UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

For the fiscal year ended December 31, 2004

OR

For the transition period from                    to                    

Commission File Number 0-24497

Registrant’s Telephone Number, Including Area Code: (303) 757-8101

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:

Partnership Common Units

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

As of February 28, 2005, there were 103,328,596 Partnership Common Units outstanding.

Documents Incorporated by Reference
None

AIMCO PROPERTIES, L.P

TABLE OF CONTENTS

ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2004

1

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. In addition to historical information, this Annual Report on Form 10-K (“Annual Report“) contains or may contain certain information that is forward-looking, including, without limitation, statements regarding the effect of acquisitions, our future financial performance and the effect of government regulations. When used in this Annual Report, the words “may,” “will,” “expect,” “intend,” “plan,” “believe,” “anticipate,” “estimate,” “continue” or other similar words or expressions are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this Annual Report. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the general level of interest rates; the terms of governmental regulations that affect us and interpretations of those regulations; the competitive environment in which we operate; financing risks, including the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; acquisition and development risks, including failure of such acquisitions to perform in accordance with projections; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us. In addition, Aimco’s current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on its ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership. Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” described in Item 1 of this Annual Report and the other documents we file from time to time with the Securities and Exchange Commission.

PART I

ITEM 1. Business

The Company

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

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

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     Aimco frequently consummates transactions for our benefit. For legal, tax or other business reasons, Aimco may hold title or ownership of certain assets until they can be transferred to us. However, we have a controlling financial interest in substantially all of Aimco’s assets in the process of transfer to us.

     As of December 31, 2004, we owned or managed a real estate portfolio of 1,499 apartment properties containing 263,734 apartment units located in 47 states, the District of Columbia and Puerto Rico. Our portfolio includes garden style, mid-rise and high-rise properties.

     We own an equity interest in, and consolidate the majority of, the properties in our owned real estate portfolio. These properties represent the consolidated real estate holdings in our financial statements, which we refer to as consolidated properties. In addition, we have an equity interest in, but do not consolidate for financial statement purposes, certain properties that are accounted for under the equity method. These properties represent our investment in unconsolidated real estate partnerships in our financial statements, which we refer to as unconsolidated properties. Additionally, we manage (both property and asset) but do not own an equity interest in other properties, 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. Our equity holdings and managed properties are as follows as of December 31, 2004:

     At December 31, 2004, 103,315,366 common OP Units, 42,885,060 preferred OP Units and 2,379,084 High Performance Units (includes only those units that have met the required measurement benchmarks and are dilutive – see Note 13 to the consolidated financial statements in Item 8) were outstanding.

     Since Aimco’s initial public offering in July 1994, we have completed numerous transactions, expanding our portfolio of owned or managed properties from 132 properties with 29,343 apartment units to 1,499 properties with 263,734 apartment units as of December 31, 2004. These transactions have included purchases of properties and interests in entities that own or manage properties, as well as corporate mergers.

     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. Except as the context otherwise requires, “Aimco” refers to Aimco and Aimco’s consolidated corporate subsidiaries and consolidated real estate partnerships, collectively. As used herein, and except where the context otherwise requires, “partnership” refers to a limited partnership or a limited liability company and “partner” refers to a limited partner in a limited partnership or a member in a limited liability company.

Available Information

     We do not maintain a website. However, Aimco does, and it makes all of its filings with the Securities and Exchange Commission available free of charge as soon as reasonably practicable through its website at www.aimco.com. The information contained on Aimco’s website is not incorporated into this Annual Report. We will furnish copies of the Partnership’s filings free of charge upon written request to Aimco’s corporate secretary.

Financial Information About Industry Segments

     We operate in two reportable segments: real estate (owning and operating apartments) and investment management business (providing property management and other services relating to the apartment business to third parties and affiliates). For further information on these segments, see Note 18 of the consolidated financial statements in Item 8, and Management’s Discussion and Analysis in Item 7.

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Business Overview

     Our principal objective is to increase long-term OP unitholder value, which we believe results from increasing asset values, increasing operating cash flows and long-term, predictable Funds From Operations, or FFO (as defined by the National Association of Real Estate Investment Trusts), per common OP Unit, less capital spending for replacements. For a description of the meaning of FFO and its use and limitations as an operating measure, see the discussion titled “Funds From Operations” in Item 7.

     We strive to meet our objectives by focusing on property operations, generation of fees, portfolio management, reinvestment in properties, increasing land values through entitlements, managing our cost of capital by using leverage that is largely long-term, non-recourse and property specific, and managing our general and administrative costs through increasing productivity.

     Property Operations

     We divide property operations into two business components: conventional and affordable. Our conventional operations, which typically are market-rate apartments with rents paid by the resident, include 591 properties with 164,807 units and also include our university communities portfolio (16 properties with 4,277 units). Aimco Capital conducts our affordable operations of 415 properties with 49,853 units, which typically are apartments with rents set by a government agency and frequently subsidized or paid by a government agency.

     Our property operations are characterized by diversification of product, location and price point. We operate a broad range of property types, from suburban garden-style to urban high-rise properties in 47 states, the District of Columbia and Puerto Rico at a broad range of average monthly rental rates, with most between $500 and $1,100 per month, and reaching as much as $6,000 per month at some of our premier properties. This geographic diversification insulates us, to some degree, from inevitable downturns in any one market.

     Conventional

     Our conventional operations are organized into four divisions, each of which is supervised by a Division Vice President, or DVP, and as of December 31, 2004, are further sub-divided into 17 regional operating centers, or ROCs, and a university communities group. Each ROC is supervised by a Regional Vice President, or RVP. The ROCs are generally smaller business units with specialized operational, financial and human resource leadership. We seek to improve the operating results from our property operations by, among other methods, combining centralized financial control and uniform operating procedures with localized property management decision-making and market knowledge. To manage our nationwide portfolio more efficiently and to increase the benefits from our local management expertise, we have given direct responsibility for operations to the RVP with oversight from extensive regular reviews with senior management. To enable the RVPs to focus on sales and service, as well as improve financial control and budgeting, we have dedicated a regional financial officer to support each RVP and have an expanded construction services group to handle all work on site beyond routine maintenance, thus reducing the need for RVPs to spend time on oversight of construction projects. We continue to improve our corporate-level oversight of conventional property operations by developing better systems, standardizing business goals, operational measurements and internal reporting, and enhancing financial controls over field operations. Many changes were made during 2003 and 2004 that we believe will enable our regional and community managers to benefit from more organizational clarity, more and better information, and more tools to help them make quicker, better decisions closer to the property and to the customer, including the areas discussed below:

•

Customer Service. We are changing our operating culture to become more focused on our customers, by emphasizing customer service and evaluating our performance through a customer satisfaction tracking system. We increased training at the community level and elevated the role of the service manager in enhancing the experience of our residents. These changes included an increased emphasis on our service order intake process and implementation of standardized preventive and proactive maintenance programs.

•

Resident Selection and Retention. In apartment properties, neighbors are a part of the product, together with the location of the property and the physical quality of the apartment units. Part of our conventional operations strategy is to focus on resident acquisition and retention — attracting and retaining credit-worthy residents who are good neighbors. In addition to the customer service initiatives discussed above, we enhanced our resident acquisition and retention processes by: implementing structured goals and coaching

4

for all of our sales personnel; refining the content and placement of our advertising; standardizing the content and timing of our phone and email responses to customer inquiries, including the implementation of a tracking system for inquiries; and standardizing our renewal communication programs. We standardized residential financial stability requirements and raised the standard across our portfolio to reduce turnover costs and improve retention. Additionally, we have implemented policies and monitoring practices to maintain our resident quality. We believe that the costs exceed the benefits when higher occupancy results from lowering of financial stability standards.

•

Revenue Increases. We increase rents where feasible and seek to improve occupancy rates. We are also focused on the automation of on-site operations, as we believe that timely and accurate collection of property performance and resident profile data will enable us to maximize revenue through better property management and leasing decisions. We have standardized policies for new and renewal pricing with timely data and analyses by floor-plan, thereby enabling us to maximize our ability to modify pricing, even in challenging sub-markets. In addition, we intend to continue our emphasis on the quality of our on-site employees through recruiting, training and retention programs, which we believe lead to increased occupancy rates through improved customer service and enhanced performance.

•

Controlling Expenses. Cost controls are accomplished by local focus at the ROC level and by taking advantage of economies of scale at the corporate level. As a result of the size of our portfolio and our creation of regional concentrations of properties, we have the ability to spread over a large property base fixed costs for general and administrative expenditures and certain operating functions, such as purchasing, insurance and information technology. We are currently implementing a local vendor consolidation program and an electronic procurement system to provide better ongoing control over purchasing decisions and to take advantage of volume discounts.

•

Ancillary Services. We believe that our ownership and management of properties provide us with unique access to a customer base that allows us to provide additional services and thereby increase occupancy and rents, while also generating incremental revenue. We currently provide cable television, telephone services, appliance rental, and carport, garage and storage space rental at certain properties.

     University Communities

     We established University Communities as an autonomous division in 2003 with the goal of becoming the most significant operator in the student-housing sector. In 2004, the division managed 16 properties with 4,277 apartments and maintained academic year occupancy at 93% through focused attention on student leasing. University Communities is actively acquiring multi-family and residence hall properties both on its own, through our joint venture with the California State Teachers Retirement System (CalSTRS), and in partnership with major universities. In 2004, we added two well-located properties with 504 units to this portfolio, one next to Duke University in Durham, North Carolina and one adjoining the campus of the University of Notre Dame in South Bend, Indiana.

     Aimco Capital

     We are among the largest owners and operators of affordable properties in the United States. We formed Aimco Capital in 2002 to focus on our affordable housing properties, the operations of which are most often subsidized or financed by the United States Department of Housing and Urban Development, or HUD, state housing agencies or tax credit financing. Aimco Capital has organized its property operations and asset management under a management team dedicated to this sector. Aimco Capital operates its affordable properties through four ROCs. Affordable properties tend to have stable rents and occupancy due to government subsidies and thus are much less affected by market circumstances.

     Aimco Capital also generates income from asset management (compliance oversight for its owned and operated affordable portfolio as well as two other large portfolios that are asset managed only) and transactional activity related to its affordable holdings. Currently, Aimco Capital generates revenue primarily from: current asset management fees; deferred asset management fees; refinancing and disposition fees; developer fees; and syndication fees. In addition, Aimco Capital is exploring other sources of revenue related to the tax credit redevelopment process. We believe that Aimco Capital is well positioned as it has the national structure, knowledge and pipeline to grow as a more autonomous operation with dedicated capital.

