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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 September 30, 2005
 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
(State or other jurisdiction of
incorporation or organization)
    
    84-1275621
(I.R.S. Employer
Identification No.)4582 South Ulster Street Parkway, Suite 1100Denver, Colorado
(Address of principal executive offices)
    
    80237
(Zip Code)
 (303) 757-8101
 Not Applicable
 þ 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 September 30, 2005 (unaudited) and December 31, 2004
    
    
    2Consolidated Statements of Income for the Three and Nine Months Ended September 30,
2005 and 2004 (unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005
and 2004 (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
    
    
    31ITEM 4.
    
    Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    32ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32ITEM 6.
    
    Exhibits
    
    
    33Signatures
    
    
    
    
    34Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906Agreement
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AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED BALANCE SHEETS
(In Thousands)
 September 30, 2005
    
    
    December 31, 2004(Unaudited)ASSETSReal estate:Land
    
    $
    2,293,876
    
    
    $
    2,113,839Buildings and improvements
    
    
    8,692,623
    
    
    
    8,133,833Total real estate
    
    
    10,986,499
    
    
    
    10,247,672Less accumulated depreciation
    
    
    (2,199,291
    )
    
    
    (1,898,988
    )Net real estate
    
    
    8,787,208
    
    
    
    8,348,684Cash and cash equivalents
    
    
    139,636
    
    
    
    105,343Restricted cash
    
    
    314,585
    
    
    
    289,689Accounts receivable
    
    
    78,343
    
    
    
    75,044Accounts receivable from affiliates
    
    
    40,495
    
    
    
    39,216Deferred financing costs
    
    
    66,619
    
    
    
    69,228Notes receivable from unconsolidated real estate partnerships
    
    
    178,407
    
    
    
    165,289Notes receivable from non-affiliates
    
    
    27,373
    
    
    
    31,716Notes receivable from Aimco
    
    
    13,127
    
    
    
    12,613Investment in unconsolidated real estate partnerships
    
    
    176,387
    
    
    
    206,708Other assets
    
    
    239,171
    
    
    
    243,243Assets held for sale
    
    
    214,132
    
    
    
    497,381Total assets
    
    $
    10,275,483
    
    
    $
    10,084,154LIABILITIES AND PARTNERS CAPITALSecured tax-exempt bond financing
    
    $
    1,060,872
    
    
    $
    1,101,225Secured notes payable
    
    
    4,598,410
    
    
    
    4,212,040Mandatorily redeemable preferred securities
    
    
    
    
    
    
    15,019Term loans
    
    
    400,000
    
    
    
    300,000Credit facility
    
    
    232,000
    
    
    
    68,700Total indebtedness
    
    
    6,291,282
    
    
    
    5,696,984Accounts payable
    
    
    44,731
    
    
    
    34,663Accrued liabilities and other
    
    
    401,817
    
    
    
    400,972Deferred income
    
    
    46,104
    
    
    
    43,924Security deposits
    
    
    39,107
    
    
    
    35,740Deferred income taxes payable, net
    
    
    8,257
    
    
    
    20,139Liabilities related to assets held for sale
    
    
    156,703
    
    
    
    347,818Total liabilities
    
    
    6,988,001
    
    
    
    6,580,240Minority interest in consolidated real estate partnerships
    
    
    210,015
    
    
    
    212,827Partners capital:Preferred units
    
    
    1,188,497
    
    
    
    1,131,041General Partner and Special Limited Partner
    
    
    1,688,591
    
    
    
    1,851,733Limited Partners
    
    
    309,786
    
    
    
    326,113High performance units
    
    
    (13,091
    )
    
    
    (8,880
    )Investment in Aimco Class A Common Stock
    
    
    (8,228
    )
    
    
    (8,920
    )Note receivable from Aimco
    
    
    (88,088
    )
    
    
    Total partners capital
    
    
    3,077,467
    
    
    
    3,291,087Total liabilities and partners capital
    
    $
    10,275,483
    
    
    $
    10,084,154
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AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Unit Data)
(Unaudited)
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004REVENUES:Rental and other property revenues
    
    $
    379,550
    
    
    $
    341,116
    
    
    $
    1,099,783
    
    
    $
    985,148Property management revenues, primarily from affiliates
    
    
    6,094
    
    
    
    8,713
    
    
    
    18,684
    
    
    
    26,032Activity fees and asset management revenues, primarily from affiliates
    
    
    8,018
    
    
    
    5,985
    
    
    
    22,715
    
    
    
    24,381Total revenues
    
    
    393,662
    
    
    
    355,814
    
    
    
    1,141,182
    
    
    
    1,035,561EXPENSES:Property operating expenses
    
    
    185,078
    
    
    
    169,900
    
    
    
    528,756
    
    
    
    474,443Property management expenses
    
    
    1,918
    
    
    
    2,737
    
    
    
    5,663
    
    
    
    7,327Activity and asset management expenses
    
    
    2,760
    
    
    
