##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 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
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



AIMCO PROPERTIES, L.P.
 TABLE OF CONTENTS
 FORM 10-Q
  
 PagePART I. FINANCIAL INFORMATIONITEM 1.Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2008 and December
31, 2007 (Unaudited)
    
    
    2Condensed Consolidated Statements of Income for the Three and Nine Months
Ended September 30, 2008 and 2007 (Unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2008 and 2007 (Unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5ITEM 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21ITEM 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    38ITEM 4.Controls and Procedures
    
    
    38PART II. OTHER INFORMATIONITEM 1A.Risk Factors
    
    
    39ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39ITEM 6.Exhibits
    
    
    40Signatures
    
    
    41Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.1
   1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 AIMCO PROPERTIES, L.P.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 September 30,
    
    
    December 31,2008
    
    
    2007ASSETSReal estate:Buildings and improvements
    
    $
    8,752,890
    
    
    $
    8,302,059Land
    
    
    2,440,154
    
    
    
    2,397,070Total real estate
    
    
    11,193,044
    
    
    
    10,699,129Less accumulated depreciation
    
    
    (2,821,540
    )
    
    
    (2,526,888
    )Net real estate
    
    
    8,371,504
    
    
    
    8,172,241Cash and cash equivalents
    
    
    219,047
    
    
    
    210,461Restricted cash
    
    
    306,999
    
    
    
    314,890Accounts receivable, net
    
    
    91,703
    
    
    
    71,463Accounts receivable from affiliates, net
    
    
    32,842
    
    
    
    34,958Deferred financing costs, net
    
    
    61,782
    
    
    
    68,548Notes receivable from unconsolidated real estate partnerships, net
    
    
    30,326
    
    
    
    35,186Notes receivable from non-affiliates, net
    
    
    150,460
    
    
    
    143,054Notes receivable from Aimco
    
    
    15,353
    
    
    
    14,765Investment in unconsolidated real estate partnerships
    
    
    113,362
    
    
    
    116,086Other assets
    
    
    201,955
    
    
    
    207,783Deferred income tax assets, net
    
    
    12,706
    
    
    
    14,426Assets held for sale
    
    
    303,829
    
    
    
    1,216,736Total assets
    
    $
    9,911,868
    
    
    $
    10,620,597LIABILITIES AND PARTNERS CAPITALProperty tax-exempt bond financing
    
    $
    792,280
    
    
    $
    779,737Property loans payable
    
    
    5,511,840
    
    
    
    5,271,044Term loans
    
    
    475,000
    
    
    
    475,000Credit facility
    
    
    5,100
    
    
    
    Other borrowings
    
    
    81,511
    
    
    
    75,057Total indebtedness
    
    
    6,865,731
    
    
    
    6,600,838Accounts payable
    
    
    36,477
    
    
    
    56,792Accrued liabilities and other
    
    
    395,110
    
    
    
    449,485Deferred income
    
    
    190,617
    
    
    
    200,714Security deposits
    
    
    45,840
    
    
    
    42,912Liabilities related to assets held for sale
    
    
    267,890
    
    
    
    951,046Total liabilities
    
    
    7,801,665
    
    
    
    8,301,787Minority interest in consolidated real estate partnerships
    
    
    402,389
    
    
    
    442,804Commitments and contingencies (Note 5)Partners capital:Preferred units
    
    
    775,209
    
    
    
    803,593General Partner and Special Limited Partner
    
    
    716,565
    
    
    
    853,615Limited Partners
    
    
    250,204
    
    
    
    253,652High Performance Units
    
    
    (28,772
    )
    
    
    (28,703
    )Investment in Aimco Class A Common Stock
    
    
    (5,392
    )
    
    
    (6,151
    )Total partners capital
    
    
    1,707,814
    
    
    
    1,876,006Total liabilities and partners capital
    
    $
    9,911,868
    
    
    $
    10,620,597
   2




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AIMCO PROPERTIES, L.P.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007REVENUES:Rental and other property revenues
    
    $
    361,996
    
    
    $
    345,197
    
    
    $
    1,070,604
    
    
    $
    1,023,390Property management revenues, primarily from affiliates
    
    
    1,227
    
    
    
    1,824
    
    
    
    4,746
    
    
    
    5,192Asset management and tax credit revenues
    
    
    32,755
    
    
    
    12,747
    
    
    
    83,782
    
    
    
    39,554Total revenues
    
    
    395,978
    
    
    
    359,768
    
    
    
    1,159,132
    
    
    
    1,068,136OPERATING EXPENSES:Property operating expenses
    
    
    172,705
    
    
    
    162,829
    
    
    
    506,546
    
    
    
    473,446Property management expenses
    
    
    1,560
    
    
    
    1,333
    
    
    
    4,018
    
    
    
    5,268Investment management expenses
    
    
    5,842
    
    
    
    5,812
    
    
    
    15,859
    
    
    
    15,799Depreciation and amortization
    
    
    120,771
    
    
    
    110,946
    
    
    
    343,636
    
    
    
    318,691General and administrative expenses
    
    
    27,332
    
    
    
    20,663
    
    
    
    75,820
    
    
    
    66,763Other (income) expenses, net
    
    
    (3,944
    )
    
    
    (4,953
    )
    
    
    7,316
    
    
    
    (5,776
    )Total operating expenses
    
    
    324,266
    
    
    
    296,630
    
    
    
    953,195
    
    
    
    874,191Operating income
    
    
    71,712
    
    
    
    63,138
    
    
    
    205,937
    
    
    
    193,945Interest income
    
    
    5,546
    
    
    
    10,954
    
    
    
    14,836
    
    
    
    31,112(Provision for) recoveries of losses on notes receivable, net
    
    
    (2,093
    )
    
    
    153
    
    
    
    (3,786
    )
    
    
    (2,124
    )Interest expense
    
    
    (94,611
    )
    
    
    (92,699
    )
    
    
    (285,723
    )
    
    
    (271,461
    )Deficit distributions to minority partners, net
    
    
    (17,798
    )
    
    
    (11,640
    )
    
    
    (22,981
    )
    
    
    (13,998
    )Equity in (losses) earnings of unconsolidated real estate partnerships
    
    
    (1,559
    )
    
    
    348
    
    
    
    (3,431
    )
    
    
    (1,710
    )Provision for real estate impairment losses
    
    
    (2,319
    )
    
    
    
    
    
    
    (2,319
    )
    
    
    Gain on dispositions of unconsolidated real estate and other
    
    
    100,359
    
    
    
    5,841
    
    
    
    100,345
    
    
    
    26,919Income (loss) before minority interests and discontinued operations
    
    
    59,237
    
    
    
    (23,905
    )
    
    
    2,878
    
    
    
    (37,317
    )Minority interest in consolidated real estate partnerships
    
    
    11,354
    
    
    
    371
    
    
    
    15,551
    
    
    
    (1,896
    )Income (loss) from continuing operations
    
    
    70,591
    
    
    
    (23,534
    )
    
