property operating expenses
    
    
    125,589
    
    
    
    121,478Consolidated same store net operating income
    
    
    170,896
    
    
    
    160,690Adjustments to reconcile same store net operating
income to real estate segment net operating income
(1)
    
    
    50,359
    
    
    
    48,762Real estate segment net operating income
    
    $
    221,255
    
    
    $
    209,452Consolidated Same Store Statistics:Properties
    
    
    392
    
    
    
    392Apartment units
    
    
    114,557
    
    
    
    114,557Average physical occupancy
    
    
    94.4
    %
    
    
    94.7
    %Average rent/unit/month
    
    $
    839
    
    
    $
    801
 
 (1)
    
    Reflects property revenues and property operating expenses related to consolidated
properties other than same store properties (e.g., affordable, acquisition and
redevelopment properties), casualty gains and losses, and net operating income from
property management.  Property Management
   Three Months EndedMarch 31,2007
    
    
    2006Property management revenues, primarily from affiliates
    
    $
    2,096
    
    
    $
    3,030Property management expenses
    
    
    1,206
    
    
    
    492Net operating income from property management
    
    $
    890
    
    
    $
    2,538
 18




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##### Table of Contents



Activity Fees and Asset Management
   Three Months EndedMarch 31,2007
    
    
    2006Activity fees and asset management revenues
    
    $
    11,630
    
    
    $
    9,539Activity and asset management expenses
    
    
    5,654
    
    
    
    4,898Net operating income from activity fees and asset
management
    
    $
    5,976
    
    
    $
    4,641
  Depreciation and Amortization
 Use of
Estimates
 General and Administrative Expenses
  Other Expenses (Income), Net
   19




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##### Table of Contents



Interest Income
   Interest Expense
  Gain on Dispositions of Unconsolidated Real Estate and Other
   Minority Interest in Consolidated Real Estate Partnerships
   Income from Discontinued Operations, Net
  20




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Critical Accounting Policies and Estimates
  Impairment of Long-Lived Assets
   
    
    the general economic climate;
    
    competition from other apartment communities and other housing options;
    
    local conditions, such as loss of jobs or an increase in the supply of apartments, that
might adversely affect apartment occupancy or rental rates;
    
    changes in governmental regulations and the related cost of compliance;
    
    increases in operating costs (including real estate taxes) due to inflation and other
factors, which may not be offset by increased rents;
    
    changes in tax laws and housing laws, including the enactment of rent control laws or
other laws regulating multifamily housing;
    
    changes in market capitalization rates; and
    
    the relative illiquidity of such investments.
  21




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Notes Receivable and Interest Income Recognition
    Allowance for Losses on Notes Receivable
   Capitalized Costs
  22




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##### Table of Contents



Funds From Operations
   Three Months EndedMarch 31,2007
    
    
    2006Net income attributable to common unitholders (1)
    
    $
    9,868
    
    
    $
    66,645Adjustments:Depreciation and amortization (2)
    
    
    123,990
    
    
    
    105,709Depreciation and amortization related to non-real estate assets
    
    
    (6,623
    )
    
    
    (4,730
    )Depreciation of rental property related to minority partners
interest and unconsolidated entities (3) (4)
    
    
    (14,034
    )
    
    
    (13,897
    )Gain on dispositions unconsolidated real estate and other
    
    
    (20,422
    )
    
    
    (9,696
    )Gain on dispositions of non-depreciable assets and other
    
    
    19,373
    
    
    
    5,700Deficit distributions to minority partners, net (5)
    
    
    1,270
    
    
    
    2,102Discontinued operations:Gain on dispositions of real estate, net of minority partners
interest (3)
    
    
    (15,633
    )
    
    
    (99,710
    )Depreciation of rental property, net of minority partners
interest (3) (5)
    
    
    (16,154
    )
    
    
    8,415Recovery of deficit distributions to minority partners, net (5)
    
    
    59
    
    
    
    (14,276
    )Income tax arising from disposals
    
    
    164
    
    
    
    26,943Preferred OP Unit distributions
    
    
    18,130
    
    
    
    24,399Redemption related preferred OP Unit issuance costs
    
    
    
    
    
    
    2,574Funds From Operations
    
    $
    99,988
    
    
    $
    100,178Preferred OP Unit Distributions
    
    
    (18,130
    )
    
    
    (24,399
    )Redemption related preferred OP Unit issuance costs
    
    
    
    
    
    
    (2,574
    )Distributions on dilutive preferred securities
    
    
    
    
    
    
    1,183Funds From Operations attributable to common unitholders  diluted
    
    $
    81,858
    
    
    $
    74,388Weighted average number of common units, common unit equivalents
and dilutive preferred securities outstanding:Common units and equivalents (6)
    
    
    109,882
    
    
    
    106,857Dilutive preferred securities
    
    
    
    
    
    
    3,512Total
    
    
    109,882
    
    
    
    110,369
 
  (1)
    
    Represents the numerator for earnings per common unit (see Note 6 to the consolidated
financial statements in Item 1).(2)
    
    Includes amortization of management contracts where we are the general partner. Such
management contracts were established in certain instances where we acquired a general
partner interest in either a consolidated or an unconsolidated partnership. Because the
recoverability of these management contracts depends primarily on the operations of the
real estate 23