    2,272
    
    
    
    7,673
    
    
    
    9,299Depreciation and amortization
    
    
    112,594
    
    
    
    84,907
    
    
    
    312,945
    
    
    
    251,085General and administrative expenses
    
    
    23,123
    
    
    
    18,434
    
    
    
    65,697
    
    
    
    54,020Other expenses (income), net
    
    
    (3,402
    )
    
    
    (1,865
    )
    
    
    (5,261
    )
    
    
    (2,520
    )Total expenses
    
    
    322,071
    
    
    
    276,385
    
    
    
    915,473
    
    
    
    793,654Operating income
    
    
    71,591
    
    
    
    79,429
    
    
    
    225,709
    
    
    
    241,907Interest income
    
    
    8,699
    
    
    
    10,345
    
    
    
    25,427
    
    
    
    25,820Recovery of (provision for) losses on notes receivable
    
    
    (206
    )
    
    
    (672
    )
    
    
    1,352
    
    
    
    (1,773
    )Interest expense
    
    
    (96,107
    )
    
    
    (92,043
    )
    
    
    (277,101
    )
    
    
    (261,826
    )Deficit distributions to minority partners, net
    
    
    (2,977
    )
    
    
    (7,105
    )
    
    
    (6,147
    )
    
    
    (14,286
    )Equity in losses of unconsolidated real estate partnerships
    
    
    (552
    )
    
    
    (1,197
    )
    
    
    (1,871
    )
    
    
    (3,669
    )Impairment losses related to real estate partnerships
    
    
    (1,178
    )
    
    
    (583
    )
    
    
    (1,709
    )
    
    
    (2,316
    )Gain on dispositions of real estate related to unconsolidated entities
and other
    
    
    8,097
    
    
    
    39,138
    
    
    
    12,870
    
    
    
    41,235Income (loss) before minority interest, discontinued operations and
cumulative effect of change in accounting principle
    
    
    (12,633
    )
    
    
    27,312
    
    
    
    (21,470
    )
    
    
    25,092Minority interest in consolidated real estate partnerships
    
    
    3,923
    
    
    
    1,353
    
    
    
    8,637
    
    
    
    7,158Income (loss) from continuing operations
    
    
    (8,710
    )
    
    
    28,665
    
    
    
    (12,833
    )
    
    
    32,250Income from discontinued operations, net
    
    
    38,746
    
    
    
    153,632
    
    
    
    76,221
    
    
    
    184,873Income before cumulative effect of change in accounting principle
    
    
    30,036
    
    
    
    182,297
    
    
    
    63,388
    
    
    
    217,123Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,957
    )Net income
    
    
    30,036
    
    
    
    182,297
    
    
    
    63,388
    
    
    
    213,166Net income attributable to preferred unitholders
    
    
    24,655
    
    
    
    26,635
    
    
    
    74,356
    
    
    
    72,475Net income (loss) attributable to common unitholders
    
    $
    5,381
    
    
    $
    155,662
    
    
    $
    (10,968
    )
    
    $
    140,691Earnings (loss) per common unit  basic:Income (loss) from continuing operations (net of preferred
distributions)
    
    $
    (0.32
    )
    
    $
    0.02
    
    
    $
    (0.83
    )
    
    $
    (0.39
    )Income from discontinued operations
    
    
    0.37
    
    
    
    1.47
    
    
    
    0.73
    
    
    
    1.78Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.04
    )Net income (loss) attributable to common unitholders
    
    $
    0.05
    
    
    $
    1.49
    
    
    $
    (0.10
    )
    
    $
    1.35Earnings (loss) per common unit  diluted:Income (loss) from continuing operations (net of preferred
distributions)
    
    $
    (0.32
    )
    
    $
    0.02
    
    
    $
    (0.83
    )
    
    $
    (0.39
    )Income from discontinued operations
    
    
    0.37
    
    
    
    1.47
    
    
    
    0.73
    
    
    
    1.78Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.04
    )Net income (loss) attributable to common unitholders
    
    $
    0.05
    
    
    $
    1.49
    
    
    $
    (0.10
    )
    
    $
    1.35Weighted average common units outstanding
    
    
    104,585
    
    
    
    104,296
    
    
    
    104,469
    
    
    
    104,266Weighted average common units and equivalents outstanding
    
    
    104,585
    
    
    
    104,443
    
    
    
    104,469
    
    
    
    104,266Distributions declared per common unit
    
    $
    0.60
    
    
    $
    0.60
    
    
    $
    1.80
    
    
    $
    1.80
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AIMCO PROPERTIES, L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In Thousands, Unaudited)
 For the Nine MonthsEnded September 30,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    63,388
    
    
    $
    213,166Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    312,945
    
    
    
    251,085Discontinued operations
    
    
    (64,890
    )
    
    
    (159,469
    )Other adjustments
    
    
    (29,786
    )
    