    
    18,429
    
    
    
    (39,213
    )Income from discontinued operations, net
    
    
    122,866
    
    
    
    21,028
    
    
    
    432,927
    
    
    
    86,367Net income (loss)
    
    
    193,457
    
    
    
    (2,506
    )
    
    
    451,356
    
    
    
    47,154Net income attributable to preferred unitholders
    
    
    14,186
    
    
    
    20,802
    
    
    
    45,771
    
    
    
    57,061Net income (loss) attributable to common unitholders
    
    $
    179,271
    
    
    $
    (23,308
    )
    
    $
    405,585
    
    
    $
    (9,907
    )Earnings (loss) per common unit  basic:Income (loss) from continuing operations (net of preferred
distributions)
    
    $
    0.57
    
    
    $
    (0.38
    )
    
    $
    (0.26
    )
    
    $
    (0.83
    )Income from discontinued operations
    
    
    1.24
    
    
    
    0.18
    
    
    
    4.20
    
    
    
    0.74Net income (loss) attributable to common unitholders
    
    $
    1.81
    
    
    $
    (0.20
    )
    
    $
    3.94
    
    
    $
    (0.09
    )Earnings (loss) per common unit  diluted:Income (loss) from continuing operations (net of preferred
distributions)
    
    $
    0.57
    
    
    $
    (0.38
    )
    
    $
    (0.26
    )
    
    $
    (0.83
    )Income from discontinued operations
    
    
    1.23
    
    
    
    0.18
    
    
    
    4.20
    
    
    
    0.74Net income (loss) attributable to common unitholders
    
    $
    1.80
    
    
    $
    (0.20
    )
    
    $
    3.94
    
    
    $
    (0.09
    )Weighted average common units outstanding
    
    
    99,169
    
    
    
    115,913
    
    
    
    103,046
    
    
    
    116,653Weighted average common units and equivalents outstanding
    
    
    99,785
    
    
    
    115,913
    
    
    
    103,046
    
    
    
    116,653Distributions declared per common unit
    
    $
    2.83
    
    
    $
    0.54
    
    
    $
    3.40
    
    
    $
    1.08
  3




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AIMCO PROPERTIES, L.P.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine MonthsEnded September 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    451,356
    
    
    $
    47,154Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    343,636
    
    
    
    318,691Gain on dispositions of unconsolidated real estate
    
    
    (98,875
    )
    
    
    (169
    )Discontinued operations
    
    
    (405,244
    )
    
    
    (17,276
    )Other adjustments
    
    
    33,158
    
    
    
    (34,082
    )Net changes in operating assets and operating liabilities
    
    
    11,196
    
    
    
    3,116Net cash provided by operating activities
    
    
    335,227
    
    
    
    317,434CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of real estate
    
    
    (75,907
    )
    
    
    (198,998
    )Capital expenditures
    
    
    (476,030
    )
    
    
    (456,377
    )Proceeds from dispositions of real estate
    
    
    1,419,909
    
    
    
    356,943Change in funds held in escrow from tax-free exchanges
    
    
    (3,791
    )
    
    
    25,957Purchases of partnership interests and other assets
    
    
    (22,940
    )
    
    
    (41,819
    )Originations of notes receivable from unconsolidated real estate partnerships
    
    
    (5,887
    )
    
    
    (9,774
    )Proceeds from repayment of notes receivable
    
    
    7,037
    
    
    
    14,418Distributions from investments in unconsolidated real estate partnerships
    
    
    86,279
    
    
    
    2,909Other investing activities
    
    
    8,749
    
    
    
    18,694Net cash provided by (used in) investing activities
    
    
    937,419
    
    
    
    (288,047
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from property loans
    
    
    522,564
    
    
    
    1,315,111Principal repayments on property loans
    
    
    (853,435
    )
    
    
    (823,639
    )Proceeds from tax exempt bond financing
    
    
    21,988
    
    
    
    82,350Principal repayments on tax-exempt bond financing
    
    
    (89,287
    )
    
    
    (68,443
    )Net borrowings on revolving credit facility
    
    
    5,100
    
    
    
    10,000Repurchase of preferred units
    
    
    (24,840
    )
    
    
    Repurchases of common OP units
    
    
    (452,297
    )
    
    
    (185,708
    )Proceeds from Aimco Class A Common Stock option exercises
    
    
    706
    
    
    
    53,717Payment of distributions to minority interest
    
    
    (137,562
    )
    
    
    (48,495
    )Payment of distributions to General Partner and Special Limited Partner
    
    
    (159,589
    )
    
    
    (174,698
    )Payment of distributions to Limited Partners
    
    
    (43,734
    )
    
    
    (14,170
    )Payment of distributions on High Performance Units
    
    
    (14,536
    )
    
    
    (4,282
    )Payment of distributions to preferred units
    
    
    (47,269
    )
    
    
    (54,630
    )Other financing activities
    
    
    8,131
    
    
    
    (8,830
    )Net cash (used in) provided by financing activities
    
    
    (1,264,060
    )
    
    
    78,283NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    8,586
    
    
    
    107,670CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    210,461
    
    
    
    229,824CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    219,047
    
    
    $
    337,494
   4




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AIMCO PROPERTIES, L.P.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(Unaudited)
 Note 1  Organization
     
    
    owned an equity interest in and consolidated 130,913 units in 573 properties (which we
refer to as consolidated), of which 129,422 units were also managed by us;
    
    owned an equity interest in and did not consolidate 10,172 units in 90 properties (which
we refer to as unconsolidated), of which 5,009 units were also managed by us; and
    
    provided services for or managed 36,998 units in 404 properties, primarily pursuant to
long-term agreements (including 33,839 units in 370 properties for which we provide asset
management services only, and not also property management services). In certain cases we
may indirectly own generally less than one percent of the operations of such properties
through a partnership syndication or other fund.
   5




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Special Distributions
    
    January 2008
    
    
    August 2008Distribution per unit
    
    $
    2.51
    
    
    $
    3.00Total distribution
    
    $
    257.2 million
    
    
    $
    285.5 millionCommon OP Units and High Performance Units outstanding
on record date
    
    
    102,478,510
    
    
    
    95,151,333Common OP Units held by Aimco
    
    
    92,795,891
    
    
    
    85,619,144Total distribution on Aimco common OP Units
    
    $
    232.9 million
    

    
    $
    256.9 millionCash distribution to Aimco
    
    $
    55.0 million
    

    
    $
    51.4 millionPortion of distribution paid to Aimco through issuance
of common OP Units
    
    $
    177.9 million
    

    
    $
    205.5 millionCommon OP Units issued to Aimco pursuant to distribution
    
    
    4,594,074
    
    
    
    5,731,310Effective increase in outstanding common OP Units and
High Performance units on record date
    
    
    4.48%
    
    
    
    6.02%Cash distributed to holders of common OP Units and High
Performance Units other than Aimco
    