5

     Portfolio Management

     Conventional

     We view our conventional property portfolio in terms of “core” and “non-core” properties. Core properties are those properties that are located in selected markets, many where population and employment growth are expected to exceed national trends and where we believe that we can become a regionally significant owner. We categorize core properties among: “preferred markets” – which are typically coastal, with high barriers to entry and home prices and median incomes above the national average; “growth markets” – which are typically in sunbelt regions with expectations of above average job growth; and “stable markets” – which are located in Midwest areas with limited new construction but also limited job growth. We intend to hold and improve core properties over the long-term and seek an allocation of properties among the above three categories in order to reduce volatility of our overall property operations. At December 31, 2004, we had 377 conventional core properties in 38 selected markets. Within our core portfolio, the largest single market (Washington, D.C.) contributed approximately 11%, and the five largest markets (Washington, D.C., greater Los Angeles, Philadelphia, Chicago and Miami-Fort Lauderdale) together contributed approximately 32%, to income before depreciation and interest expense, or net operating income. At December 31, 2004, we had 214 conventional non-core properties. Non-core properties are those properties located in 32 other markets or in less favored locations within the 38 selected markets, which we generally intend to hold for investment for the intermediate term. During 2005, we expect to exit an additional 10-12 markets and over the next several years we expect to exit the remaining markets in which we hold our non-core properties.

     Portfolio management includes expanding our core portfolio through acquisitions of properties located in selected markets throughout the United States. We specifically seek investments in a variety of asset qualities and types in the selected markets at a purchase price below replacement cost. Currently, we acquire properties and property interests primarily in three ways:

•

the direct acquisition of a property or portfolio of properties;

•

acquisition of a portfolio of properties through a purchase from, or a merger or business combination with, an entity that owns or controls the property or portfolio being acquired; and

•

the purchase from third parties, subject to our fiduciary duties, of additional interests in partnerships where we own a general partnership interest. These are typically executed for cash or OP Units. Since 1996, we have completed over 2,800 tender offers with respect to various partnerships resulting in over 171,000 transactions totaling $891 million in cash paid and OP Units issued to purchase additional interests in such partnerships.

     In 2004, we completed direct acquisitions of 11 conventional core properties, containing approximately 1,880 residential units for an aggregate purchase price of approximately $361 million and acquired additional interests in 147 partnerships for approximately $50 million (including transaction costs).

     Portfolio management also includes dispositions of properties located in other markets, properties located in less desirable sub-markets or properties that do not meet our long-term investment criteria. Additionally, from time to time, we may dispose of certain core properties that are consistent with our long-term investment strategy but offer attractive returns, such as in sales to buyers who intend to convert the properties to condominiums. The sales of core and non-core properties partially fund our acquisitions. In 2004, we sold 40 non-core properties, generating net cash proceeds to us, after repayment of existing debt, payment of transaction costs and distributions to limited partners, of $147 million. Additionally, in 2004, we sold seven core properties and one land parcel, generating net cash proceeds to us, after repayment of existing debt, payment of transaction costs and distributions to limited partners, of $338 million.

     Aimco Capital

     The portfolio management strategy for Aimco Capital is similar to that of our Conventional portfolio. Aimco Capital seeks to dispose of properties that are inconsistent with our long-term investment strategy and Aimco Capital’s operations. During 2004, we sold 60 non-core properties from within the Aimco Capital portfolio, generating net cash proceeds to us, after repayment of existing debt, payment of transaction costs and distributions to limited partners, of $45 million. At December 31, 2004 within the Aimco Capital portfolio, we had 415 properties, of which approximately two-thirds are non-core properties, which we generally intend to hold for

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investment for the intermediate term. During 2005, we intend to sell approximately the same number of Aimco Capital properties as we sold in 2004.

     Rezoning and Entitlements

     Rezoning and entitlements are another aspect of portfolio management. Rezoning and entitlements provide us the opportunity to enhance the value of our existing portfolio by obtaining local approvals required to add dwelling or residential units to a site, which should enable us to realize upside in land values through increasing density of use. To date, we have identified 12 properties with an aggregate value in excess of $700 million where we believe there exists this opportunity. These properties are typically well located and were built 30 or more years ago. These properties were built at lower densities than the local zoning laws currently provide.

     Reinvestment in Properties

     We believe that the physical condition and amenities of our apartment properties are important factors in our ability to maintain and increase rental rates. In 2004, we spent $77.2 million, or $483 per owned apartment unit, for Capital Replacements, which are expenditures that represent the share of expenditures that are deemed to replace the consumed portion of acquired capital assets. Additionally, we spent $82.4 million for Capital Improvements, which are non-redevelopment capital expenditures that are made to enhance the value, profitability or useful life of an asset from its original purchase condition.

     In addition to maintenance and improvements of our properties, we focus on the redevelopment of certain properties each year. We believe redevelopment of certain properties in superior locations provides advantages over ground-up development, enabling us to generate rents comparable to new properties with relatively lower financial risk, in less time and with reduced delays associated with governmental permits and authorizations. We undertake two types of redevelopment projects including: major projects, where a substantial number or all available units are vacated for significant renovations to the property; and moderate projects, where there is significant renovation, such as exteriors, common areas or unit improvements, typically done upon lease expirations without the need to vacate units on any wholesale or substantial basis. We have a specialized Redevelopment and Construction Services Group, which includes engineers, architects and construction managers, to oversee these projects. As of December 31, 2004, we had 34 projects at various stages of redevelopment, which included 10 properties for which redevelopment activities were complete but the property operations of which had not yet stabilized. Of the 24 active projects, 14 are conventional properties (one major project and 13 moderate projects) and 10 are affordable redevelopments. During 2004, redevelopment expenditures totaled $137 million, of which our share totaled $89 million. Redevelopment expenditures for our one active major project in Marietta, GA will be approximately $32.2 million (our share $18.4 million), of which approximately $11.3 million (our share $6.5 million) remains to be spent. Total redevelopment expenditures for our 13 active conventional moderate projects will be approximately $100.3 million (our share $75.2 million), of which approximately $81.5 million (our share $60.1 million) remains to be spent. Total redevelopment expenditures for our 10 affordable redevelopments will be approximately $106.0 million, of which approximately $54.3 million remains to be spent, most of which will be funded by third-party tax credit equity and tax-exempt debt. Additionally, we have four major projects, 25 moderate projects and seven affordable redevelopments under review for possible commencement in 2005.

     Cost of Capital

     We are focused on minimizing our cost of capital. In 2004, we modified our credit facility and term debt, resulting in lower interest rate spreads, extended maturity dates, and more operating and financial covenant flexibility. We also refinanced $734 million in property debt at an average rate of 4.48% generating a savings of approximately 2.0% over prior rates. Additionally, we have reduced our cost of capital through the redemption of higher cost preferred securities with proceeds from the issuance of lower cost preferred securities.

     Productivity

     Over the past several years, we have had growth in our general and administrative spending as a result of the building of our infrastructure in certain areas in which we had needs, including, operational systems, information technology and other automation, human resources, and expanded accounting, legal, and financial planning and analysis functions. We are focused on containing this spending going forward through enhanced productivity and process improvements.

7

Taxation

     We are treated as a “pass-through” entity for Federal income tax purposes and are not subject to Federal income taxation. Each of our partners, however, is subject to tax on his allocable share of partnership tax items, including partnership income, gains, losses, deductions and credits, or Partnership Tax Items, for each taxable year during which he is a partner, regardless of whether he receives any actual distributions of cash or other property from us during the taxable year. Generally, the characterization of any particular Partnership Tax Item is determined by us, rather than at the partner level, and the amount of a partner’s allocable share of such item is governed by the terms of the Partnership Agreement. The General Partner is our “tax matters partner” for Federal income tax purposes. The tax matters partner is authorized, but not required, to take certain actions on behalf of us with respect to tax matters.

Taxation of Aimco

     Aimco has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, which we refer to as the Code, commencing with its taxable year ended December 31, 1994, and intends to continue to operate in such a manner. Aimco’s current and continuing qualification as a REIT depends on its ability to meet the various requirements imposed by the Code, which are related to organizational structure, distribution levels, diversity of stock ownership and certain restrictions with regard to owned assets and categories of income. If Aimco qualifies for taxation as a REIT, it will generally not be subject to United States Federal corporate income tax on its net income that is currently distributed to stockholders. This treatment substantially eliminates the “double taxation” (at the corporate and stockholder levels) that generally results from investment in a corporation.

     Even if Aimco qualifies as a REIT, it may be subject to United States Federal income and excise taxes in various situations, such as on its undistributed income. Aimco also will be required to pay 100% tax on non-arms length transactions between it and a TRS (described below) and on any net income from sales of property that the Internal Revenue Service, or IRS, successfully asserts was property held for sale to customers in the ordinary course. Aimco and its stockholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside. Any taxes imposed on Aimco would reduce our operating cash flow. The state and local tax treatment that Aimco and its stockholders receive may not conform to the United States Federal income tax treatment.

     Certain of Aimco’s operations (property management, asset management, risk, etc.) are conducted through taxable REIT subsidiaries, each of which we refer to as a TRS. A TRS is a C-corporation that has not elected REIT status and as such is subject to United States Federal corporate income tax. Aimco uses the TRS format to facilitate its ability to offer certain services and activities to its residents that are not generally considered as qualifying REIT activities.

Competition

     In attracting and retaining residents to occupy our properties we compete with numerous other housing alternatives. Our properties compete directly with other rental apartments, as well as with condominiums and single-family homes that are available for rent or purchase in the markets in which our properties are located. Principal factors of competition include rent or price charged, attractiveness of the location and property and quality and breadth of services. The number of competitive properties in a particular area has a material effect on our ability to lease apartment units at our properties and on the rents we charge. Additionally, we compete with other real estate investors, including other apartment REITs, pension and investment funds, partnerships and investment companies in acquiring, redeveloping and managing apartment properties. This affects our ability to acquire properties we want to add to our portfolios and the price that we pay in such acquisitions.

Regulation

General

     Apartment properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, activity centers and other common areas. Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, which would adversely affect our net income and cash flows from

8

operating activities. In addition, future enactment of rent control or rent stabilization laws or other laws regulating multifamily housing may reduce rental revenue or increase operating costs in particular markets.

Environmental

     Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of properties, we could potentially be liable for environmental liabilities or costs associated with our properties or properties we acquire or manage in the future.

     We are aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. We have only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure.

     We have a national policy and procedures to prevent or eliminate mold from our properties. Our policy and procedures are based on guidelines established by various Federal, state and local bodies. We believe that our measures will eliminate, or at least minimize, the effects that mold could have on our residents. To date, we have not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change we can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on our consolidated financial condition or results of operations.

Insurance

     Our primary lines of insurance coverage are property, general liability and workers' compensation. We believe that our insurance coverages adequately insure our properties against the risk of loss attributable to fire, earthquake, hurricane, tornado, flood and other perils and adequately insure us against other risks. Our coverage includes deductibles, retentions and limits that are customary in the industry. We have established loss prevention, loss mitigation, claim handling, litigation management and loss reserving procedures to manage our exposure.

Employees

     We currently have approximately 6,800 employees, of which approximately 5,700 are at the property level, performing various on-site functions, with the balance managing corporate and regional operations, including investment and debt transactions, legal, financial reporting, accounting, information systems, human resources and other support functions. Unions represent approximately 200 of our employees. We have never experienced a work stoppage and believe we maintain satisfactory relations with our employees.