    
    (9,002
    )Net changes in operating assets and operating liabilities
    
    
    (3,979
    )
    
    
    6,858Net cash provided by operating activities
    
    
    277,678
    
    
    
    302,638CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of real estate
    
    
    (158,584
    )
    
    
    (206,246
    )Capital expenditures
    
    
    (324,046
    )
    
    
    (191,379
    )Proceeds from dispositions of real estate
    
    
    390,808
    
    
    
    679,793Change in funds held in escrow from tax-free exchanges
    
    
    (13,063
    )
    
    
    709Cash from newly consolidated properties
    
    
    2,211
    
    
    
    14,827Purchases of non-real estate related corporate assets
    
    
    (11,090
    )
    
    
    (23,967
    )Purchases of general and limited partnership interests and other assets
    
    
    (85,267
    )
    
    
    (67,437
    )Originations of notes receivable from unconsolidated real estate partnerships
    
    
    (28,042
    )
    
    
    (64,491
    )Originations of notes receivable from Aimco
    
    
    (85,412
    )
    
    
    (69,678
    )Proceeds from repayment of notes receivable
    
    
    16,402
    
    
    
    34,145Proceeds from repayment of notes receivable from Aimco
    
    
    
    
    
    
    69,678Distributions received from investments in unconsolidated real estate partnerships
    
    
    40,131
    
    
    
    44,973Other investing activities
    
    
    314
    
    
    
    (1,517
    )Net cash (used in) provided by investing activities
    
    
    (255,638
    )
    
    
    219,410CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from secured notes payable borrowings
    
    
    550,243
    
    
    
    407,620Principal repayments on secured notes payable
    
    
    (452,310
    )
    
    
    (465,555
    )Proceeds from tax-exempt bond financing
    
    
    
    
    
    
    69,471Principal repayments on tax-exempt bond financing
    
    
    (40,431
    )
    
    
    (169,945
    )Net borrowings on term loans and revolving credit facility
    
    
    263,300
    
    
    
    (16,987
    )Redemption of mandatorily redeemable preferred securities
    
    
    (15,019
    )
    
    
    (98,875
    )Proceeds from issuance of preferred units, net
    
    
    
    
    
    
    207,072Redemption of preferred units
    
    
    (31,250
    )
    
    
    (149,926
    )Repurchase and redemption of common units and warrant purchase
    
    
    (3,791
    )
    
    
    (13,469
    )Contributions from minority interest
    
    
    25,453
    
    
    
    27,697Payment of distributions to minority interest
    
    
    (26,266
    )
    
    
    (42,903
    )Payment of distributions to General Partner and Special Limited Partner
    
    
    (170,660
    )
    
    
    (170,040
    )Payment of distributions to Limited Partners
    
    
    (16,278
    )
    
    
    (15,759
    )Payment of distributions to High Performance Units
    
    
    (4,283
    )
    
    
    (4,372
    )Payment of distributions to preferred units
    
    
    (70,578
    )
    
    
    (73,259
    )Other financing activities
    
    
    4,123
    
    
    
    (4,680
    )Net cash provided by (used in) financing activities
    
    
    12,253
    
    
    
    (513,910
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    34,293
    
    
    
    8,138CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    105,343
    
    
    
    114,432CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    139,636
    
    
    $
    122,570Supplemental cash flow information:Issuance of preferred units associated with the purchase of real estate
    
    $
    85,412
    
    
    $
    69,678Secured debt assumed in connection with purchase of real estate
    
    $
    38,740
    
    
    $
    67,560
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AIMCO PROPERTIES, L.P.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)
 Note 1  Organization
     
    
    owned an equity interest in and consolidated 166,087 units in 651 properties (which we
refer to as consolidated), of which 165,277 units were also managed by us;
    
    owned an equity interest in and did not consolidate 38,591 units in 286 properties
(which we refer to as unconsolidated), of which 32,406 units were also managed by us; and
    
    provided services or managed, for third-party owners, 46,572 units in 487 properties,
primarily pursuant to long-term agreements (including 41,439 units in 434 properties that
are asset managed only, and not also property managed), although in certain cases we may
indirectly own generally less than one percent of the operations of such properties through
a partnership syndication or other fund.
  5




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Note 2  Basis of Presentation
   Principles of Consolidation
  Consolidation of Variable Interest Entities
 Minority Interest in Consolidated Real Estate Partnerships
  Use of Estimates
  6




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Accounting for the Impairment or
Disposal of Long-Lived Assets,
 Stock-Based Compensation
  Accounting for Stock-Based Compensation, Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123, Accounting for Stock Issued to Employees
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss) attributable to common unitholders,
as reported
    
    $
    5,381
    
    
    $
    155,662
    
    
    $
    (10,968
    )
    
    $
    140,691Add stock-based employee compensation expense included in
reported net income:Restricted stock awards
    
    
    2,157
    
    
    
    1,567
    
    
    
    6,239
    
    
    
    3,272Stock options
    
    
    466
    
    
    