    $
    24.3 million
    

    
    $
    28.6 millionAmounts after elimination of the effects of units held
by us and our consolidated subsidiaries:Common OP Units and High Performance Units outstanding
on record date
    
    
    102,062,370
    
    
    
    94,714,854Common OP Units held by Aimco
    
    
    92,379,751
    
    
    
    85,182,665Total distribution
    
    $
    256.2 million
    

    
    $
    284.1 millionTotal distribution on Aimco common OP units
    
    $
    231.9 million
    

    
    $
    255.5 millionCash distribution to Aimco
    
    $
    54.8 million
    

    
    $
    51.1 millionPortion of dividend paid through issuance of shares
    
    $
    177.1 million
    

    
    $
    204.4 millionCommon OP Units issued pursuant to distribution
    
    
    4,573,735
    
    
    
    5,703,265
  Note 2  Basis of Presentation
   6




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Principles of Consolidation
    Use of Estimates
   Accounting for the Impairment or Disposal of Long-Lived
Assets,
   7




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Income Taxes
  Adoption of SFAS 157
 Fair Value Measurements Effective Date of FASB Statement No. 157
 Basis of Fair Value Measurement (Valuation Hierarchy)
  Level 1 
    
    Unadjusted quoted prices for identical and unrestricted assets or
liabilities in active marketsLevel 2 
    
    Quoted prices for similar assets and liabilities in active markets,
and inputs that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the
financial instrumentLevel 3 
    
    Unobservable inputs that are significant to the fair value measurement
    8




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Fair ValueMeasurement
    
    Valuation MethodologiesNotes receivable
    
    We assess the collectibility of notes
receivable on a periodic basis, which
assessment consists primarily of an
evaluation of cash flow projections
of the borrower to determine whether
estimated cash flows are sufficient
to repay principal and interest in
accordance with the contractual terms
of the note. We recognize
impairments on notes receivable when
it is probable that principal and
interest will not be received in
accordance with the contractual terms
of the loan. The amount of the
impairment to be recognized generally
is based on the fair value of the
real estate, the collateral for the
loan, which represents the primary
source of loan repayment. The fair
value of the collateral, such as real
estate or interests in real estate
partnerships, is estimated through
income and market valuation
approaches using information such as
broker estimates, purchase prices for
recent transactions on comparable
assets and net operating income
capitalization analyses using
observable and unobservable inputs
such as capitalization rates, asset
quality grading, geographic location
analysis, and local supply and demand
observations.Total rate of return swaps
    
    Our total rate of return swaps have
contractually-defined termination
values generally equal to the
difference between the fair value and
the counterpartys purchased value of
the underlying borrowings. Upon
termination, we are required to pay
the counterparty the difference if
the fair value is less than the
purchased value, and the counterparty
is required to pay us the difference
if the fair value is greater than the
purchased value. The underlying
borrowings are generally callable, at
our option, at face value prior to
maturity and with no prepayment
penalty. Due to our control of the
call features in the underlying
borrowings, we believe the inherent
value of any differential between the
fixed and variable cash payments due
under the swaps would be
significantly discounted by a market
participant willing to purchase or
assume any rights and obligations
under these contracts.The swaps are generally
cross-collateralized with other swap
contracts with the same counterparty
and do not allow transfer or
assignment, thus there is no
alternate or secondary market for
these instruments. Accordingly, our
assumptions of the fair value that a
willing market participant would
assign in valuing these instruments
are based on a hypothetical market in
which the highest and best use of
these contracts is in-use in
combination with the related
borrowings, similar to how we utilize
the contracts. Based on these
assumptions, we believe the
termination value, or exit value, of
the swaps approximates the fair value
that would be assigned by a willing
market participant. We calculate
the termination value using a market
approach by reference to estimates of
the fair value of the underlying
borrowings, which are discussed
below, and an evaluation of potential
changes in the credit quality of the
counterparties to these arrangements.
We compare our estimates of fair
value of the swaps and related
borrowings to valuations provided by
the counterparties on a quarterly
basis.Our method for calculating fair value
of the swaps generally results in
changes in fair value equal to the
changes in fair value of the related
borrowings. We believe these
instruments are highly effective in
offsetting the changes in fair value
of the borrowings during the hedging
period.
  9




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Changes in fair value of
borrowings subject to total rate
of return swaps
    
    We recognize changes in the fair
value of certain borrowings subject
to total rate of return swaps, which
we have designated as fair value
hedges in accordance with Statement
of Financial Accounting Standards No.
133, Accounting for Derivative
Instruments and Hedging Activities,
or SFAS 133.We estimate the fair value of debt
instruments using an income and
market approach, including comparison
of the contractual terms to
observable and unobservable inputs
such as market interest rate risk
spreads, collateral quality and
loan-to-value ratios on similarly
encumbered assets within our
portfolio. These borrowings are
collateralized and non-recourse to
us; therefore, we believe changes in
our credit rating will not materially
affect a market participants
estimate of the borrowings fair
value.
   Assets (Liabilities)Total rate of return swaps
    
    $
    (22,836
    )Cumulative reduction of carrying
amount of debt instruments subject
to total rate of return swaps
    
    $
    22,836
 Changes in Level 3 Fair Value Measurements
  Unrealized
    
    
    RealizedFair value at
    
    
    Gains (Losses)
    
    
    gains (losses)
    
    
    Fair value atDecember 31,
    
    
    included in
    
    
    included in
    
    
    September 30,2007
    
    
    earnings (1)
    
    
    earnings (2)
    
    
    2008Total rate of return swaps
    
    
    
    
    
    
    
    
    
    $$
    (9,420
    )
    
    $
    (13,416
    )(3)
    
    
    
    
    
    $
    (22,836
    )Changes in fair value of
debt instruments subject
to total rate of return
swaps
    
    
    9,420
    
    
    
    13,416
    (3)
    
    
    
    
    
    
    22,836Total
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 (1)
    
    Unrealized gains (losses) relate to periodic revaluations of fair value and have not
resulted from the settlement of a swap position.(2)
    
    For total rate of return swaps, realized gains (losses) occur upon the settlement,
resulting from the repayment of the underlying borrowings or the early termination of the
swap, and include any net amounts paid or received upon such settlement. During the three
months ended September 30, 2008, we terminated total rate of return swaps with notional
amounts totaling $47.4 million in connection with the sale of two properties and repayment
of the related hedged debt. The debt was repaid at the swap counterpartys purchased value
and accordingly we incurred no termination payment upon termination of the related swaps.(3)
    
    Included in interest expense in the accompanying condensed consolidated statements of
income.  10




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##### Table of Contents



Adoption of SFAS 159
 The
Fair Value Option for Financial Asset and Financial Liabilities
 Note 3  Real Estate Acquisitions and Dispositions
 Real Estate Acquisitions
  Real Estate Dispositions (Discontinued Operations)
  September 30,
    
    
    December 31,2008
    
    
    2007Real estate, net
    
    $
    299,653
    
    
    $
    1,200,748Other assets
    
    
    4,176
    
    
    