9

Risk Factors

     The risk factors noted in this section and other factors noted throughout this Annual Report, describe certain risks and uncertainties that could cause our actual results to differ materially from those contained in any forward-looking statement.

Changes in the real estate market may limit our ability to generate Funds From Operations.

     Our ability to make payments to our investors depends on our ability to generate Funds From Operations in excess of required debt payments and capital expenditure requirements. Funds From Operations and the value of our properties may be adversely affected by events or conditions beyond our control, including:

	•	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 interest rates and the availability of financing; and
	•	the relative illiquidity of real estate investments.

If we are not able successfully to acquire, operate, redevelop and expand properties, our growth and results of operations will be adversely affected.

     The selective acquisition, redevelopment and expansion of properties are one component of our growth strategy. However, we may not be able to complete successfully transactions in the future. Although we seek to acquire, operate, redevelop and expand properties only when such activities increase our net income on a per unit basis, such transactions may fail to perform in accordance with our expectations. When we redevelop or expand properties, we are subject to the risks that:

	•	costs may exceed original estimates;
	•	occupancy and rental rates at the property may be below our projections;
	•	financing may not be available on favorable terms or at all;
	•	redevelopment and leasing of the properties may not be completed on schedule; and
	•	we may experience difficulty or delays in obtaining necessary zoning, land-use, building, occupancy and other governmental permits and authorizations.

We may have difficulty integrating any acquired businesses or properties.

     We have grown rapidly. Since Aimco’s initial public offering in July 1994, we have completed numerous acquisition transactions, expanding our portfolio of owned or managed properties from 132 properties with 29,343 apartment units to 1,499 properties with 263,734 apartment units as of December 31, 2004. These acquisitions have included purchases of properties and interests in entities that own or manage properties, as well as corporate mergers. Our ability to successfully integrate acquired businesses and properties depends, among other things, on our ability to:

	•	attract and retain qualified personnel;
	•	integrate the personnel and operations of the acquired businesses;
	•	maintain standards, controls, procedures and policies; and
	•	maintain adequate accounting and information systems.

     We can provide no assurance that we will be able to accomplish these goals and successfully integrate any acquired businesses or properties. If we fail to integrate successfully such businesses, our results of operations could be adversely affected.

10

We may be subject to litigation associated with partnership acquisitions that could increase our expenses and prevent completion of beneficial transactions.

     We have engaged in, and intend to continue to engage in, the selective acquisition of interests in partnerships that own apartment properties. In some cases, we have acquired the general partner of a partnership and then made an offer to acquire the limited partners’ interests in the partnership. In these transactions, we may be subject to litigation based on claims that we, as the general partner, have breached our fiduciary duty to our limited partners or that the transaction violates the relevant partnership agreement or state law. Although we intend to comply with our fiduciary obligations and the relevant partnership agreements, we may incur additional costs in connection with the defense or settlement of this type of litigation. In some cases, this type of litigation may adversely affect our desire to proceed with, or our ability to complete, a particular transaction. Any litigation of this type could also have a material adverse effect on our financial condition or results of operations.

Our existing and future debt financing could render us unable to operate, result in foreclosure on our properties or prevent us from making distributions on our equity.

     Our strategy is generally to incur debt to increase the return on our equity while maintaining acceptable interest coverage ratios. We seek to maintain a ratio of free cash flow to combined interest expense and preferred OP Unit distributions of greater than 2:1 and to match debt maturities to the character of the assets financed. For the year ended December 31, 2004, however, we had a ratio of free cash flow to combined interest expense and preferred OP Unit distributions of 1.5:1, and this ratio in prior periods has also deviated from our goal. In addition, the General Partner could change this strategy at any time and increase our leverage. Our organizational documents do not limit the amount of debt that we may incur, and we have significant amounts of debt outstanding. Payments of principal and interest may leave us with insufficient cash resources to operate our properties or pay distributions required to be paid in order to maintain Aimco’s qualification as a REIT. We are also subject to the risk that our cash flow from operations will be insufficient to make required payments of principal and interest, and the risk that existing indebtedness may not be refinanced or that the terms of any refinancing will not be as favorable as the terms of existing indebtedness. If we fail to make required payments of principal and interest on any debt, our lenders could foreclose on the properties securing such debt, which would result in loss of income and asset value to us. As of December 31, 2004, substantially all of the properties that we owned or controlled were encumbered by debt.

Increases in interest rates would increase our interest expense.

     As of December 31, 2004, we had approximately $1,533.2 million of variable-rate indebtedness outstanding. Based on this level of debt, an increase in interest rates of 1% would result in our income and cash flows being reduced by $15.3 million on an annual basis and could reduce our ability to service our indebtedness and make distributions. Of the total debt subject to variable interest rates, floating rate tax-exempt bond financing was $741.8 million. Floating rate tax-exempt bond financing is benchmarked against the Bond Market Association Municipal Swap Index, or the BMA Index, which since 1981 has averaged 52.1% of the 10-year Treasury Yield. If this relationship continues, an increase in the 10-year Treasury Yield, of 1% (0.52% in tax-exempt interest rates) would result in our income before minority interests and cash flows being reduced by $11.8 million on an annual basis.

Covenant restrictions may limit our ability to make payments to our investors.

     Some of our debt and other securities contain covenants that restrict our ability to make distributions or other payments to our investors unless certain financial tests or other criteria are satisfied. Our credit facility provides that we may make distributions to our investors during any 12-month period in an aggregate amount that does not exceed the greater of 95% of our Funds From Operations for such period or such amount as may be necessary for Aimco to maintain its REIT status.

     Our outstanding classes of preferred OP Units prohibit the payment of distributions on our common OP Units if we fail to pay the distributions to which the holders of the preferred OP Units are entitled. If we are unable to pay distributions on our common OP Units, Aimco may fail to qualify as a REIT. This would subject Aimco to corporate taxation and reduce our ability to make distributions to our investors.

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We depend on distributions and other payments from our subsidiaries that they may be prohibited from making to us.

     We depend on distributions and other payments from our subsidiaries in order to satisfy our financial obligations and make payments to our investors. The ability of our subsidiaries to make such distributions and other payments depends on their earnings and may be subject to statutory or contractual limitations. As an equity investor in our subsidiaries, our right to receive assets upon their liquidation or reorganization will be effectively subordinated to the claims of their creditors. To the extent that we are recognized as a creditor of such subsidiaries, our claims may still be subordinate to any security interest in or other lien on their assets and to any of their debt or other obligations that are senior to our claims.

Laws benefiting disabled persons may result in our incurrence of unanticipated expenses.

     Under the Americans with Disabilities Act of 1990, or ADA, all places intended to be used by the public are required to meet certain Federal requirements related to access and use by disabled persons. Likewise, the Fair Housing Amendments Act of 1988, or FHAA, requires apartment properties first occupied after March 13, 1990 to be accessible to the handicapped. These and other Federal, state and local laws may require modifications to our properties, or restrict renovations of the properties. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. Although we believe that our properties are substantially in compliance with present requirements, we may incur unanticipated expenses to comply with the ADA and the FHAA.

Affordable housing regulations may limit rent increases at some of our properties, reducing our revenue and, in some cases, causing us to sell properties that we might otherwise continue to own.

     As of December 31, 2004, we owned an equity interest in 415 affordable properties and managed for third parties and affiliates 409 properties that benefit from governmental programs intended to provide housing to people with low or moderate incomes. These programs, which are usually administered by HUD or state housing finance agencies, typically provide mortgage insurance, favorable financing terms or rental assistance payments to the property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents to pre-approved amounts. If permitted rents on a property are insufficient to cover costs, a sale of the property may become necessary, which could result in a loss of management fee revenue. We usually need to obtain the approval of HUD in order to manage, or acquire a significant interest in, a HUD-assisted property. We may not always receive such approval.

We depend on our senior management

     Our success depends upon the retention of our senior management, including Terry Considine, Aimco’s chief executive officer and president. We cannot assure you that we would be able to find qualified replacements for the individuals who make up our senior management if their services were no longer available. The loss of services of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations. We do not currently maintain key-man life insurance for any of our employees. The loss of any member of senior management could adversely affect our ability to pursue effectively our business strategy.

As a REIT, Aimco is subject to substantial risks related to its compliance with the tax laws.

     Aimco May Fail to Qualify as a REIT. Aimco believes that it operates in a manner that enables it to meet the requirements for qualification as a REIT for Federal income tax purposes; however, future economic, market, legal, tax or other considerations may cause it to fail to qualify as a REIT, or its board of directors may determine to revoke its REIT status. If Aimco fails to qualify, or revokes its status, as a REIT, Aimco will not be allowed a deduction for dividends paid to its stockholders in computing its taxable income, and Aimco will be subject to Federal income tax at regular corporate rates. This would substantially reduce the funds available for payment to Aimco’s investors.

     In addition, Aimco’s failure to qualify as a REIT would trigger the following consequences:

•

Aimco would be obligated to repurchase certain classes of its preferred stock, plus accrued and unpaid dividends to the date of repurchase; and

•

We would be in default under our primary credit facilities and certain other loan agreements.

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     REIT Distribution Requirements Limit Aimco’s Available Cash. As a REIT, Aimco is subject to annual distribution requirements. As Aimco's operating partnership, we pay distributions intended to enable Aimco to satisfy these distribution requirements. This limits the amount of cash we have available for other business purposes, including amounts to fund growth.

     Legislative or Other Actions Affecting REITs Could Have a Negative Impact on Aimco. The rules dealing with Federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the United States Treasury Department. Changes to the tax laws, which may have retroactive application, could adversely affect Aimco’s investors. Aimco cannot predict how changes in the tax law might affect it or its investors. For example, under legislation effective January 1, 2001, if any of Aimco’s taxable REIT subsidiaries were deemed to operate or manage a health care or lodging facility, Aimco would fail to qualify as a REIT. While Aimco believes that, since January 1, 2001, none of its taxable REIT subsidiaries have operated or managed any health care or lodging facilities, the statute provides little guidance as to the definition of a health care or lodging facility. Accordingly, Aimco cannot assure that the IRS will not contend that any of its taxable REIT subsidiaries operate or manage a health care or lodging facility, resulting in its disqualification as a REIT.

The FBI has issued alerts regarding potential terrorist threats involving apartment buildings — a risk for which we are only partially insured.

     From time to time, the Federal Bureau of Investigation, or FBI, and the United States Department of Homeland Security issue alerts regarding potential terrorist threats involving apartment buildings. Threats of future terrorist attacks, such as those announced by the FBI and the Department of Homeland Security, could have a negative effect on rent and occupancy levels at our properties. The effect that future terrorist activities or threats of such activities could have on our business is uncertain and unpredictable. If we incur a loss at a property as a result of an act of terrorism, we could lose all or a portion of the capital we have invested in the property, as well as the future revenue from the property. Since September 2001, our lenders have increased their scrutiny regarding terrorism exposure, and we have sometimes been required to purchase terrorism insurance. In all cases, we have purchased insurance that exceeds the minimum requirements of our lenders. Currently, these costs have not had a negative effect on our consolidated financial condition or results of operations.