    413
    
    
    
    1,389
    
    
    
    1,188Deduct total stock-based employee compensation expense
determined under fair value based method for all awards:Restricted stock awards
    
    
    (2,157
    )
    
    
    (1,567
    )
    
    
    (6,239
    )
    
    
    (3,272
    )Stock options
    
    
    (877
    )
    
    
    (1,065
    )
    
    
    (2,631
    )
    
    
    (3,222
    )Pro forma net income (loss) attributable to common unitholders
    
    $
    4,970
    
    
    $
    155,010
    
    
    $
    (12,210
    )
    
    $
    138,657Basic earnings (loss) per common unit:Reported
    
    $
    0.05
    
    
    $
    1.49
    
    
    $
    (0.10
    )
    
    $
    1.35Pro forma
    
    $
    0.05
    
    
    $
    1.49
    
    
    $
    (0.12
    )
    
    $
    1.33Diluted earnings (loss) per common unit:Reported
    
    $
    0.05
    
    
    $
    1.49
    
    
    $
    (0.10
    )
    
    $
    1.35Pro forma
    
    $
    0.05
    
    
    $
    1.48
    
    
    $
    (0.12
    )
    
    $
    1.33
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Note 3  Acquisitions
 Real Estate Acquisitions
   Acquisitions of Partnership Interests
  Note 4  Mandatorily Redeemable Preferred Securities
  Note 5  Term Loans
  8




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Note 6  Commitments and Contingencies
 Commitments
  
    
    invest up to $50 million for a 20% limited liability company interest in Casden
Properties LLC. As of September 30, 2005, we had invested $44.8 million. Casden
Properties LLC intends to pursue new development opportunities in Southern California and
other markets. We have an option, but not an obligation, to purchase at completion all
multifamily rental projects developed by Casden Properties LLC; and
    
    pay $2.5 million per quarter for five years (for an aggregate amount of $50 million) to
Casden Properties LLC as a retainer on account for redevelopment services on our assets (as
of September 30, 2005, $35.0 million has been paid).
 Guarantees
  Legal Matters
        9




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Note 7  Partners Capital
 Preferred OP Units
  Common OP Units
    High Performance Units
  11




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Note 8  Discontinued Operations and Assets Held for Sale
   For the Three Months
    
    
    For the Nine MonthsEnded
September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Rental and other property revenues
    
    $
    17,332
    
    
    $
    44,634
    
    
    $
    67,396
    
    
    $
    141,127Property operating expense
    
    
    (11,204
    )
    
    
    (22,279
    )
    
    
    (37,205
    )
    
    
    (66,773
    )Depreciation and amortization
    
    
    (408
    )
    
    
    (9,137
    )
    
    
    (12,638
    )
    
    
    (28,304
    )Other (expenses) income, net
    
    
    (316
    )
    
    
    (434
    )
    
    
    (961
    )
    
    
    (1,063
    )Operating income
    
    
    5,404
    
    
    
    12,784
    
    
    
    16,592
    
    
    
    44,987Interest income
    
    
    35
    
    
    
    82
    
    
    
    178
    
    
    
    213Interest expense
    
    
    (3,513
    )
    
    
    (11,098
    )
    
    
    (15,229
    )
    
    
    (34,865
    )Minority interest in consolidated real estate
partnerships
    
    
    (63
    )
    
    
    (13
    )
    
    
    490
    
    
    
    (1,022
    )Income before gain on dispositions of real estate,
impairment losses, deficit distributions to minority
partners, and income tax
    
    
    1,863
    
    
    
    1,755
    
    
    
    2,031
    
    
    
    9,313Gain on dispositions of real estate, net of
minority partners interest
    
    
    44,050
    
    
    
    174,497
    
    
    
    81,101
    
    
    
    196,049Impairment losses on real estate assets sold or
held for sale
    
    
    (6,208
    )
    
    
    (9,451
    )
    
    
    (8,395
    )
    
    
    (9,942
    )Recovery of deficit distributions (deficit
distributions)
to minority partners, net
    
    
    671
    
    
    
    (723
    )
    
    
    4,333
    
    
    
    2,688Income tax arising from disposals
    
    
    (1,630
    )
    
    
    (12,446
    )
    
    
    (2,849
    )
    
    
    (13,235
    )Income from discontinued operations
    
    $
    38,746
    
    
    $
    153,632
    
    
    $
    76,221
    
    
    $
    184,873
  12




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Note 9  Earnings per Unit
  For the Three Months
    
    
    For the Nine MonthsEnded
September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Numerator:Income (loss) from continuing operations
    
    $
    (8,710
    )
    
    $
    28,665
    
    
    $
    (12,833
    )
    
    $
    32,250Less net income attributable to preferred unitholders
    
    
    (24,655
    )
    
    
    (26,635
    )
    
    
    (74,356
    )
    
    
    (72,475
    )Numerator for basic and diluted earnings per unit
 Income (loss) from continuing operations
    