    15,988Assets held for sale
    
    $
    303,829
    
    
    $
    1,216,736Property debt
    
    $
    240,837
    
    
    $
    942,560Other liabilities
    
    
    27,053
    
    
    
    8,486Liabilities related to assets held for sale
    
    $
    267,890
    
    
    $
    951,046
  11




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Rental and other property revenues
    
    $
    31,044
    
    
    $
    76,902
    
    
    $
    167,450
    
    
    $
    246,806Property operating expenses
    
    
    (13,882
    )
    
    
    (41,210
    )
    
    
    (81,695
    )
    
    
    (124,201
    )Depreciation and amortization
    
    
    (7,238
    )
    
    
    (18,773
    )
    
    
    (39,397
    )
    
    
    (59,936
    )Other expenses, net
    
    
    (4,967
    )
    
    
    (1,771
    )
    
    
    (6,502
    )
    
    
    (4,099
    )Operating income
    
    
    4,957
    
    
    
    15,148
    
    
    
    39,856
    
    
    
    58,570Interest income
    
    
    420
    
    
    
    517
    
    
    
    974
    
    
    
    1,662Interest expense
    
    
    (6,194
    )
    
    
    (15,038
    )
    
    
    (31,453
    )
    
    
    (49,467
    )Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,852Minority interest in consolidated real
estate partnerships
    
    
    298
    
    
    
    2,126
    
    
    
    855
    
    
    
    (1,427
    )Income (loss) before gain on dispositions
of real estate, impairment losses,
deficit distributions to minority
partners and income tax
    
    
    (519
    )
    
    
    2,753
    
    
    
    10,232
    
    
    
    32,190Gain on dispositions of real estate, net
of minority partners interest
    
    
    128,301
    
    
    
    17,406
    
    
    
    443,795
    
    
    
    57,296Real estate impairment losses, net
    
    
    (1,798
    )
    
    
    
    
    
    
    (8,334
    )
    
    
    (783
    )Recovery of deficit distributions (deficit
distributions) to minority partners
    
    
    909
    
    
    
    (282
    )
    
    
    8,325
    
    
    
    (726
    )Income tax arising from dispositions
    
    
    (4,027
    )
    
    
    1,151
    
    
    
    (21,091
    )
    
    
    (1,610
    )Income from discontinued operations, net
    
    $
    122,866
    
    
    $
    21,028
    
    
    $
    432,927
    
    
    $
    86,367
   12




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##### Table of Contents



Dispositions of Unconsolidated Real Estate
  Note 4  Other Significant Transactions
 Common Stock Repurchases
  Partial Repurchase of Series A Community Reinvestment Act Perpetual Preferred Units
 The Effect on the
Calculation of Earnings Per Share for the Redemption or Induced Conversion of Preferred Stock
 Redemption of Convertible Preferred Units
  Casualty Loss Related to Tropical Storm Fay and Hurricane Ike
   13




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##### Table of Contents



Transactions Involving VMS National Properties Joint Venture
   Flamingo South Beach Property
 Accounting for Sales of Real
Estate,
 Note 5  Commitments and Contingencies
 Commitments
   Tax Credit Arrangements
   14




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##### Table of Contents



Legal Matters
  Limited Partnerships
  Environmental
  Conditional
Asset Retirement Obligations
 Mold
   15




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##### Table of Contents



FLSA Litigation
  Note 6  Earnings per Unit
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Income (loss) from continuing operations
    
    $
    70,591
    
    
    $
    (23,534
    )
    
    $
    18,429
    
    
    $
    (39,213
    )Less net income attributable to preferred unitholders
    
    
    (14,186
    )
    
    
    (20,802
    )
    
    
    (45,771
    )
    
    
    (57,061
    )Numerator for basic and diluted earnings per unit 
Income (loss) from continuing operations (net of
income attributable to preferred unitholders)
    
    $
    56,405
    
    
    $
    (44,336
    )
    
    $
    (27,342
    )
    
    $
    (96,274
    )Income from discontinued operations
    
    $
    122,866
    
    
    $
    21,028
    
    
    $
    432,927
    
    
    $
    86,367Net income (loss)
    
    $
    193,457
    
    
    $
    (2,506
    )
    
    $
    451,356
    
    
    $
    47,154Less net income attributable to preferred unitholders
    
    
    (14,186
    )
    
    
    (20,802
    )
    
    
    (45,771
    )
    
    
    (57,061
    )Numerator for basic and diluted earnings per unit 
Net income (loss) attributable to common unitholders
    
    $
    179,271
    
    
    $
    (23,308
    )
    
    $
    405,585
    
    
    $
    (9,907
    )Denominator:Denominator for basic earnings per unit  weighted
average number of shares of common units outstandingCommon OP Units
    
    
    96,801
    
    
    
    113,534
    
    
    
    100,671
    
    
    
    114,274Class I HPUs
    
    
    2,368
    
    
    
    2,379
    
    
    
    2,375
    
    
    
    2,379Total common units
    
    
    99,169
    
    
    
    115,913
    
    
    
    103,046
    
    
    
    116,653Effect of dilutive securities:Dilutive potential common units
    
    
    616
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings per unit
    
    
    99,785
    
    
    
    115,913
    
    
    
    103,046
    
    
    
    116,653Earnings (loss) per common unit:Basic earnings (loss) per common unit:Income (loss) from continuing operations (net of
income attributable to preferred unitholders)
    
    $
    0.57
    
    
    $
    (0.38
    )
    
    $
    (0.26
    )
    
    $
    (0.83
    )Income from discontinued operations
    
    
    1.24
    
    
    
    0.18
    
    
    
    4.20
    
    
    
    0.74Net income (loss) attributable to common unitholders
    
    $
    1.81
    
    
    $
    (0.20
    )
    
    $
    3.94
    
    
    $
    (0.09
    )Diluted earnings (loss) per common unit:Income (loss) from continuing operations (net of
income attributable to preferred unitholders)
    
    $
    0.57
    
    
    $
    (0.38
    )
    
    $
    (0.26
    )
    
    $
    (0.83
    )Income from discontinued operations
    
    
    1.23
    
    
    
    0.18
    
    
    
    4.20
    
    
    
    0.74Net income (loss) attributable to common unitholders
    
    $
    1.80
    
    
    $
    (0.20
    )
    
    $
    3.94
    
    
    $
    (0.09
    )
   16




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##### Table of Contents



Note 7  Recent Accounting Developments
 Business Combinations  a replacement of FASB Statement No. 141
 Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement
No. 133
 Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities
  17




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##### Table of Contents



Note 8  Business Segments
 Disclosures about Segments of an
Enterprise and Related Information
  Real Estate Segment
  Investment Management Segment
   Investment
    
    
    CorporateReal Estate
    
    
    Management
    
    
    (Not AllocatedSegment
    
    
    Segment
    
    
    to Segments)
    
    
    TotalThree Months Ended September 30, 2008:Rental and other property revenues
    
    $
    361,996
    
    
    $
    
    
    