The market place for insurance coverage is uncertain and in some cases insurance is becoming more expensive and more difficult to obtain.

     The current insurance market is characterized by volatility with respect to premiums, deductibles and coverage. For certain types of coverage, such as property coverage, we are currently experiencing stable or declining premiums. For other types of coverage, however, such as liability and executive coverage, we continue to experience rising premiums, higher deductibles, and more restrictive coverage language. Although we make use of many alternative methods of risk financing that enable us to insulate ourselves to some degree from variations in coverage language and cost, sustained deterioration in insurance marketplace conditions may have a negative effect on our operating results.

Limits on ownership of Aimco’s shares in Aimco’s charter may result in the loss of economic and voting rights by purchasers that violate those limits.

     Aimco’s charter limits ownership of its common stock by any single stockholder to 8.7% of the outstanding shares, or 15% in the case of certain pension trusts, registered investment companies and Mr. Considine. The charter also limits ownership of Aimco’s common stock and preferred stock by any single stockholder to 8.7% of the value of the outstanding common stock and preferred stock, or 15% in the case of certain pension trusts, registered investment companies and Mr. Considine. The charter also prohibits anyone from buying shares if the purchase would result in Aimco losing its REIT status. This could happen if a transaction results in fewer than 100 persons owning all of Aimco’s shares. If anyone acquires shares in excess of the ownership limit or in violation of the ownership requirements of the Code for REITs:

	•	the transfer will be considered null and void;
	•	Aimco will not reflect the transaction on its books;
	•	Aimco may institute legal action to enjoin the transaction;
	•	Aimco may demand repayment of any dividends received by the affected person on those shares;
	•	Aimco may redeem the shares;
	•	the affected person will not have any voting rights for those shares; and

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•

the shares (and all voting and dividend rights of the shares) will be held in trust for the benefit of one or more charitable organizations designated by us.

     Aimco may purchase the shares held in trust at a price equal to the lesser of the price paid by the transferee of the shares or the then current market price. If the trust transfers any of the shares, the affected person will receive the lesser of the price paid for the shares or the then current market price. An individual who acquires shares that violate the above rules bears the risk that the individual:

	•	may lose control over the power to dispose of such shares;
	•	may not recognize profit from the sale of such shares if the market price of the shares increases;
	•	may be required to recognize a loss from the sale of such shares if the market price decreases; and
	•	may be required to repay to Aimco any dividends received from Aimco as a result of his or her ownership of the shares.

Aimco’s charter and Maryland law may limit the ability of a third party to acquire control of Aimco.

     Ownership Limit. The 8.7% ownership limit discussed above may have the effect of precluding acquisition of control of Aimco by a third party without the consent of Aimco’s board of directors.

     Preferred Stock. Aimco’s charter authorizes its board of directors to issue up to 510,587,500 shares of capital stock. As of December 31, 2004, 426,157,976 shares were classified as Aimco Class A Common Stock and 84,429,524 shares were classified as preferred stock. Under Aimco’s charter, its board of directors has the authority to classify and reclassify any of Aimco’s unissued shares of capital stock into shares of preferred stock with such preferences, rights, powers and restrictions as Aimco’s board of directors may determine. The authorization and issuance of preferred stock could have the effect of delaying or preventing someone from taking control of Aimco, even if a change in control were in stockholders’ best interests.

     Maryland Business Statutes. As a Maryland corporation, Aimco is subject to various Maryland laws that may have the effect of discouraging offers to acquire Aimco and of increasing the difficulty of consummating any such offers, even if Aimco’s acquisition would be in the best interests of Aimco stockholders or the Limited Partners. The Maryland General Corporation Law restricts mergers and other business combination transactions between Aimco and any person who acquires beneficial ownership of shares of Aimco’s stock representing 10% or more of the voting power without Aimco’s board of directors’ prior approval. Any such business combination transaction could not be completed until five years after the person acquired such voting power, and generally only with the approval of stockholders representing 80% of all votes entitled to be cast and 66-2/3% of the votes entitled to be cast, excluding the interested stockholder, or upon payment of a fair price. Maryland law also provides generally that a person who acquires shares of Aimco stock that represent 10% or more of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to vote, excluding the control shares. Maryland law provides, among other things, that the board of directors has broad discretion in adopting stockholders’ rights plans and has the sole power to fix the record date, time and place for special meetings of the stockholders. In addition, Maryland law provides that corporations that:

	•	have at least three directors who are not employees of the entity or related to an acquiring person; and
	•	are subject to the reporting requirements of the Securities Exchange Act of 1934,

may elect in their charter or bylaws or by resolution of the board of directors to be subject to all or part of a special subtitle that provides that:

	•	the corporation will have a staggered board of directors;
	•	any director may be removed only for cause and by the vote of two-thirds of the votes entitled to be cast in the election of directors generally, even if a lesser proportion is provided in the charter or bylaws;
	•	the number of directors may only be set by the board of directors, even if the procedure is contrary to the charter or bylaws;
	•	vacancies may only be filled by the remaining directors, even if the procedure is contrary to the charter or bylaws; and
	•	the secretary of the corporation may call a special meeting of stockholders at the request of stockholders only on the written request of the stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting, even if the procedure is contrary to the charter or bylaws.

     To date, Aimco has not made any of the elections described above.

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ITEM 2. Properties

     Our properties are located in 47 states, the District of Columbia and Puerto Rico. As of December 31, 2004, our conventional properties are operated through 17 regional operating centers and a university communities group. Affordable property operations are managed through Aimco Capital and are operated through four regional operating centers. The following table sets forth information on all of our property operations as of December 31, 2004 and 2003 .

     At December 31, 2004, we owned an equity interest in and consolidated 676 properties containing 169,932 apartment units, which we refer to as “consolidated.” These consolidated properties contain, on average, 251 apartment units, with the largest property containing 2,899 apartment units. These properties offer residents a range of amenities, including swimming pools, clubhouses, spas, fitness centers, tennis courts and saunas. Many of the apartment units offer design and appliance features such as vaulted ceilings, fireplaces, washer and dryer hook-ups, cable television, balconies and patios. Additional information on our consolidated properties is contained in “Schedule III, Real Estate and Accumulated Depreciation” in this Annual Report. At December 31, 2004, we held an equity interest in and did not consolidate 330 properties containing 44,728 apartment units, which we refer to as “unconsolidated.” In addition, we provided property management services for third parties owning 72 properties containing 7,841 apartment units, and asset management services for third parties owning 421 properties containing 41,233 apartment units, although in certain cases we may indirectly own generally less than one percent of the operations of such properties through a partnership syndication or other fund.

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     Substantially all of our consolidated properties are encumbered by mortgage indebtedness. At December 31, 2004, our consolidated properties were encumbered by aggregate mortgage indebtedness totaling $5,604.7 million (not including $50.2 million of mortgage indebtedness included within liabilities related to assets held for sale), having an aggregate weighted average interest rate of 5.95%. Such mortgage indebtedness was secured by 648 properties with a combined net book value of $8,687.0 million. Included in the 648 properties, we had a total of 48 mortgage loans, with an aggregate principal balance outstanding of $539.2 million, that were each secured by property and cross-collateralized with certain (but not all) other mortgage loans within this group of 48 mortgage loans. See Note 6 of the consolidated financial statements in Item 8 for additional information about our indebtedness.

ITEM 3. Legal Proceedings

     See the information under the caption “Legal Matters” in Note 9 of the consolidated financial statements in Item 8 for information regarding legal proceedings, which information is incorporated by reference in this Item 3.

ITEM 4. Submission of Matters to a Vote of Security Holders

     None.

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PART II

ITEM 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     There is no public market for the OP Units, and we do not intend to list the OP Units on any securities exchange. In addition, the Partnership Agreement restricts the transferability of OP Units. The following table sets forth the cash distributions declared per common OP Unit in each quarterly period during the two years ended December 31, 2004 and 2003:

     On February 28, 2005, there were 103,328,596 common OP Units outstanding, held by approximately 2,902 unitholders of record.

     During 2004, we completed tender offers for limited partnership interests resulting in the issuance of approximately 82,000 common OP Units. Each of these transactions was exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.

     During the year ended December 31, 2004, we issued to Aimco, in exchange for cash and the conversion of Class Twelve Partnership Preferred Units, 8,000,000 Class U Partnership Preferred Units. We also issued to Aimco, in exchange for cash, 3,450,000 Class V Partnership Preferred Units and 3,450,000 Class Y Partnership Preferred Units. All the proceeds were used to repay indebtedness or for general corporate purposes. Each of these transactions was also exempt from registration under the Securities Act, pursuant to Section 4(2) thereof or Regulation D thereunder.

     Our Partnership Agreement generally provides that after holding the common OP Units for one year, our Limited Partners have the right to redeem their common OP Units for cash, subject to our prior right to cause Aimco to acquire some or all of the common OP Units tendered for redemption in exchange for shares of Aimco Class A Common Stock. Common OP Units redeemed for Aimco Class A Common Stock are generally on a one-for-one basis (subject to antidilution adjustments). The following table summarizes repurchases of our equity securities for cash for the year ended December 31, 2004. In addition, during the year ended December 31, 2004, Aimco purchased approximately 735,000 common OP Units in exchange for approximately 735,000 shares of Aimco Class A Common Stock.

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(2)

Of these common OP Units repurchased, 287,272 units were purchased from Aimco, and the proceeds used by Aimco to purchase shares of its common stock in a privately negotiated transaction.

ITEM 6. Selected Financial Data

     The following selected financial data is based on our audited historical financial statements. This information should be read in conjunction with such financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein or in previous filings with the Securities and Exchange Commission.

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(2)

In 2004, 2003 and 2002, includes approximately 41,233, 39,428 and 45,187 units, respectively, that are only asset managed by us, 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.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

     We are engaged in the ownership, acquisition, management and redevelopment of apartment properties. Our property operations are characterized by diversification of product, location and price point. As of December 31, 2004, we owned or managed 1,499 apartment properties containing 263,734 units located in 47 states, the District of Columbia and Puerto Rico. Our primary sources of income and cash are rents associated with apartment leases.

     The key financial indicators that we use in managing our business and in evaluating our financial condition and operating performance are: Funds From Operations, or FFO; FFO less spending for Capital Replacements, or AFFO; same store property operating results; net operating income; net operating income less spending for Capital Replacements; financial coverage ratios; and leverage as shown on our balance sheet. These terms are defined and described in the sections captioned “Funds From Operations” and “Capital Expenditures” below. The key macro-economic factors and non-financial indicators that affect our financial condition and operating performance are: rates of job growth; unemployment rates; single-family and multifamily housing starts; and interest rates.