    $
    (33,365
    )
    
    $
    2,030
    
    
    $
    (87,189
    )
    
    $
    (40,225
    )Income from discontinued operations
    
    $
    38,746
    
    
    $
    153,632
    
    
    $
    76,221
    
    
    $
    184,873Cumulative effect of change in accounting principle
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (3,957
    )Net income
    
    $
    30,036
    
    
    $
    182,297
    
    
    $
    63,388
    
    
    $
    213,166Less net income attributable to preferred unitholders
    
    
    (24,655
    )
    
    
    (26,635
    )
    
    
    (74,356
    )
    
    
    (72,475
    )Numerator for basic and diluted earnings per unit
 Net income (loss) attributable to common
unitholders
    
    $
    5,381
    
    
    $
    155,662
    
    
    $
    (10,968
    )
    
    $
    140,691Denominator:Denominator for basic earnings per unit  weighted
average number of common units outstanding
    
    
    104,585
    
    
    
    104,296
    
    
    
    104,469
    
    
    
    104,266Effect of dilutive securities:Dilutive potential common units
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    Denominator for diluted earnings per unit
    
    
    104,585
    
    
    
    104,443
    
    
    
    104,469
    
    
    
    104,266Earnings (loss) per common unit:Basic earnings (loss) per common unit:Income (loss) from continuing operations (net of
preferred distributions)
    
    $
    (0.32
    )
    
    $
    0.02
    
    
    $
    (0.83
    )
    
    $
    (0.39
    )Income from discontinued operations
    
    
    0.37
    
    
    
    1.47
    
    
    
    0.73
    
    
    
    1.78Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.04
    )Net income (loss) attributable to common
unitholders
    
    $
    0.05
    
    
    $
    1.49
    
    
    $
    (0.10
    )
    
    $
    1.35Diluted earnings (loss) per common unit:Income (loss) from continuing operations (net of
preferred distributions)
    
    $
    (0.32
    )
    
    $
    0.02
    
    
    $
    (0.83
    )
    
    $
    (0.39
    )Income from discontinued operations
    
    
    0.37
    
    
    
    1.47
    
    
    
    0.73
    
    
    
    1.78Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.04
    )Net income (loss) attributable to common
unitholders
    
    $
    0.05
    
    
    $
    1.49
    
    
    $
    (0.10
    )
    
    $
    1.35
  13




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##### Table of Contents



Note 10  Business Segments
  Disclosures about Segments of an
Enterprise and Related Information
  For the Three Months
    
    
    For the Nine MonthsEnded
September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Real estate segment
    
    $
    379,550
    
    
    $
    341,116
    
    
    $
    1,099,783
    
    
    $
    985,148Investment management segment:Gross revenues
    
    
    34,255
    
    
    
    33,836
    
    
    
    101,311
    
    
    
    105,417Elimination of intersegment revenues
    
    
    (20,143
    )
    
    
    (19,138
    )
    
    
    (59,912
    )
    
    
    (55,004
    )Net revenues after elimination
    
    
    14,112
    
    
    
    14,698
    
    
    
    41,399
    
    
    
    50,413Total revenues of reportable segments
    
    $
    393,662
    
    
    $
    355,814
    
    
    $
    1,141,182
    
    
    $
    1,035,561Net operating income:Real estate segment
    
    $
    194,472
    
    
    $
    171,216
    
    
    $
    571,027
    
    
    $
    510,705Investment management segment
    
    
    9,434
    
    
    
    9,689
    
    
    
    28,063
    
    
    
    33,787Total net operating income of reportable segments
    
    
    203,906
    
    
    
    180,905
    
    
    
    599,090
    
    
    
    544,492Reconciliation of net operating income of
reportable segments to operating income:Depreciation and amortization
    
    
    (112,594
    )
    
    
    (84,907
    )
    
    
    (312,945
    )
    
    
    (251,085
    )General and administrative expenses
    
    
    (23,123
    )
    
    
    (18,434
    )
    
    
    (65,697
    )
    
    
    (54,020
    )Other (expenses) income, net
    
    
    3,402
    
    
    
    1,865
    
    
    
    5,261
    
    
    
    2,520Operating income
    
    $
    71,591
    
    
    $
    79,429
    
    
    $
    225,709
    
    
    $
    241,907
 September 30,
    
    
    December 31,ASSETS (in thousands):
    
    2005
    
    
    2004Total assets for reportable segments (1)
    
    $
    9,895,092
    
    
    $
    9,706,305Corporate and other assets
    
    
    380,391
    
    
    
    377,849Total consolidated assets
    
    $
    10,275,483
    
    
    $
    10,084,154
 
 (1)
    
    Total assets for reportable segments include assets associated with both the real
estate and investment management business segments. 14




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Note 11  Recent Accounting Developments
 Share-Based Payment
 Accounting
Changes and Error Corrections,
 Determining Whether a
General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
 Note 12  Notes Receivable from Aimco
  