    $
    
    
    
    $
    361,996Property management revenues, primarily
from affiliates
    
    
    1,227
    
    
    
    
    
    
    
    
    
    
    
    1,227Asset management and tax credit revenues
    
    
    
    
    
    
    32,755
    
    
    
    
    
    
    
    32,755Total revenues
    
    
    363,223
    
    
    
    32,755
    
    
    
    
    
    
    
    395,978Property operating expenses
    
    
    172,705
    
    
    
    
    
    
    
    
    
    
    
    172,705Property management expenses
    
    
    1,560
    
    
    
    
    
    
    
    
    
    
    
    1,560Investment management expenses
    
    
    
    
    
    
    5,842
    
    
    
    
    
    
    
    5,842Depreciation and amortization (1)
    
    
    
    
    
    
    
    
    
    
    120,771
    
    
    
    120,771General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    27,332
    
    
    
    27,332Other income, net
    
    
    
    
    
    
    
    
    
    
    (3,944
    )
    
    
    (3,944
    )Total operating expenses
    
    
    174,265
    
    
    
    5,842
    
    
    
    144,159
    
    
    
    324,266Net operating income (loss)
    
    
    188,958
    
    
    
    26,913
    
    
    
    (144,159
    )
    
    
    71,712Other items included in continuing
operations (2)
    
    
    
    
    
    
    4,418
    
    
    
    (5,539
    )
    
    
    (1,121
    )Income (loss) from continuing operations
    
    $
    188,958
    
    
    $
    31,331
    
    
    $
    (149,698
    )
    
    $
    70,591
  18




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##### Table of Contents



Investment
    
    
    CorporateReal Estate
    
    
    Management
    
    
    (Not AllocatedSegment
    
    
    Segment
    
    
    to Segments)
    
    
    TotalThree Months Ended September 30, 2007:Rental and other property revenues
    
    $
    345,197
    
    
    $
    
    
    
    $
    
    
    
    $
    345,197Property management revenues, primarily
from affiliates
    
    
    1,824
    
    
    
    
    
    
    
    
    
    
    
    1,824Asset management and tax credit revenues
    
    
    
    
    
    
    12,747
    
    
    
    
    
    
    
    12,747Total revenues
    
    
    347,021
    
    
    
    12,747
    
    
    
    
    
    
    
    359,768Property operating expenses
    
    
    162,829
    
    
    
    
    
    
    
    
    
    
    
    162,829Property management expenses
    
    
    1,333
    
    
    
    
    
    
    
    
    
    
    
    1,333Investment management expenses
    
    
    
    
    
    
    5,812
    
    
    
    
    
    
    
    5,812Depreciation and amortization (1)
    
    
    
    
    
    
    
    
    
    
    110,946
    
    
    
    110,946General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    20,663
    
    
    
    20,663Other income, net
    
    
    
    
    
    
    
    
    
    
    (4,953
    )
    
    
    (4,953
    )Total operating expenses
    
    
    164,162
    
    
    
    5,812
    
    
    
    126,656
    
    
    
    296,630Net operating income (loss)
    
    
    182,859
    
    
    
    6,935
    
    
    
    (126,656
    )
    
    
    63,138Other items included in continuing
operations (2)
    
    
    
    
    
    
    9,812
    
    
    
    (96,484
    )
    
    
    (86,672
    )Income (loss) from continuing operations
    
    $
    182,859
    
    
    $
    16,747
    
    
    $
    (223,140
    )
    
    $
    (23,534
    )
 Investment
    
    
    CorporateReal Estate
    
    
    Management
    
    
    (Not AllocatedSegment
    
    
    Segment
    
    
    to Segments)
    
    
    TotalNine Months Ended September 30, 2008:Rental and other property revenues
    
    $
    1,070,604
    
    
    $
    
    
    
    $
    
    
    
    $
    1,070,604Property management revenues, primarily
from affiliates
    
    
    4,746
    
    
    
    
    
    
    
    
    
    
    
    4,746Asset management and tax credit revenues
    
    
    
    
    
    
    83,782
    
    
    
    
    
    
    
    83,782Total revenues
    
    
    1,075,350
    
    
    
    83,782
    
    
    
    
    
    
    
    1,159,132Property operating expenses
    
    
    506,546
    
    
    
    
    
    
    
    
    
    
    
    506,546Property management expenses
    
    
    4,018
    
    
    
    
    
    
    
    
    
    
    
    4,018Investment management expenses
    
    
    
    
    
    
    15,859
    
    
    
    
    
    
    
    15,859Depreciation and amortization (1)
    
    
    
    
    
    
    
    
    
    
    343,636
    
    
    
    343,636General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    75,820
    
    
    
    75,820Other expenses, net
    
    
    
    
    
    
    
    
    
    
    7,316
    
    
    
    7,316Total operating expenses
    
    
    510,564
    
    
    
    15,859
    
    
    
    426,772
    
    
    
    953,195Net operating income (loss)
    
    
    564,786
    
    
    
    67,923
    
    
    
    (426,772
    )
    
    
    205,937Other items included in continuing
operations (2)
    
    
    
    
    
    
    6,231
    
    
    
    (193,739
    )
    
    
    (187,508
    )Income (loss) from continuing operations
    
    $
    564,786
    
    
    $
    74,154
    
    
    $
    (620,511
    )
    
    $
    18,429
  19




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##### Table of Contents



Investment
    
    
    CorporateReal Estate
    
    
    Management
    
    
    (Not AllocatedSegment
    
    
    Segment
    
    
    to Segments)
    
    
    TotalNine Months Ended September 30, 2007:Rental and other property revenues
    
    $
    1,023,390
    
    
    $
    
    
    
    $
    
    
    
    $
    1,023,390Property management revenues, primarily
from affiliates
    
    
    5,192
    
    
    
    
    
    
    
    
    
    
    
    5,192Asset management and tax credit revenues
    
    
    
    
    
    
    39,554
    
    
    
    
    
    
    
    39,554Total revenues
    
    
    1,028,582
    
    
    
    39,554
    
    
    
    
    
    
    
    1,068,136Property operating expenses
    
    
    473,446
    
    
    
    
    
    
    
    
    
    
    
    473,446Property management expenses
    
    
    5,268
    
    
    
    
    
    
    
    
    
    
    
    5,268Investment management expenses
    
    
    
    
    
    
    15,799
    
    
    
    
    
    
    
    15,799Depreciation and amortization (1)
    
    
    
    
    
    
    
    
    
    
    318,691
    
    
    
    318,691General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    66,763
    
    
    
    66,763Other income, net
    
    
    
    
    
    
    
    
    
    
    (5,776
    )
    
    
    (5,776
    )Total operating expenses
    
    
    478,714
    
    
    
    15,799
    
    
    
    379,678
    
    
    
    874,191Net operating income (loss)
    
    
    549,868
    
    
    
    23,755
    
    
    
    (379,678
    )
    