     Because our operating results depend primarily on income from our properties, the supply and demand for apartments substantially influences our results. Additionally, the level of expenses required to operate and maintain our properties and the pace and price at which we redevelop, acquire and dispose of our apartment properties can affect our operating results. Our cost of capital is affected by the conditions in the capital and credit markets and the terms that we negotiate for our equity and debt financings.

     We have grown rapidly over the past decade, and during the past three years our growth has moderated. During 2004, the apartment industry continued to face a challenging operating environment – job growth at a pace slower than anticipated, low interest rates and an abundant supply of housing alternatives. In addition, we experienced greater difficulty as compared to our peers because our property operating systems and structure were not as effective in meeting the challenges presented by the apartment markets. The effect of these operational challenges was mitigated by a favorable investment climate in which we were able to sell properties at attractive prices, generally higher than the cost of replacement.

     In response to this challenging operating environment and our specific operational issues, during late 2003 and throughout 2004 we adjusted our business strategies to compete successfully in challenging times and to be ready to maximize our opportunities as the economy improves. We focused on a number of areas related to improving operations, including those related to customer service, resident selection and retention, marketing, pricing, and operating cost management. Our resident selection initiatives designed to make our communities more desirable places to live and work, which drives better financial performance from higher and more stable occupancy levels, increased pricing power and reduced costs. In combination, our initiatives are resulting in improved customer service, better pricing decisions, increased resident quality, a focus on sales and marketing and higher employee satisfaction. Our revenue building initiatives are largely completed with processes in place for continued improvement in resident quality, pricing, sales and marketing.

     Our focus in 2005 will be to continue to increase revenue and work on cost management and productivity initiatives including centralizing purchasing, restructuring business processes, using technology to increase efficiency and implementing structured monthly reporting to identify issues and improve effectiveness of spending. We believe that our improvement efforts are working and have resulted in a positive trend in certain operating results and are the foundation for long-term benefits that we began to realize in the second half of 2004 and expect to continue throughout 2005 and beyond. These initiatives and others have also resulted in improved asset quality, and we will continue to seek opportunities to reinvest in our properties through capital expenditures and to manage our portfolio through property sales and acquisitions.

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

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Results of Operations

Overview

     2004 compared to 2003

     We recognized net income of $293.1 million and net income attributable to common unitholders of $196.2 million for the year ended December 31, 2004, compared to net income of $177.9 million and net income attributable to common unitholders of $74.2 million for the year ended December 31, 2003, increases of $115.2 million and $122.0 million, respectively. These increases were principally due to the following items, all of which are discussed in further detail within this section:

	•	an increase in net gain on disposition of real estate (including the gain recognized in discontinued operations and the gain related to unconsolidated entities and other); and
	•	an increase in activity fees and asset management revenues.

     These increases were partially offset by:

	•	an overall decline in net operating income, which included increases related to acquisitions and newly consolidated properties, offset by a decline in same store net operating results;
	•	an increase in general and administrative expenses;
	•	an increase in interest expense; and
	•	an increase in depreciation and amortization expense.

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

     2003 compared to 2002

     We recognized net income of $177.9 million and net income attributable to common unitholders of $74.2 million for the year ended December 31, 2003, compared to net income of $206.2 million and net income attributable to common unitholders of $98.6 million for the year ended December 31, 2002, decreases of $28.3 million and $24.4 million, respectively. These decreases were principally due to the following items, all of which are discussed in further detail within this section:

	•	an overall decline in net operating income, which included increases related to acquisitions and newly consolidated properties, offset by a decline in same store net operating results;
	•	an increase in depreciation and amortization expenses;
	•	an increase in interest expense;
	•	a decrease in interest income; and
	•	a decrease in property management revenues.

     These decreases were partially offset by:

	•	an increase in net gain on disposition of real estate (including the gain recognized in discontinued operations and the gain relating to unconsolidated entities); and
	•	lower minority interest allocations as a result of lower property operating results.

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Rental Property Operations

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

     The following table summarizes the overall performance of our consolidated properties for the years ended December 31, 2004, 2003 and 2002 (in thousands):

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, net operating income for our consolidated property operations decreased by $18.5 million, or 2.5%. This decrease was principally due to a $40.3 million decrease in consolidated same store net operating income (see further discussion of same store results under the heading “Conventional Same Store Property Operating Results”). Additionally, there was a $6.6 million decrease related to net casualty losses and other costs primarily resulting from hurricanes and tropical storms in the third quarter of 2004, which damaged over 100 of our properties and $4.0 million in higher property management costs. These decreases were offset by an $18.2 million increase related to operations of newly consolidated properties, which are properties that had been previously unconsolidated and accounted for by the equity method (42 properties first consolidated in 2004, which includes 24 properties that were consolidated due to the adoption of Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, or FIN 46, and 12 properties that were first consolidated after the first quarter of 2003) and a $16.0 million increase related to operations of acquisition properties, which were principally comprised of The Palazzo at Park La Brea and 10 other properties purchased in 2004, and three properties purchased in 2003.

     For the year ended December 31, 2003, compared to the year ended December 31, 2002, net operating income for our consolidated property operations increased by $27.9 million, or 3.9%. This increase was principally due to $62.2 million related to operations of newly consolidated properties (19 properties first consolidated in 2003 and 78 properties first consolidated in 2002) and $34.6 million related to operations of acquisition properties, which were principally comprised of three properties purchased in 2003, 115 properties acquired in the March 2002 acquisition of Casden Properties, Inc., 11 properties acquired in the August 2002 acquisition of New England area properties, and two properties purchased in 2002. This was partially offset by a $71.1 million decrease in consolidated same store net operating income (see further discussion of same store results under the heading “Conventional Same Store Property Operating Results”).

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Conventional Same Store Property Operating Results

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

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, our share of same store net operating income decreased $27.9 million, or 5.4%. Revenues decreased $6.8 million, or 0.8%, primarily due to lower occupancy (down 1.6%), and slightly lower average rent (down $1 per unit), offset by higher utility reimbursements from residents and lower bad debt expense. Expenses increased by $21.1 million, or 5.5%, primarily due to: an increase of $18.9 million in compensation and benefit expense related to a new employee health plan, merit increases and increased staffing levels; an increase of $3.7 million in utilities due to the increase in the cost of natural gas; and an increase of $3.9 million in marketing and administrative expenses associated with our efforts to increase occupancy. These increases were partially offset by a decrease in property taxes related to successful appeals and changes in estimates related to assessments.

     For the year ended December 31, 2003, compared to the year ended December 31, 2002, our share of same store net operating income decreased $73.0 million, or 12.4%. Revenues decreased $34.7 million, or 3.7%, primarily due to lower average rent (down $19 per unit), lower occupancy (down 0.9%), and increased bad debt. Expenses increased by $38.3 million, or 11.2%, primarily due to: an increase of $10.1 million in turnover, marketing and administrative costs in 2003 related to focused efforts to improve property appearance and the condition of units ready to be occupied; $9.6 million in contract services and repairs and maintenance primarily driven by seasonal factors such as landscaping and snow removal due to more severe winter conditions in 2003 than in 2002; $6.0 million in utilities due to the increase in the cost of natural gas, electric, water and sewer; and $4.8 million in property hazard insurance due to increased casualty losses.

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Property Management

     We earn income from property management primarily from unconsolidated real estate partnerships for which we are the general partner. The income is primarily in the form of fees generated through property management and other associated activities. Our revenue from property management decreases as we consolidate real estate partnerships and the income generated is therefore eliminated in consolidation. We expect this trend to continue as we increase our ownership in more of these partnerships or otherwise determine that consolidation is required by GAAP. Additionally, our revenue decreases as properties within our unconsolidated real estate partnerships are sold. Offsetting the revenue earned in property management are the direct expenses associated with property management.

     The following table summarizes the overall performance of our property management business for the years ended December 31, 2004, 2003 and 2002 (in thousands):

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, net operating income from property management decreased by $6.6 million, or 22.2%. For the year ended December 31, 2003, compared to the year ended December 31, 2002, net operating income from property management decreased by $19.3 million, or 39.3%. In both periods the decreases were principally due to an increase in consolidated real estate partnerships, which required elimination of fee income and associated property operating expense related to such partnerships, and the sales of properties within our unconsolidated partnerships (53 properties in 2004 and 37 properties in 2003) that had previously generated property management revenues.

Activity Fees and Asset Management

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

     The following table summarizes the overall performance of our activity fees and asset management for the years ended December 31, 2004, 2003 and 2002 (in thousands):

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     Included in the activity fees and asset management revenues, primarily from affiliates for the years ended December 31, 2004, 2003 and 2002, were $30.3 million, $18.9 million and $19.7 million, respectively, of fees related to affordable properties within the Aimco Capital portfolio.

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, net operating income from activity fees and asset management increased by $11.2 million, or 94.4%. This overall increase was principally a result of increased activity fees related to disposition, refinancing and developer activities of $7.3 million, $2.3 million and $3.0 million, respectively, due to a greater number of transactions in 2004 than in 2003. Additionally, there was an increase of $2.9 million related to the recognition of deferred asset management fees resulting from closed transactions and improved operations. These increases were offset by a $2.1 million decrease related to syndication fees and $3.4 million in higher expenses associated with these activities.

     For the year ended December 31, 2003, compared to the year ended December 31, 2002, net operating income from activity fees and asset management decreased by $0.04 million. This overall decrease was principally a result of decreased activity fees related to disposition and refinancing activities of $2.6 million and $2.3 million, respectively, due to a fewer number of transactions in 2003 than in 2002. Additionally, there was a decrease of $3.5 million related to the recognition of deferred asset management fees resulting from fewer closed transactions in 2003. These decreases were offset by a $6.6 million increase related to syndication fees and lower expenses of $1.4 million associated with these activities.

Depreciation and Amortization

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, depreciation and amortization increased $37.2 million, or 11.2%. This increase was principally due to $11.3 million and $7.2 million of additional depreciation related to the newly consolidated and acquisition properties, respectively, as well as $10.5 million from the completion of certain redevelopment properties. Additionally, $7.1 million of the increase resulted from additional depreciation on certain assets where, based on a periodic review, the estimated useful lives were reduced.

     For the year ended December 31, 2003, compared to the year ended December 31, 2002, depreciation and amortization increased $63.5 million, or 23.7%. This increase was principally due to $23.4 million and $23.5 million of additional depreciation related to the acquisition properties and the newly consolidated properties, respectively, as well as $12.3 million of additional depreciation related to new capital spending on same store properties. Additionally, amortization of intangibles increased $2.7 million as a result of additional amortization recognized due to the termination of certain management contracts acquired in the Casden Transactions.