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##### Table of Contents



owned by the limited partnerships, we believe it is consistent with the White Paper to add
back such amortization, as the White Paper directs the add-back of amortization of assets
uniquely significant to the real estate industry.(3)
    
    Minority partners interest means minority interest in our consolidated real estate
partnerships.(4)
    
    Adjustments related to minority partners share of depreciation of rental property
include the subtraction of $15.1 million and $17.8 million for continuing operations and
discontinued operations, respectively, related to the VMS debt
extinguishment gains (see Note 8 to the
consolidated financial statements in Item 1). These subtractions are required because we
added back the minority partners share of depreciation related to rental property in
determining FFO in prior periods. Accordingly, the net effect of the VMS debt
extinguishment gains on our FFO for the three months ended March 31, 2007 was an increase
of $9.3 million.(5)
    
    In accordance with GAAP, deficit distributions to minority partners are charges
recognized in our income statement when cash is distributed to a non-controlling partner in
a consolidated real estate partnership in excess of the positive balance in such partners
capital account, which is classified as minority interest on our balance sheet. We record
these charges for GAAP purposes even though there is no economic effect or cost. Deficit
distributions to minority partners occur when the fair value of the underlying real estate
exceeds its depreciated net book value because the underlying real estate has appreciated
or maintained its value. As a result, the recognition of expense for deficit distributions
to minority partners represents, in substance, either (a) our recognition of depreciation
previously allocated to the non-controlling partner or (b) a payment related to the
non-controlling partners share of real estate appreciation. Based on White Paper guidance
that requires real estate depreciation and gains to be excluded from FFO, we add back
deficit distributions and subtract related recoveries in our reconciliation of net income
to FFO.(6)
    
    Represents the denominator for earnings per common unit  diluted, calculated in
accordance with GAAP, plus additional common unit equivalents that are dilutive for FFO. Liquidity and Capital Resources
    Operating Activities
  24




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Investing Activities
       25




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##### Table of Contents



Our Share ofExpenditures
    
    
    Cost Per UnitCapital Replacements Detail:Building and grounds
    
    $
    6,066
    
    
    $
    46Turnover related
    
    
    7,035
    
    
    
    54Capitalized site payroll and indirect costs and other
    
    
    5,584
    
    
    
    42Our share of Capital Replacements
    
    $
    18,685
    
    
    $
    142Capital Replacements:Conventional
    
    $
    17,335
    
    
    $
    153Affordable
    
    
    1,350
    
    
    
    73Our share of Capital Replacements
    
    
    18,685
    
    
    $
    142Capital Improvements:Conventional
    
    
    16,367
    
    
    $
    145Affordable
    
    
    2,210
    
    
    
    119Our share of Capital Improvements
    
    
    18,577
    
    
    $
    141Casualties:Conventional
    
    
    2,666Affordable
    
    
    1,477Our share of casualties
    
    
    4,143Redevelopment:Active Conventional
    
    
    48,617Active tax credit projects
    
    
    798Pre-construction and other activities
    
    
    8,304Our share of redevelopment
    
    
    57,719Entitlements
    
    
    5,967Our share of total capital expenditures
    
    
    105,091Plus minority partners share of consolidated spending
    
    
    16,373Less our share of unconsolidated spending
    
    
    (158
    )Capital expenditures per consolidated statement of cash flows
    
    $
    121,306
   Financing Activities
    26




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##### Table of Contents



Future Capital Needs
  27




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
 ITEM 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  28




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Repurchases of Equity Securities.
  Maximum Number ofTotal Number of
    
    Units thatTotal
    
    Average
    
    Units Purchased as
    
    May Yet BeNumber
    
    Price
    
    Part of Publicly
    
    Purchased Under theof Units
    
    Paid
    
    Announced Plans
    
    Plans or ProgramsPeriod
    
    Purchased
    
    per Unit
    
    or Programs
    
    (1)January 1  January 31, 2007
    
    
    0
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AFebruary 1  February 28, 2007
    
    
    617,202
    
    
    $
    59.35
    
    
    
    N/A
    
    
    
    N/AMarch 1  March 31, 2007
    
    
    1,157,712
    
    
    $
    56.29
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    1,774,914
    
    
    $
    57.36
    
    
    
    N/A
 
 (1)
    
    The terms of our Partnership Agreement do not provide for a maximum number of units that
may be repurchased, and other than the express terms of our Partnership Agreement we have
not publicly announced plans or programs of repurchase. Distribution Payments.
 29




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##### Table of Contents



ITEM 6. Exhibits
  EXHIBIT NO.31.1
    
    
    Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200299.1
    
    
    Agreement re: disclosure of long-term debt instruments
 30




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##### Table of Contents



AIMCO PROPERTIES, L.P.
 
 SIGNATURES
  AIMCO PROPERTIES, L.P.By:
    
    AIMCO GP, Inc., its general partnerBy:
    
    /s/ THOMAS M. HERZOGThomas M. HerzogExecutive Vice President andChief Financial Officer(duly authorized officer andprincipal financial officer)By:
    
    /s/ SCOTT W. FORDHAMScott W. FordhamSenior Vice President andChief Accounting OfficerDate: May 4, 2007
 31




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##### Table of Contents



EXHIBIT
INDEX
 EXHIBIT NO.31.1
    
    
    Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 200299.1
    
    
    Agreement re: disclosure of long-term debt instruments