    
    193,945Other items included in continuing
operations (2)
    
    
    
    
    
    
    14,611
    
    
    
    (247,769
    )
    
    
    (233,158
    )Income (loss) from continuing operations
    
    $
    549,868
    
    
    $
    38,366
    
    
    $
    (627,447
    )
    
    $
    (39,213
    )
 (1)
    
    Our chief operating decision maker assesses the performance of real estate using, among other
measures, net operating income, excluding depreciation and amortization. Accordingly, we do
not allocate depreciation and amortization to the real estate segment.(2)
    
    Other items in continuing operations for the investment management segment include accretion
income recognized on discounted notes receivable and other income items associated with
transactional activities. Other items in continuing operations not allocated to segments
include: (i) interest income and expense; (ii) recoveries of, or provisions for, losses on
notes receivable and impairment of real estate, net; (iii) deficit distributions to minority
partners; (iv) equity in losses of unconsolidated real estate partnerships; (v) gains on
dispositions of unconsolidated real estate and other; and (vi) minority interests. Note 9  Subsequent Events
     20




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
 The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements in certain circumstances. Certain information included in this Report
contains or may contain information that is forward-looking, including, without limitation,
statements regarding the effect of acquisitions and redevelopments, our future financial
performance, including our ability to maintain current or meet projected occupancy, rent levels and
same store results, and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and, in addition, will be affected by a
variety of risks and factors that are beyond our control including, without limitation: natural
disasters and severe weather 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 fluctuations in real
estate values and the general economic climate in local markets and competition for residents in
such markets; insurance risks; acquisition and development risks, including failure of such
acquisitions to perform in accordance with projections; the timing of acquisitions and
dispositions; litigation, including costs associated with prosecuting or defending claims and any
adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that
may be incurred due to necessary remediation of contamination of properties presently owned or
previously owned by us. In addition, Aimcos current and continuing qualification as a real estate
investment trust involves the application of highly technical and complex provisions of the
Internal Revenue Code and depends on 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 section entitled Risk Factors described in Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2007, 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
      21




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##### Table of Contents



Results of Operations
 Overview
 Three months ended September 30, 2008 compared to three months ended September 30, 2007
  
    
    an increase in income from discontinued operations, primarily related to higher net
gains on sales of real estate;
    
    an increase in gain on dispositions of unconsolidated real estate and other, primarily
related to higher net gains on disposition of real estate by our unconsolidated real estate
partnerships; and
    
    an increase in asset management and tax credit revenues, including increases in promote
income resulting from asset disposition activities.
  Nine months ended September 30, 2008 compared to nine months ended September 30, 2007
  
    
    an increase in income from discontinued operations, primarily related to higher net
gains on sales of real estate;
    
    an increase in gain on dispositions of unconsolidated real estate and other, primarily
related to higher net gains on disposition of real estate by our unconsolidated real estate
partnerships; and
    
    an increase in asset management and tax credit revenues, which is primarily attributed
to increases in promote income resulting from asset disposition activities.
  
    
    an increase in interest expense, reflecting higher loan principal balances resulting
from refinancings;
    
    a decrease in interest income, primarily related to an adjustment of accretion of
discounted notes receivable, and lower cash balances and interest rates;
    
    an increase in depreciation and amortization expense, primarily related to completed
redevelopments; and
    
    the recognition in 2007 of deferred debt extinguishment gains in connection with the
refinancing of certain mortgage loans that had been restructured in a 1997 bankruptcy
settlement.
  22




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##### Table of Contents



Business Segment Operating Results
  Real Estate Segment
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Real estate segment revenues:Rental and other property revenues
    
    $
    361,996
    
    
    $
    345,197
    
    
    $
    1,070,604
    
    
    $
    1,023,390Property management revenues, primarily
from affiliates
    
    
    1,227
    
    
    
    1,824
    
    
    
    4,746
    
    
    
    5,192363,223
    
    
    
    347,021
    
    
    
    1,075,350
    
    
    
    1,028,582Real estate segment expenses:Property operating expenses
    
    
    172,705
    
    
    
    162,829
    
    
    
    506,546
    
    
    
    473,446Property management expenses
    
    
    1,560
    
    
    
    1,333
    
    
    
    4,018
    
    
    
    5,268174,265
    
    
    
    164,162
    
    
    
    510,564
    
    
    
    478,714Real estate segment net operating income
    
    $
    188,958
    
    
    $
    182,859
    
    
    $
    564,786
    
    
    $
    549,868
 Consolidated Conventional Same Store Property Operating Results
  Three Months Ended September 30,2008
    
    
    2007
    
    
    ChangeConsolidated same store revenues
    
    $
    228,582
    
    
    $
    223,137
    
    
    
    2.4
    %Consolidated same store expenses
    
    
    90,861
    
    
    
    93,730
    
    
    
    -3.1
    %Same store net operating income
    
    
    137,721
    
    
    
    129,407
    
    
    
    6.4
    %Reconciling items (1)
    
    
    51,237
    
    
    
    53,452
    
    
    
    -4.1
    %Real estate segment net operating income
    
    $
    188,958
    
    
    $
    182,859
    
    
    
    3.3
    %Same store operating statistics:Properties
    
    
    254
    
    
    
    254Apartment units
    
    
    78,142
    
    
    
    78,142Average physical occupancy
    
    
    95.1
    %
    
    
    94.7
    %
    
    
    0.4
    %Average rent/unit/month
    
    $
    939
    
    
    $
    926
    
    
    
    1.4
    %
 (1)
    
    Reflects property revenues and property operating expenses related to
consolidated properties other than same store properties (e.g., affordable,
acquisition, redevelopment and newly consolidated properties) and casualty gains
and losses.  23




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##### Table of Contents



Nine Months Ended September 30,2008
    
    
    2007
    
    
    ChangeConsolidated same store revenues
    
    $
    672,179
    
    
    $
    656,005
    
    
    
    2.5
    %Consolidated same store expenses
    
    
    268,001
    
    
    
    268,725
    
    
    
    -0.3
    %Same store net operating income
    
    
    404,178
    
    
    
    387,280
    
    
    
    4.4
    %Reconciling items (1)
    
    
    160,608
    
    
    
    162,588
    
    
    
    -1.2
    %Real estate segment net operating income
    
    $
    564,786
    
    
    $
    549,868
    
    
    
    2.7
    %Same store operating statistics:Properties
    
    
    250
    
    
    
    250Apartment units
    
    
    77,153
    
    
    
    77,153Average physical occupancy
    
    
    94.9
    %
    
    
    94.7
    %
    
    
    0.2
    %Average rent/unit/month
    
    $
    935
    
    
    $
    916
    
    
    
    2.1
    %
 (1)
    
    Reflects property revenues and property operating expenses related to
consolidated properties other than same store properties (e.g., affordable,
acquisition, redevelopment and newly consolidated properties) and casualty gains
and losses.   Investment Management Segmen
    24