General and Administrative Expenses

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, general and administrative expenses increased $29.4 million, or 60.5%. This increase was principally due to: $15.5 million in higher compensation related to increased staffing levels, merit increases and variable compensation; $7.7 million related to increased health insurance costs and the effect of a favorable change in 2003 related to our accrual for insurance claims incurred but not reported (IBNR); $3.2 million in increased amortization of restricted stock and stock option compensation; and $3.1 million in legal costs and compliance costs primarily related to the internal control reporting requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

     For the year ended December 31, 2003, compared to the year ended December 31, 2002, general and administrative expenses remained relatively flat decreasing $0.4 million, or 0.8%. This decrease was principally due to: $6.0 million related to lower health insurance costs and the effect of a favorable change in our IBNR accrual in 2003; and $2.9 million in lower salaries, primarily related to lower variable compensation. These decreases were offset by an $8.7 million increase in consulting fees associated with the implementation of site level software and legal fees.

Other Expenses (Income), Net

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

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, other expenses (income), net changed $9.7 million from income of $6.3 million in 2003 to expense of $3.4 million in 2004. This

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change was principally due to a $10.8 million lower tax benefit recognized in 2004 as compared to 2003, due primarily to an $8.0 million benefit related to the reversal of a deferred income tax asset valuation allowance (see further discussion in Note 10 of the consolidated financial statements in Item 8). In the year ended December 31, 2004, there was a tax benefit of $7.2 million recorded, as compared to $18.0 million in the year ended December 31, 2003.

     For the year ended December 31, 2003, compared to the year ended December 31, 2002, other expenses (income), net changed $8.3 million from expense of $2.0 million in 2002 to income of $6.3 million in 2003. This change was principally due to a $15.5 million higher tax benefit recognized in 2003 as compared to 2002, partially offset by $2.4 million in higher franchise taxes and $1.3 million in decreased risk operations due to increased legal expenses. In the year ended December 31, 2003, there was a tax benefit of $18.0 million recorded, as compared to $2.5 million in the year ended December 31, 2002. See discussion above on the 2003 tax activity.

Interest Income

     Interest income consists primarily of interest and accretion on general partner notes receivable from our unconsolidated real estate partnerships. Transactions that result in accretion occur on varying timetables and thus the income generated may vary from period to period.

     For the year ended December 31, 2004, as compared to the year ended December 31, 2003, interest income increased $7.2 million, or 27.4%. This increase was principally a result of $5.0 million in higher interest due from general partner notes receivable, and $3.0 million in higher accretion income.

     For the year ended December 31, 2003, as compared to the year ended December 31, 2002, interest income decreased $54.6 million, or 67.6%. This decrease was principally a result of: $33.5 million in reduced accretion income; $11.1 million in lower interest due from general partner notes receivable resulting from the consolidation of real estate partnerships, and therefore the elimination of interest income, as well as the collection of outstanding notes receivable; and $7.7 million related to gain recognized in second quarter 2002 on the sale of certain tax-exempt bonds.

Recovery of (Provision for) Losses on Notes Receivable

     For the year ended December 31, 2004, as compared to the year ended December 31, 2003, recovery of (provision for) losses on notes receivable changed $3.9 million from a provision of $2.2 million in 2003 to a recovery of $1.8 million in 2004. For the year ended December 31, 2003, as compared to the year ended December 31, 2002, provision for losses on notes receivable decreased $6.8 million.

     The provision or recovery in each period was determined based on our periodic review of the collectibility of each loan made to affiliated partnerships within our loan receivable portfolio as well as actual cash collections. We continue to monitor these loans and assess the collectibility of each loan on a periodic basis and record provisions as necessary based on the projected operating cash flows of the underlying real estate assets.

Interest Expense

     For the year ended December 31, 2004, compared to the year ended December 31, 2003, interest expense, which includes the amortization of deferred financing costs, increased $24.8 million, or 7.3%. This increase was principally due to: $9.9 million resulting from interest on the additional debt related to the newly consolidated properties; $9.6 million resulting from interest on the additional debt related to acquisition properties; and a $4.7 million decrease in capitalized interest due to redevelopment properties being placed in service. Additionally, an $8.8 million increase related to the credit facility and term loan (of which $1.8 million was associated with the write-off of deferred loan costs related to the November 2004 modification of the credit facility and term loan and $0.8 million related to the payoff of the indebtedness incurred to complete the Casden Transactions) due to higher average principal balances along with a higher weighted average interest rate. The November 2004 modification reduced the spread over LIBOR by an average of 1.25%, which will favorably impact interest expense related to our revolving credit facility and $300 million term loan. These increases were partially offset by lower weighted average effective interest rates on mortgage debt due to refinancings that occurred in 2003 and 2004.

     For the year ended December 31, 2003, as compared to the year ended December 31, 2002, interest expense increased $47.0 million, or 16.0%. This increase was principally due to $26.6 million and $21.3 million of

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additional interest on the debt related to the newly consolidated properties and the acquisition properties, respectively.

Deficit Distributions to Minority Partners

     When real estate partnerships consolidated in our financial statements make cash distributions to partners in excess of the carrying amount of the minority interest, we record a charge equal to the amount of such distribution, even though there is no economic effect or cost.

     For the year ended December 31, 2004, as compared to the year ended December 31, 2003, deficit distributions to minority partners decreased $4.6 million, or 20.4%. For the year ended December 31, 2003, as compared to the year ended December 31, 2002, deficit distributions to minority partners decreased $4.9 million, or 17.8%. Each of these decreases were due to reduced levels of distributions being made by the consolidated real estate partnerships as a result of lower refinancing activity and decreased operating results, as well as our increased ownership of such partnerships.

Equity in Earnings (Losses) of Unconsolidated Real Estate Partnerships

     For the year ended December 31, 2004, as compared to the year ended December 31, 2003, equity in losses of unconsolidated real estate partnerships decreased $4.7 million, or 72.5%. This decrease in loss was principally the result of increased ownership in certain unconsolidated partnerships and better property operating results at certain properties.

     For the year ended December 31, 2003, as compared to the year ended December 31, 2002, equity in earnings (losses) of unconsolidated real estate partnerships changed $7.1 million from equity in earnings of $0.7 million in 2002 to equity in losses of $6.4 million in 2003. This increase was principally the result of the purchase of equity interests in unconsolidated real estate partnerships that resulted in these properties becoming consolidated. Such real estate partnerships owned better performing properties that are now contributing to consolidated rental revenues and expenses. In addition, the remaining properties within unconsolidated real estate partnerships had decreased earnings driven by lower property operating results in 2003 than in 2002.

Gain (Loss) on Dispositions of Real Estate Related to Unconsolidated Entities and Other

     Gain on dispositions of real estate related to unconsolidated entities and other includes our share of gain related to dispositions of real estate within our unconsolidated real estate partnerships, gain on dispositions of non-depreciable assets and costs related to asset disposal activities. Gains (losses) on properties sold are determined on a property-by-property basis and are not comparable period to period.

     For the year ended December 31, 2004, as compared to the year ended December 31, 2003, gain on dispositions of real estate related to unconsolidated entities and other increased $65.5 million. This increase was principally due to a $34.6 million gain on the sale of a parcel of land located in Florida, and $17.4 million gain from the sale of one of our unconsolidated core properties.

     For the year ended December 31, 2003, as compared to the year ended December 31, 2002, gain on dispositions of real estate related to unconsolidated entities and other increased $25.5 million. Included in 2002 was a loss of approximately $28.0 million that resulted primarily from a change in estimate due to better insight into information related to the finalization of the recording of purchase price accounting to appropriate entities acquired in past acquisitions and the related historical estimation process in determining the carrying value of assets sold. The recognition of this amount in 2002 was considered to be a change in estimate associated with the historical estimated gain or loss on the sale of these properties. The recognition of this change in estimate resulted in a decrease in basic and diluted earnings per unit of $0.28 for the year ended December 31, 2002.

Minority Interest in Consolidated Real Estate Partnerships

     For the year ended December 31, 2004, as compared to the year ended December 31, 2003, minority interest in consolidated real estate partnerships changed $17.5 million. For the year ended December 31, 2003, as compared to the year ended December 31, 2002, minority interest in consolidated real estate partnerships changed $13.5 million. The changes in both periods were principally a result of decreased earnings caused by lower property operating results than in the prior year.

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Income from Discontinued Operations, Net

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

     For the years ended December 31, 2004, 2003, and 2002, income from discontinued operations, net totaled $237.1 million, $106.8 million and $32.2 million, respectively, which includes income from operations of $6.6 million, $15.4 million and $34.2 million, respectively. In 2004, the income from operations included 68 properties that were sold or classified as held for sale during 2004. In 2003 and 2002, the income from operations included 140 properties and 177 properties, respectively, that were sold or classified as held for sale in 2002, 2003 and 2004. Due to varying number of properties and the timing of sales, the income from operations is not comparable year to year.

     During 2004, we sold 54 properties, resulting in a net gain on sale of approximately $233.9 million (which is net of $16.0 million of related taxes). Additionally, we recognized $7.3 million in impairment losses on assets sold or held for sale in 2004. During 2003, we sold 72 properties, resulting in a net gain on sale of approximately $89.7 million (which is net of $12.1 million of related taxes). Additionally, we recognized $9.0 million in impairment losses on assets sold or held for sale in 2003. During 2002, we sold 37 properties, resulting in a net gain on sale of approximately $1.9 million (which is net of $2.5 million of related taxes). Additionally, we recognized $2.9 million in impairment losses on assets sold or held for sale in 2002.

     Gains (losses) on properties sold are determined on a property-by-property basis and are not comparable period to period. See Note 15 of the consolidated financial statements in Item 8 for more details on discontinued operations.

Cumulative Effect of Change in Accounting Principle

     On March 31, 2004, we recorded a $4.0 million cumulative effect of change in accounting principle related to the adoption of FIN 46. This charge is attributable to our recognition of cumulative losses allocable to minority interest that would otherwise have resulted in minority interest deficits. See Note 2 of the consolidated financial statements in Item 8 for further information.

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Critical Accounting Policies and Estimates

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

Impairment of Long-Lived Assets

     Real estate and other long-lived assets to be held and used are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, we make an assessment of its recoverability by comparing the carrying amount to our estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate undiscounted future cash flows, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

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

	•	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.

     Any adverse changes in these factors could cause an impairment in our long-lived assets, including real estate, goodwill and investments in unconsolidated real estate partnerships. Based on periodic tests of recoverability of long-lived assets, we have determined that the carrying amount for our properties to be held and used is recoverable and, therefore, we did not record any impairment losses related to such properties during the years ended December 31, 2004, 2003 and 2002.

Notes Receivable and Interest Income Recognition

     Notes receivable from unconsolidated real estate partnerships consist primarily of subordinated notes receivable from partnerships in which we are the general partner. The ultimate repayment of these notes is subject to a number of variables, including the performance and value of the underlying real estate property and the claims of unaffiliated mortgage lenders. Our notes receivable include loans extended by us that we carry at the face amount plus accrued interest, which we refer to as “par value notes,” and loans extended by predecessors whose positions we generally acquired at a discount, which we refer to as “discounted notes.”

     We record interest income on par value notes as earned in accordance with the terms of the related loan agreements. We discontinue the accrual of interest on such notes when the notes are impaired, as discussed below, or when there is otherwise significant uncertainty as to the collection of interest. We record income on such nonaccrual loans using the cost recovery method, under which we apply cash receipts first to the recorded amount of the loan; thereafter, any additional receipts are recognized as income.