 15




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements
 The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements in certain circumstances. Certain information included in this Report contains or may
contain information that is forward-looking, including, without limitation, statements regarding
the effect of acquisitions, our future financial performance and the effect of government
regulations. Actual results may differ materially from those described in the forward-looking
statements and will be affected by a variety of risks and factors that are beyond our control
including, without limitation: natural disasters such as hurricanes; national and local economic
conditions; the general level of interest rates; energy costs; the terms of governmental
regulations that affect us and interpretations of those regulations; the competitive environment in
which we operate; financing risks, including the risk that our cash flows from operations may be
insufficient to meet required payments of principal and interest; real estate risks, including
variations of real estate values and the general economic climate in local markets and competition
for tenants in such markets; acquisition and development risks, including failure of such
acquisitions to perform in accordance with projections; the timing of acquisitions and
dispositions; litigation, including costs associated with prosecuting or defending claims and any
adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that
may be incurred due to necessary remediation of contamination of properties presently owned or
previously owned by us. In addition, Aimcos current and continuing qualification as a real estate
investment trust involves the application of highly technical and complex provisions of the
Internal Revenue Code and depends on its ability to meet the various requirements imposed by the
Internal Revenue Code, through actual operating results, distribution levels and diversity of stock
ownership. Readers should carefully review our financial statements and the notes thereto, as well
as the risk factors described in our Annual Report on Form 10-K for the year ended December 31,
2004 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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##### Table of Contents



Results of Operations
 Overview
 Three months ended September 30, 2005 compared to three months ended September 30, 2004
  
    
    a decrease in income from discontinued operations, primarily related to lower net
gains on dispositions of real estate;
    
    a decrease in net gain on disposition of real estate related to unconsolidated
entities and other, primarily related to a third quarter 2004 gain on sale of land; and
    
    higher depreciation and amortization expense.
  
    
    an increase in net operating income associated with property operations, which
included increases related to acquisition, newly consolidated and same store properties.
 Nine months ended September 30, 2005 compared to nine months ended September 30, 2004
  
    
    a decrease in income from discontinued operations, primarily related to lower net
gains on dispositions of real estate;
    
    a decrease in net gain on disposition of real estate related to unconsolidated
entities and other, primarily related to a third quarter 2004 gain on sale of land;
    
    higher depreciation and amortization expense;
    
    higher interest expense; and
    
    higher general and administrative expenses.
  
    
    an increase in net operating income associated with property operations, which
included increases related to acquisition, newly consolidated and same store properties;
and
    
    the 2004 cumulative effect of change in accounting principle due to implementation of
FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest
Entities,or FIN 46.
  17




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##### Table of Contents



Rental Property Operations
   For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Rental and other property revenues
    
    $
    379,550
    
    
    $
    341,116
    
    
    $
    1,099,783
    
    
    $
    985,148Property operating expenses
    
    
    185,078
    
    
    
    169,900
    
    
    
    528,756
    
    
    
    474,443Net operating income
    
    $
    194,472
    
    
    $
    171,216
    
    
    $
    571,027
    
    
    $
    510,705
   18




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##### Table of Contents



Conventional Same Store Property Operating Results
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Our share of same store revenues
    
    $
    266,240
    
    
    $
    250,201
    
    
    $
    766,817
    
    
    $
    725,346Less: Our share of same store expenses
    
    
    120,413
    
    
    
    113,697
    
    
    
    342,033
    
    
    
    321,860Our share of same store net operating
income
    
    $
    145,827
    
    
    $
    136,504
    
    
    $
    424,784
    
    
    $
    403,486Adjustments to reconcile same store net
operating income to real estate
segment net
operating income (1)
    
    
    48,645
    
    
    
    34,712
    
    
    
    146,243
    
    
    
    107,219Real estate segment net operating income
    
    $
    194,472
    
    
    $
    171,216
    
    
    $
    571,027
    
    
    $
    510,705Same Store StatisticsProperties
    
    
    481
    
    
    
    481
    
    
    
    477
    
    
    
    477Apartment units
    
    
    138,374
    
    
    
    138,374
    
    
    
    136,672
    
    
    
    136,672Average physical occupancy
    
    
    93.4
    %
    
    
    90.7
    %
    
    
    91.5
    %
    
    
    88.7
    %Average rent/unit/month
    
    $
    764
    
    
    $
    744
    
    
    $
    758
    
    
    $
    743
 
 (1)
    
    Includes: (i) minority partners share of consolidated, less our share of
unconsolidated, property revenues and property operating expenses (at current period
ownership); (ii) property revenues and property operating expenses related to consolidated
properties other than same store properties (e.g., affordable, acquisition and
redevelopment properties); and (iii) eliminations and other adjustments made in accordance
with GAAP.   19




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##### Table of Contents



Property Management
   For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Property management revenues, primarily from
affiliates
    