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##### Table of Contents



Three Months Ended,
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Asset management and tax credit revenues
    
    $
    32,755
    
    
    $
    12,747
    
    
    $
    83,782
    
    
    $
    39,554Investment management expenses
    
    
    5,842
    
    
    
    5,812
    
    
    
    15,859
    
    
    
    15,799Investment segment net operating income (1)
    
    $
    26,913
    
    
    $
    6,935
    
    
    $
    67,923
    
    
    $
    23,755
 (1)
    
    Excludes certain items of income and expense, which are
included in other (income) expenses, net, interest expense, interest
income and gain on dispositions of unconsolidated real estate and other
in our consolidated statements of income.   Other Operating Expenses (Income)
 Depreciation and Amortization
 Use of Estimates
 Use of Estimates
 General and Administrative Expenses
    25




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Other (Income) Expenses, Net
   Use of Estimates
 Interest Income
    Interest Expense
    26




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##### Table of Contents



Deficit Distributions to Minority Partners
    Provision for Real Estate Impairment Losses
   Gain on Dispositions of Unconsolidated Real Estate and Other
    Minority Interest in Consolidated Real Estate Partnerships
   27




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##### Table of Contents



Income from Discontinued Operations, Net
         28




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##### Table of Contents



Critical Accounting Policies and Estimates
  Impairment of Long-Lived Assets
     
    
    the general economic climate;
    
    competition from other apartment communities and other housing options;
    
    local conditions, such as loss of jobs or an increase in the supply of apartments, that
might adversely affect apartment occupancy or rental rates;
    
    changes in governmental regulations and the related cost of compliance;
    
    increases in operating costs (including real estate taxes) due to inflation and other
factors, which may not be offset by increased rents;
    
    changes in tax laws and housing laws, including the enactment of rent control laws or
other laws regulating multifamily housing;
    
    availability and cost of financing;
    
    changes in market capitalization rates; and
    
    the relative illiquidity of such investments.
  Notes Receivable and Interest Income Recognition
   29




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Allowance for Losses on Notes Receivable
   Capitalized Costs
    30




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##### Table of Contents



Funds From Operations
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss) attributable to common unitholders
(1)
    
    $
    179,271
    
    
    $
    (23,308
    )
    
    $
    405,585
    
    
    $
    (9,907
    )Adjustments:Depreciation and amortization
    
    
    120,771
    
    
    
    110,946
    
    
    
    343,636
    
    
    
    318,691Depreciation and amortization related to non-real
estate assets
    
    
    (4,189
    )
    
    
    (3,491
    )
    
    
    (13,041
    )
    
    
    (14,782
    )Depreciation of rental property related to minority
partners interest and unconsolidated entities (2)
(3)
    
    
    (15,005
    )
    
    
    (6,230
    )
    
    
    (27,334
    )
    
    
    (17,353
    )Gain on dispositions of unconsolidated real estate
and other
    
    
    (100,359
    )
    
    
    (5,841
    )
    
    
    (100,345
    )
    
    
    (26,919
    )Gain on dispositions of non-depreciable assets and
debt extinguishment gain
    
    
    1,669
    
    
    
    6,000
    
    
    
    1,669
    
    
    
    25,373Deficit distributions to minority partners, net (4)
    
    
    17,798
    
    
    
    11,640
    
    
    
    22,981
    
    
    
    13,998Discontinued operations:Gain on dispositions of real estate, net of
minority partners interest (2)
    
    
    (128,301
    )
    
    
    (17,406
    )
    
    
    (443,795
    )
    
    
    (57,296
    )Depreciation of rental property, net of minority
partners interest (2) (3)
    
    
    6,229
    
    
    
    17,089
    
    
    
    34,592
    
    
    
    32,595Deficit distributions (recovery of deficit
distributions) to minority partners (4)
    
    
    (909
    )
    
    
    282
    
    
    
    (8,325
    )
    
    
    726Income tax arising from disposals
    
    
    4,027
    
    
    
    (1,151
    )
    
    
    21,091
    
    
    
    1,610Preferred OP unit distributions
    
    
    15,668
    
    
    
    18,167
    
    
    
    47,253
    
    
    
    54,426Preferred OP unit redemption related (gains) costs (5)
    
    
    (1,482
    )
    
    
    2,635
    
    
    
    (1,482
    )
    
    
    2,635Funds From Operations
    
    $
    95,188
    
    
    $
    109,332
    
    
    $
    282,485
    
    
    $
    323,797Preferred OP
unit distributions
    
    
    (15,668
    )
    
    
    (18,167
    )
    
    
    (47,253
    )
    
    
    (54,426
    )Preferred OP unit redemption related gains (costs) (5)
    
    
    1,482
    
    
    
    (2,635
    )
    
    
    1,482
    
    
    
    (2,635
    )Distributions on dilutive preferred securities
    
    
    1,758
    
    
    
    58
    
    
    
    4,850
    
    
    
    116Funds From Operations attributable to common
unitholders  diluted
    
    $
    82,760
    
    
    $
    88,588
    
    
    $
    241,564
    
    
    $
    266,852Weighted average number of common units, common unit
equivalents and dilutive preferred securities
outstanding (6) (7):Common units and equivalents
    
    
    99,785
    
    
    
    117,239
    
    
    
    103,531
    
    
    
    119,739Dilutive preferred securities
    
    
    2,506
    
    
    
    96
    
    
    
    2,341
    
    
    
    60Total
    
    
    102,291
    
    
    
    117,335
    
    
    
    105,872
    
    
    
    119,799
 Notes:(1)
    
    Represents the numerator for earnings per common unit, calculated in accordance with
GAAP (see Note 6 to the condensed consolidated financial statements in Item 1).(2)
    
    Minority partners interest means minority interest in our consolidated real estate
partnerships.(3)
    
    Adjustments related to minority partners share of depreciation of rental property for
the nine months ended September 30, 2007, 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 4 to the condensed 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 nine months ended September 30, 2007, was an increase of $9.3 million.  31




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##### Table of Contents



(4)
    
    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.(5)
    
    Preferred OP unit redemption related costs and gains include a redemption discount, net
of issuance costs, of $1.5 million for the three and nine months ended September 30, 2008,
and a redemption premium and issuance costs of $2.6 million for the three and nine months
ended September 30, 2007.(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.(7)
    
    Weighted average common units, common unit equivalents and dilutive preferred
securities amounts for the periods presented have been retroactively adjusted for the
effect of common OP Units issued to Aimco pursuant to the special distributions discussed
in Note 1 to the condensed consolidated financial statements in Item 1. Liquidity and Capital Resources
      32




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Operating Activities
  Investing Activities
    Capital Expenditures
   33




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##### Table of Contents



Aimcos
    
    
    PerShare of
    
    
    EffectiveExpenditures
    
    
    UnitCapital Replacements Detail:Building and grounds
    
    $
    25,323
    
    
    $
    197Turnover related
    
    
    36,356
    
    
    
    283Capitalized site payroll and indirect costs
    
    
    10,820
    
    
    