     We recognize interest income on discounted notes receivable based upon whether the amount and timing of collections are both probable and reasonably estimable. We consider collections to be probable and reasonably estimable when the borrower has entered into certain closed or pending transactions (which include real estate sales, refinancings, foreclosures and rights offerings) that provide a reliable source of repayment. In such instances, we recognize accretion income, on a prospective basis using the effective interest method over the estimated remaining term of the loans, equal to the difference between the carrying amount of the discounted notes and the estimated collectible value. We record income on all other discounted notes using the cost recovery method. For the year ended December 31, 2004, if we had not been able to complete certain transactions, our accretion income would have decreased by $6.3 million ($0.06 per basic and diluted unit). Accretion income recognized in any given period

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is based on our ability to complete transactions to monetize the notes receivable and the difference between the carrying value and the estimated collectible value of the notes; therefore, accretion income varies on a period by period basis and could be lower or higher than in prior periods.

Allowance for Losses on Notes 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 partnership’s real estate that represents the primary source of loan repayment. In certain instances where other sources of cash flow are available to repay the loan, the impairment is measured by discounting the estimated cash flows at the loan’s original effective interest rate.

     During the year ended December 31, 2004, we recorded $1.8 million in net recovery of impairment losses on notes receivable. During the years ended December 31, 2003 and 2002, we identified and recorded $2.2 million, and $9.0 million in impairment losses on notes receivable (net of recoveries), respectively. We will continue to evaluate the collectibility of these notes, and we may adjust related allowances in the future due to changes in market conditions and other factors.

Capitalized Costs

     We capitalize direct and allocable indirect costs (including salaries, interest, real estate taxes and other costs) incurred in connection with redevelopment, Capital Improvement and Capital Replacement activities. We charge to expense as incurred indirect costs that do not relate to the above activities, including general and administrative expenses. The amounts capitalized depend on the volume and costs of such activities. Based on the level of capital spending during the year ended December 31, 2004, if capital activities had increased or decreased during the period by 10%, our income before minority interest would have increased or decreased, respectively, by approximately $5.1 million. See further discussion under the heading “Capital Expenditures.”

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Funds From Operations

     Funds From Operations, or FFO, is a non-GAAP financial measure that we believe, when considered with the financial data determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers or other personal property. The Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income, computed in accordance with GAAP, excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We compute FFO for all periods presented in accordance with the guidance set forth by NAREIT’s April 1, 2002 White Paper, which we refer to as the White Paper. We calculate FFO (diluted) by subtracting redemption related preferred OP Unit issuance costs and distributions on preferred OP Units, adding back distributions on dilutive preferred securities and adding back the interest expense on dilutive mandatorily redeemable convertible preferred securities. FFO should not be considered an alternative to net income or net cash flows from operating activities, as calculated in accordance with GAAP, as an indication of our performance or as a measure of liquidity. FFO is not necessarily indicative of cash available to fund future cash needs. In addition, although FFO is a measure used for comparability in assessing the performance of real estate investment trusts, there can be no assurance that our basis for computing FFO is comparable with that of other real estate investment trusts.

     For the years ended December 31, 2004, 2003 and 2002, our FFO is calculated as follows (amounts in thousands):

     Notes:

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		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 cost 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 our denominator for earnings per common unit – diluted calculated in accordance with GAAP plus additional common unit equivalents that are dilutive for FFO.

Liquidity and Capital Resources

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

     Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, distributions paid to unitholders and distributions paid to partners, and acquisitions of, and investments in, properties. We use our cash provided by operating activities to meet short-term liquidity needs. In the event that the cash provided by operating activities is not sufficient to cover our short-term liquidity demands, we have additional means, such as short-term borrowing availability and proceeds from property sales and refinancings, to help us meet our short-term liquidity demands. We use our revolving credit facility for general corporate purposes and to fund investments on an interim basis. We expect to meet our long-term liquidity requirements, such as debt maturities and property acquisitions, through long-term borrowings, both secured and unsecured, the issuance of debt or equity securities (including OP Units), the sale of properties and cash generated from operations.

     At December 31, 2004, we had $105.3 million in cash and cash equivalents, a decrease of $9.1 million from December 31, 2003, which cash is principally from sales and refinancing transactions that has yet to be distributed or applied to the outstanding balance on the revolving credit facility (see Note 8 to the consolidated financial statements in Item 8). At December 31, 2004, we had $282.0 million of restricted cash (including $12.6 million of restricted cash that is included within Assets Held for Sale), primarily consisting of reserves and escrows held by lenders for bond sinking funds, capital expenditures, property taxes and insurance. In addition, cash, cash equivalents and restricted cash are held by partnerships that are not presented on a consolidated basis. The following discussion relates to changes in cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash Flows in Item 8.

Operating Activities

     For the year ended December 31, 2004, our net cash provided by operating activities of $365.5 million was primarily from operating income from our consolidated properties, which is determined by rental rates, occupancy levels and operating expenses related to our portfolio of properties. This decreased $98.4 million compared with the year ended December 31, 2003, driven primarily by lower property operating results.

Investing Activities

     For the year ended December 31, 2004, our net cash provided by investing activities of $407.7 million primarily resulted from proceeds received from sales of properties, offset by the acquisition of The Palazzo at Park La Brea and several other properties (see Note 3 of the consolidated financial statements in Item 8 for further information on acquisitions), as well as investments in our existing real estate assets through capital spending (see further discussion on capital expenditures under the heading “Capital Expenditures”).

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     Although we hold all of our properties for investment, we sell properties when they do not meet our investment criteria or are located in areas that we believe do not justify our continued investment when compared to alternative uses for our capital. In the year ended December 31, 2004, we sold 54 consolidated properties, three consolidated land parcels, and 53 unconsolidated properties. These properties were sold for an aggregate sales price of $1.4 billion, of which $1.0 billion related to the consolidated properties and land parcels. The sale of the consolidated properties generated proceeds totaling $971.6 million, after the payment of transaction costs. Our share of the total net proceeds from the sale of the 107 properties and three land parcels, after repayment of existing debt, payment of transaction costs and distributions to limited partners, was $530.3 million, of which $60.9 million related to the unconsolidated properties. Of the $60.9 million, $39.0 million was received as of December 31, 2004 and was included in our distributions received from investments in unconsolidated real estate partnerships. These proceeds were used to repay a portion of our outstanding short-term indebtedness, redeem preferred securities, and for other corporate purposes.

     We are currently marketing for sale certain properties that are inconsistent with our long-term investment strategy. Additionally, from time to time, we may market certain properties that are consistent with our long-term investment strategy but offer attractive returns, such as sales to buyers who intend to convert the properties to condominiums. Gross sales proceeds from 2005 dispositions are expected to be $500 million to $550 million, and we plan to use such proceeds to reduce debt, fund capital expenditures on existing assets, fund property and partnership acquisitions, and for other operating needs and corporate purposes.

Financing Activities

     For the year ended December 31, 2004, net cash used in financing activities of $782.3 million primarily related to payments on our secured notes payable, the repayment in full of the term loan we entered into in connection with the Casden Transactions, payment of our distributions, and the full or partial redemptions of mandatorily redeemable preferred securities, the Class P Partnership Preferred Units, the Class D Partnership Preferred Units and the Class N Partnership Preferred Units. These were offset by proceeds from the issuance of Class U Partnership Preferred Units, Class V Partnership Preferred Units, Class Y Partnership Preferred Units and mortgage loans (see notes to the consolidated financial statements in Item 8 for further details on these activities).

     Mortgage Debt

     At December 31, 2004, we had $5.6 billion in consolidated mortgage debt outstanding as compared to $5.2 billion outstanding at December 31, 2003. During the year ended December 31, 2004, we refinanced or closed mortgage loans on 38 consolidated properties generating $444.3 million of proceeds from borrowings with a weighted average interest rate of 4.03%. Our share of the net proceeds after repayment of existing debt, payment of transaction costs and distributions to limited partners, was $120.2 million. In addition, we closed mortgage loans on 22 unconsolidated properties, with a weighted average interest rate of 4.04%. Our share of the net proceeds from these 22 mortgage loans totaled $26.2 million and are included in our distributions received from investments in unconsolidated real estate partnerships within investing activities. We used our total net proceeds from all loans closed of $146.4 million to repay existing short-term debt and for other corporate purposes. In 2005, we intend to continue to refinance mortgage debt to generate proceeds in amounts exceeding our scheduled amortizations and maturities.

     During the year ended December 31, 2004, we closed five mortgage loans totaling $126.8 million, with a weighted average interest rate of 3.40%, to finance our acquisitions.

     Revolving Credit Facility and Term Loans

     On November 2, 2004, we entered into an Amended and Restated Senior Secured Credit Agreement, which we refer to as the Credit Agreement, with a syndicate of financial institutions. The Credit Agreement replaced our previous two separate credit agreements. The original aggregate commitment under the Credit Agreement is $750 million, comprised of $450 million of revolving loan commitments and a $300 million term loan tranche. Proceeds from the term loan made on the closing date were used to repay the outstanding indebtedness under our previous loan facilities and for other corporate purposes. Proceeds from the revolving loans made on the closing date were used to repay outstanding indebtedness under the previous loan facilities. The term loan matures on November 2, 2009 and the revolving loans mature on November 2, 2007. See Note 8 of the consolidated financial statements in Item 8 for detailed information on the Credit Agreement.

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     At December 31, 2004, the outstanding principal balance of the term loan was $300.0 million at an interest rate of 4.18% (based on LIBOR plus 2.00%). The proceeds of future term loans are generally permitted to be used to fund general working capital and other corporate purposes.

     At December 31, 2004, the outstanding principal balance of the revolving loans was $68.7 million at an interest rate of 4.64% (based on various weighted average LIBOR and base rate borrowings outstanding with various maturities). The amount available under the revolving credit facility at December 31, 2004 was $358.2 million (after giving effect to $23.1 million outstanding for undrawn letters of credit issued under the revolving credit facility). The proceeds of future revolving loans are generally permitted to be used to fund working capital and for other corporate purposes.

     Additionally, during 2004, we repaid $104.4 million of indebtedness that was incurred in connection with the Casden Transactions.

     Partners’ Capital Transactions

     During the year ended December 31, 2004, Aimco issued $522.5 million of new preferred securities with rates ranging from 7.75% to 8.5%. Aimco contributed the proceeds from these offerings to us in exchange for preferred OP Units. We used the proceeds from these issuances to redeem or exchange $336.2 million of outstanding preferred OP Units with rates ranging from 8.75% to 9.00%. Additionally, Aimco redeemed all outstanding shares of Class S Cumulative Redeemable Preferred Stock for $98.9 million. Concurrently, we redeemed for cash all outstanding Class S Partnership Preferred Units (see Notes 7 and 13 to the consolidated financial statements in Item 8).