    $
    6,094
    
    
    $
    8,713
    
    
    $
    18,684
    
    
    $
    26,032Property management expenses
    
    
    1,918
    
    
    
    2,737
    
    
    
    5,663
    
    
    
    7,327Net operating income from property management
    
    $
    4,176
    
    
    $
    5,976
    
    
    $
    13,021
    
    
    $
    18,705
  Activity Fees and Asset Management
   For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Activity fees and asset management
revenues, primarily from affiliates
    
    $
    8,018
    
    
    $
    5,985
    
    
    $
    22,715
    
    
    $
    24,381Activity and asset management expenses
    
    
    2,760
    
    
    
    2,272
    
    
    
    7,673
    
    
    
    9,299Net operating income from activity fees and
asset management
    
    $
    5,258
    
    
    $
    3,713
    
    
    $
    15,042
    
    
    $
    15,082
  20




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Depreciation and Amortization
   General and Administrative Expenses
   Interest Expense
  21




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Gain on Dispositions of Real Estate Related to Unconsolidated Entities and Other
    Income from Discontinued Operations, Net
      22




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Cumulative Effect of Change in Accounting Principle
  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 an increase in unemployment or an increase in the supply of
apartments, that might adversely affect apartment occupancy or rental rates;
    
    changes in governmental regulations and the related cost of compliance;
    
    increases in operating costs (including real estate taxes) due to inflation and other
factors, which may not be offset by increased rents;
    
    changes in tax laws and housing laws, including the enactment of rent control laws or
other laws regulating multifamily housing;
    
    changes in market capitalization rates; and
    
    the relative illiquidity of such investments.
  Notes Receivable and Interest Income Recognition
   23




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Allowance for Losses on Notes Receivable
   Capitalized Costs
    24




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25




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Funds From Operations
   For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss) attributable to common unitholders (1)
    
    $
    5,381
    
    
    $
    155,662
    
    
    $
    (10,968
    )
    
    $
    140,691Adjustments:Depreciation and amortization (2)
    
    
    112,594
    
    
    
    84,907
    
    
    
    312,945
    
    
    
    251,085Depreciation and amortization related to non-real estate assets
    
    
    (4,276
    )
    
    
    (4,271
    )
    
    
    (12,591
    )
    
    
    (13,478
    )Depreciation of rental property related to minority partners
interest (3)
    
    
    (11,211
    )
    
    
    (9,420
    )
    
    
    (31,589
    )
    
    
    (31,053
    )Depreciation of rental property related to unconsolidated
entities
    
    
    5,038
    
    
    
    5,472
    
    
    
    15,627
    
    
    
    17,116Gain on dispositions of real estate related to unconsolidated
entities and other
    
    
    (8,097
    )
    
    
    (39,138
    )
    
    
    (12,870
    )
    
    
    (41,235
    )Gain on dispositions of non-depreciable assets
    
    
    1,657
    
    
    
    34,580
    
    
    
    2,450
    
    
    
    35,455Deficit distributions to minority partners, net (4)
    
    
    2,977
    
    
    
    7,105
    
    
    
    6,147
    
    
    
    14,286Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,957Discontinued operations:Gain on dispositions of real estate, net of minority partners
interest (3)
    
    
    (44,050
    )
    
    
    (174,497
    )
    
    
    (81,101
    )
    
    
    (196,049
    )Depreciation of rental property, net of minority partners
interest (3)
    
    
    534
    
    
    
    8,134
    
    
    
    11,515
    
    
    
    25,890Deficit distributions (recovery of deficit distributions) to
minority partners, net (4)
    
    
    (671
    )
    
    
    723
    
    
    
    (4,333
    )
    
    
    (2,688
    )Income tax arising from disposals
    
    
    1,630
    
    
    
    12,446
    
    
    
    2,849
    
    
    
    13,235Preferred OP Unit distributions
    
    
    24,655
    
    
    
    24,537
    
    
    
    73,233
    
    
    
    70,289Redemption related preferred OP Unit issuance costs
    
    
    
    
    
    
    2,098
    
    
    
    1,123
    
    
    
    2,186Funds From Operations
    
    $
    86,161
    
    
    $
    108,338
    
    
    $
    272,437
    
    
    $
    289,687Preferred OP Unit distributions
    
    
    (24,655
    )
    
    
    (24,537
    )
    
    
    (73,233
    )
    
    
    (70,289
    )Redemption related preferred OP Unit issuance costs
    
    
    
    
    
    
    (2,098
    )
    
    
    (1,123
    )
    
    
    (2,186
    )Distributions on dilutive preferred OP Units
    
    
    1,177
    
    
    
    1,069
    
    
    
    2,802
    
    
    
    3,018Funds From Operations attributable to common unitholders
 diluted
    
    $
    62,683
    
    
    $
    82,772
    
    
    $
    200,883
    
    
    $
    220,230Weighted average number of common OP Units, common OP
Unit equivalents and dilutive preferred OP Units outstanding:Common OP Units and equivalents (5)
    