    84Our share of Capital Replacements
    
    $
    72,499
    
    
    $
    564Capital Replacements:Conventional
    
    $
    68,060
    
    
    $
    610Affordable
    
    
    4,439
    
    
    $
    263Our share of Capital Replacements
    
    
    72,499
    
    
    $
    564Capital Improvements:Conventional
    
    
    76,875
    
    
    $
    689Affordable
    
    
    8,210
    
    
    $
    486Our share of Capital Improvements
    
    
    85,085
    
    
    $
    662Casualties (1):Conventional
    
    
    7,818Affordable
    
    
    1,453Our share of casualties
    
    
    9,271Redevelopment:Conventional projects
    
    
    182,185Tax credit projects
    
    
    73,832Our share of redevelopment
    
    
    256,017Entitlement
    
    
    18,226Our share of capital expenditures
    
    
    441,098Plus minority partners share of consolidated spending
    
    
    35,498Less our share of unconsolidated spending
    
    
    (566
    )Total capital expenditures per condensed consolidated
statement of cash flows
    
    $
    476,030
 (1)
    
    Casualties for the nine months ended September 30, 2008, reflects only the portion of
the anticipated spending related to Tropical Storm Fay and Hurricane Ike incurred as of
September 30, 2008.   34




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##### Table of Contents



Financing Activities
  Mortgage Debt
  Fair Value Measurements
  Accounting for
Derivative Instruments and Hedging Activities
 Fair Value Measurements
  35




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##### Table of Contents



Credit Facility
    Partners Capital Transactions
   36




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##### Table of Contents



Special Distributions
    
    January 2008
    
    
    August 2008Distribution per unit
    
    $
    2.51
    
    
    $
    3.00Total distribution
    
    $
    257.2 million
    
    
    $
    285.5 millionCommon OP Units and High Performance Units outstanding
on record date
    
    
    102,478,510
    
    
    
    95,151,333Common OP Units held by Aimco
    
    
    92,795,891
    
    
    
    85,619,144Total distribution on Aimco common OP Units
    
    $
    232.9 million
    
    
    $
    256.9 millionCash distribution to Aimco
    
    $
    55.0 million
    
    
    $
    51.4 millionPortion of distribution paid to Aimco through issuance of common OP Units
    
    $
    177.9 million
    
    
    $
    205.5 millionCommon OP Units issued to Aimco pursuant to distribution
    
    
    4,594,074
    
    
    
    5,731,310Effective increase in outstanding common OP Units and
High Performance units on record date
    
    
    4.48%
    
    
    
    6.02%Cash distributed to holders of common OP Units and High
Performance Units other than Aimco
    
    $
    24.3 million
    
    
    $
    28.6 millionAmounts after elimination of the effects of units held
by us and our consolidated subsidiaries:Common OP Units and High Performance Units outstanding
on record date
    
    
    102,062,370
    
    
    
    94,714,854Common OP Units held by Aimco
    
    
    92,379,751
    
    
    
    85,182,665Total distribution
    
    $
    256.2 million
    
    
    $
    284.1 millionTotal distribution on Aimco common OP units
    
    $
    231.9 million
    
    
    $
    255.5 millionCash distribution to Aimco
    
    $
    54.8 million
    
    
    $
    51.1 millionPortion of dividend paid through issuance of shares
    
    $
    177.1 million
    
    
    $
    204.4 millionCommon OP Units issued pursuant to distribution
    
    
    4,573,735
    
    
    
    5,703,265
    Future Capital Needs
   37




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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
   38




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Repurchases of Equity Securities.
 Maximum NumberTotal Number of
    
    
    of Units thatTotal
    
    
    Average
    
    
    Units Purchased as
    
    
    May Yet BeNumber
    
    
    Price
    
    
    Part of Publicly
    
    
    Purchased Underof Units
    
    
    Paid
    
    
    Announced Plans
    
    
    the PlansPeriod
    
    Purchased
    
    
    per Unit
    
    
    or Programs (1)
    
    
    or Programs (2)July 1  July 31, 2008 (3)
    
    
    2,915,613
    
    
    $
    34.45
    
    
    
    N/A
    
    
    
    N/AAugust 1  August 31, 2008
    
    
    4,400
    
    
    $
    34.89
    
    
    
    N/A
    
    
    
    N/ASeptember 1  September 30, 2008
    
    
    1,683
    
    
    $
    21.63
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    2,921,696
    
    
    $
    34.44
 (1)
    
    The terms of our Partnership Agreement do not provide for a maximum number of units that
may be repurchased, and other than the express terms of our Partnership Agreement, we have
no publicly announced plans or programs of repurchase. However, whenever Aimco repurchases
its Class A Common Stock, it is expected that Aimco will fund the repurchase with a
concurrent repurchase by us of common OP Units held by Aimco at a price per unit that is
equal to the price per share paid for the Class A Common Stock.(2)
    
    Aimcos board of directors has, from time to time, authorized Aimco to repurchase shares
of Class A Common Stock. As of September 30, 2008, Aimco was authorized to repurchase
approximately 21.3 million additional shares. This authorization has no expiration date.
These repurchases may be made from time to time in the open market or in privately
negotiated transactions.(3)
    
    During the period from July 1 through July 31, we repurchased from Aimco 2,902,900 common
OP Units concurrent with Aimcos repurchase of an equal number of shares of Aimco Class A
Common stock, at an average price of $34.45 per unit. The number of units repurchased from
Aimco during this period totaled 3,053,931, resulting in an average price of $32.74 per
unit, after giving effect to the units issued pursuant to the August 2008 special
distribution discussed in Note 1 to the consolidated financial statements in Item 1. Distribution Payments.
  39




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##### Table of Contents



ITEM 6. Exhibits
  EXHIBIT NO.10.1
    
    Fifth Amendment to Senior Secured Credit Agreement, dated as of
September 9, 2008, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc.,
as the Borrowers, the pledgors and guarantors named therein, Bank of
America, N.A., as administrative agent and Bank of America, N.A. and
the other lenders party thereto (Exhibit 10.1 to Aimcos Current
Report on Form 8-K, dated September 9, 2008, is incorporated herein
by this reference)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 Regarding Disclosure of Long-Term Debt Instruments
  40




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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 and
Chief Financial Officer
(duly authorized officer and
principal financial officer)By:
    /s/ PAUL BELDINPaul BeldinSenior Vice President and
Chief Accounting Officer   41




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##### Table of Contents



Exhibit Index
 EXHIBIT NO.
    
    EXHIBIT TITLE10.1
    
    Fifth Amendment to Senior Secured Credit Agreement, dated as
of September 9, 2008, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein, Bank of America, N.A., as administrative agent
and Bank of America, N.A. and the other lenders party thereto
(Exhibit 10.1 to Aimcos Current Report on Form 8-K, dated
September 9, 2008, is incorporated herein by this
reference)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 Regarding Disclosure of Long-Term Debt Instruments