    
    105,557
    
    
    
    104,443
    
    
    
    105,081
    
    
    
    104,335Dilutive preferred OP Units
    
    
    3,452
    
    
    
    1,590
    
    
    
    2,752
    
    
    
    1,719Total
    
    
    109,009
    
    
    
    106,033
    
    
    
    107,833
    
    
    
    106,054
 26




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##### Table of Contents



(1)
    
    Represents the numerator for earnings per common unit, calculated in accordance with
GAAP.(2)
    
    Includes amortization of management contracts where we are the general partner. Such
management contracts were established in certain instances where we acquired a general
partner interest in either a consolidated or an unconsolidated partnership. Because the
recoverability of these management contracts depends primarily on the operations of the
real estate owned by the limited partnerships, we believe it is consistent with the White
Paper to add back such amortization, as the White Paper directs the add-back of
amortization of assets uniquely significant to the real estate industry.(3)
    
    Minority partners interest, means minority interest in our consolidated real estate
partnerships.(4)
    
    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)
    
    Represents the denominator for earnings per common unit  diluted, calculated in
accordance with GAAP, plus additional common OP Unit equivalents that are dilutive for FFO. Liquidity and Capital Resources
    Operating Activities
  27




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Investing Activities
       28




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##### Table of Contents



Actual Cost
    
    
    Cost Per UnitCapital Replacements Detail:Building interiors
    
    $
    11,092
    
    
    $
    73Includes: hot water heaters, kitchen/bathBuilding exteriors
    
    
    11,130
    
    
    
    73Includes: roofs, exterior painting, electrical, plumbingLandscaping and grounds
    
    
    6,258
    
    
    
    41Includes: parking lot improvements, pool improvementsTurnover related
    
    
    29,689
    
    
    
    195Includes: carpet, vinyl, tile, appliance, and fixture replacementsCapitalized site payroll and indirect costs
    
    
    11,171
    
    
    
    73Total our share of Capital Replacements
    
    $
    69,340
    
    
    $
    455Capital Replacements:Conventional
    
    $
    65,217Affordable
    
    
    4,123Total our share of Capital Replacements
    
    
    69,340Capital Improvements:Conventional
    
    
    70,800Affordable
    
    
    14,310Total our share of Capital Improvements
    
    
    85,110Casualties:Conventional
    
    
    15,128Affordable
    
    
    1,062Total our share of casualties
    
    
    16,190Redevelopment:Conventional
    
    
    96,404Affordable
    
    
    2,073Total our share of redevelopment
    
    
    98,477Total our share of capital expenditures
    
    
    269,117Plus minority partners share of consolidated spending
    
    
    63,225Less our share of unconsolidated spending
    
    
    (8,296
    )Total capital expenditures per Consolidated Statement of Cash Flows
    
    $
    324,046
   Financing Activities
  29




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Future Capital Needs
  30




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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
  31




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 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 Under theof Units
    
    
    Paid
    
    
    Announced Plans or
    
    
    Plans or Programs (1)Fiscal period
    
    Purchased
    
    
    per Unit
    
    
    Programs
    
    
    (in millions)July 1  July 31, 2005
    
    
    7,546
    
    
    $
    40.85
    
    
    
    n/a
    
    
    
    n/aAugust 1
 August 31, 2005
    
    
    12,579
    
    
    
    40.99
    
    
    
    n/a
    
    
    
    n/aSeptember 1
 September 30, 2005
    
    
    4,042
    
    
    
    39.67
    
    
    
    n/a
    
    
    
    n/aTotal
    
    
    24,167
    
    
    $
    40.73
    
    
    
    n/a
 
 (1)
    
    The terms of our Partnership Agreement do not provide for a maximum number of Units that
may be repurchased, and other than the express terms of our Partnership Agreement we have no
publicly announced plans or programs of repurchase. Distribution Payments.
 32




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##### Table of Contents



ITEM 6. Exhibits
  EXHIBIT NO.31.1
    
    Certification of the equivalent of the 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 the equivalent of the 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 of the equivalent of the chief executive officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the equivalent of the chief financial officer
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
 33




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##### Table of Contents



AIMCO PROPERTIES, L.P.
 
 SIGNATURES
  AIMCO PROPERTIES, L.P.By: AIMCO GP, Inc. its general partnerBy:
    
    /s/ PAUL J. McAULIFFEPaul J. McAuliffeExecutive Vice President andChief Financial Officer(duly authorized officer andprincipal financial officer)By:
    
    /s/ THOMAS M. HERZOGThomas M. HerzogExecutive Vice President andChief Accounting OfficerDate: November 3, 2005
 34




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##### Table of Contents



Exhibit Index
 EXHIBIT NO.31.1
    
    Certification of the equivalent of the 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 the equivalent of the 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 of the equivalent of the chief executive officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the equivalent of the chief financial officer
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
 35