     Under the shelf registration, which was declared effective in April 2004, we had approximately $500 million of debt securities available and Aimco had $877 million of debt and equity securities available as of December 31, 2004 (see Notes 12 and 13 to the consolidated financial statements in Item 8 for further details on the shelf registration statement and preferred OP Units). Aimco intends to continue to issue preferred securities in both public offerings and private placements to generate proceeds that it will use to redeem higher cost preferred securities, to finance acquisitions of real estate interests and for other corporate purposes.

     Aimco’s board of directors has, from time to time and most recently in 2001, authorized Aimco to repurchase shares of Aimco Class A Common Stock and preferred stock. Currently, Aimco is authorized to repurchase up to a total of approximately 1.5 million shares of either Aimco Class A Common Stock or preferred stock. These repurchases may be made from time to time in the open market or in privately negotiated transactions, subject to applicable law. On February 18, 19 and 24, 2004, Aimco purchased in the open market 30,000, 60,000 and 20,000 shares of Aimco Class A Common Stock, respectively, at an average price per share of approximately $32.03, $32.17 and $31.26, respectively. Concurrently, we purchased 30,000, 60,000 and 20,000 common OP Units from Aimco. Additionally, on February 24, 2004, Aimco completed the purchase of 287,272 shares of Aimco Class A Common Stock at a price of $31.60 per share in a privately negotiated transaction. Concurrently, we purchased 287,272 common OP Units from Aimco.

     The distribution paid in February 2005 of $0.60 per unit represents a distribution of 120% of diluted Adjusted Funds From Operations, which we refer to as AFFO, and 83% of diluted FFO for the quarter ended December 31, 2004.

Capital Expenditures

     Effective January 1, 2004, we classify all capital spending as Capital Replacements (which we refer to as CR), Capital Improvements (which we refer to as CI) or redevelopment. We believe the new classifications are simpler to apply, allow more discrete differentiation between categories, facilitate sound economic decisions, and assist investors and analysts in better understanding our capital spending.

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

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     For the year ended December 31, 2004, we spent a total of $77.2 million on CR. These are expenditures that represent the share of expenditures that are deemed to replace the consumed portion of acquired capital assets. For the year ended December 31, 2004, we spent a total of $82.4 million and $88.8 million, respectively, on CI and redevelopment. CI expenditures represent all non-redevelopment capital expenditures that are made to enhance the value, profitability or useful life of an asset from its original purchase condition, and redevelopment expenditures represent expenditures that substantially upgrade the property.

     The table below details our share of actual spending, on both consolidated and unconsolidated real estate partnerships, for CR, CI and redevelopment for the year ended December 31, 2004 on a per unit and total dollar basis (based on approximately 160,000 ownership equivalent units), and reconciles it to our Consolidated Statement of Cash Flows for the same period (in thousands, except per unit amounts).

     Included in the above spending for CI and redevelopment, is approximately $26.6 million of our share of capitalized payroll and other indirect costs related to these activities for the year ended December 31, 2004.

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

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Contractual Obligations

     This table summarizes information contained elsewhere in this Annual Report regarding payments due under contractual obligations and commitments as of December 31, 2004 (amounts in thousands):

	(1)	Mandatorily redeemable preferred securities were fully redeemed on January 11, 2005 (see Note 22 of the consolidated financial statements in Item 8 for further information).
	(2)	Of the $485.5 million total: $201 million was associated with the commitment to purchase Westwood (a commitment entered into in connection with the Casden Transactions), which commitment was extinguished on January 3, 2005; and $199 million was associated with the commitment to acquire the Palazzo East at Park La Brea (a commitment entered into in connection with the Casden Transactions), which transaction was completed on February 28, 2005. As a result, as of February 28, 2005 the total remaining commitment to purchase real estate is $85.5 million. See Notes 9 and 22 of the consolidated financial statements in Item 8.
	(3)	The development fee payments above were established in connection with the Casden Transactions and our commitment as it relates to the Casden Development Company, LLC. We agreed to pay $2.5 million per quarter for five years (up to an aggregate amount of $50.0 million) to Casden Development Company, LLC as a retainer on account for redevelopment services on our assets.

Future Capital Needs

     In addition to the items set forth in “Contractual Obligations” above, we expect to fund any future acquisitions, additional redevelopment projects and capital improvements principally with proceeds from property sales (including tax-free exchange proceeds), short-term borrowings, debt and equity financings and operating cash flows.

Off-Balance Sheet Arrangements

     We own general and limited partner interests in unconsolidated real estate partnerships, which interests were acquired through portfolio acquisitions, individual property purchases and separate offers to other limited partners. Our total ownership interests in these unconsolidated real estate partnerships ranges typically from less than 1% to 50%. However, based on the provisions of the related partnership agreements, which grant varying degrees of control, we are not deemed to have control of these partnerships sufficient to require or permit consolidation for accounting purposes. The requirement or ability to consolidate a real estate partnership is determined by FIN 46 (see Note 2 of the consolidated financial statements in Item 8). There are no lines of credit, side agreements, or any other derivative financial instruments related to or between our unconsolidated real estate partnerships and us and no material exposure to financial guarantees (see Note 9 of the consolidated financial statements in Item 8). Accordingly, our maximum risk of loss related to these unconsolidated real estate partnerships is limited to the aggregate carrying amount of our investment in the unconsolidated real estate partnerships and any outstanding notes receivable as reported in our consolidated financial statements. See Note 4 of the consolidated financial statements in Item 8 for additional information on our unconsolidated real estate partnerships.

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ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

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

     We had $1,533.2 million of floating rate debt outstanding at December 31, 2004. Of the total floating rate debt, the major components were floating rate tax-exempt bond financing ($741.8 million), floating rate secured notes ($422.7 million), revolving loans ($68.7 million), and the term loan ($300.0 million). Based on this level of debt, an increase in interest rates of 1% would result in our income before minority interests and cash flows being reduced by $15.3 million on an annual basis. Historically, changes in tax-exempt interest rates have been at a ratio of less than 1:1 with changes in taxable interest rates. Floating rate tax-exempt bond financing is benchmarked against the BMA Index, which since 1981 has averaged 52.1% of the 10-year Treasury Yield. If this relationship continues, an increase in the 10-year Treasury Yield, of 1% (0.52% in tax-exempt interest rates) would result in our income before minority interests and cash flows being reduced by $11.8 million on an annual basis. At December 31, 2004, we had $4,455.2 million of fixed-rate debt outstanding. As of December 31, 2003, based on our level of floating rate debt of $1,599.0 million, an increase in interest rates of 1% would have resulted in our income before minority interests and cash flows being reduced by $16.0 million on an annual basis. The potential reduction of income before minority interests and cash flows due to an increase in interest rates decreased $0.7 million for 2004 compared to 2003 due to lower floating rate balances resulting from the redemption of Class S Partnership Preferred Units and repayment of a portion of the term loan.

     We believe that the fair value of our floating rate secured tax-exempt bond debt and floating rate secured long-term debt as of December 31, 2004 approximate their carrying values. The fair value for our fixed-rate debt agreements were estimated based on the quoted market rate for the same or similar issues. The combined carrying amount of our fixed-rate secured tax-exempt bonds and fixed rate secured notes payable at December 31, 2004 was $4.4 billion compared to the computed fair value of $4.8 billion (see Note 2 to the consolidated financial statements in Item 8).

     As of December 31, 2004, the scheduled principal amortization and maturity payments for our consolidated secured notes payable and consolidated secured tax-exempt bonds were as follows (dollars in thousands):

ITEM 8. Financial Statements and Supplementary Data

     The independent registered public accounting firm’s report, consolidated financial statements and schedule listed in the accompanying index are filed as part of this report and incorporated herein by this reference. See “Index to Financial Statements” on page F-1 of this Annual Report.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     None.

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ITEM 9A. Controls and Procedures

     Disclosure Controls and Procedures

     The Partnership’s management, with the participation of the chief executive officer and chief financial officer of the General Partner, who are the equivalent of the Partnership’s chief executive officer and chief financial officer, respectively, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the chief executive officer and chief financial officer of the General Partner, who are the equivalent of the Partnership’s chief executive officer and chief financial officer, respectively, have concluded that, as of the end of such period, our disclosure controls and procedures are adequate.

Management’s Report on Internal Control Over Financial Reporting

     Management of the Partnership is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the General Partner’s principal executive and principal financial officers, or persons performing similar functions, and effected by the General Partner’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

	•	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
	•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
	•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     Management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2004. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

     Based on our assessment, management concluded that, as of December 31, 2004, the Partnership’s internal control over financial reporting is effective.

     The Partnership’s independent registered public accounting firm has issued an audit report on our assessment of the Partnership’s internal control over financial reporting.

     Changes in Internal Control over Financial Reporting

     There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange Act) during fourth quarter 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

The Partners of AIMCO Properties, L.P.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that AIMCO Properties, L.P. (the “Partnership”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Partnership’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that AIMCO Properties, L.P. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, AIMCO Properties, L.P. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of AIMCO Properties, L.P. as of December 31, 2004 and 2003, and the related consolidated statements of income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2004, and our report dated March 10, 2005 expressed an unqualified opinion thereon.

/s/Ernst & Young LLP          

Denver, Colorado
March 10, 2005

ITEM 9B. Other Information

     None.

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PART III

ITEM 10. Directors and Executive Officers of the Registrant

     All of the executive officers of our General Partner also serve as executive officers of Aimco. Accordingly, the information below reflects the directors of our General Partner and the executive officers of both our General Partner and Aimco. The officers of Aimco and the General Partner are elected annually by their respective Board of Directors.

     The following is a biographical summary for the past five years or more of the current directors and executive officers of the Company.

     Terry Considine. Mr. Considine has been Chairman of the Board and Chief Executive Officer since July 1994. Mr. Considine also serves as Chairman and Chief Executive Officer of American Land Lease, Inc., another publicly held real estate investment trust. Mr. Considine devotes substantially all of his time to his responsibilities at Aimco.

     Jeffrey W. Adler. Mr. Adler was appointed Executive Vice President, Conventional Property Operations in February 2004. Previously he served as Senior Vice President of Risk Management of Aimco from January 2002 until November 2002, when he added the responsibility of Senior Vice President, Marketing. Prior to joining Aimco from 2000 to 2002, Mr. Adler was Vice President, Property/Casualty for Channelpoint, a software company.

     Harry G. Alcock. Mr. Alcock was appointed Executive Vice President and Chief Investment Officer in October 1999. Mr. Alcock has had responsibility for acquisition and financing activities of the Company since July 1994, serving as a Vice President from July 1996 to October 1997 and as a Senior Vice President from October 1997 to October 1999.

     Miles Cortez. Mr. Cortez was appointed Executive Vice President, General Counsel and Secretary in August 2001. Prior to joining the Company, Mr. Cortez was the senior partner of Cortez Macaulay Bernhardt & Schuetze LLC, a Denver law firm, from December 1997 through September 2001. He served as president of the Colorado Bar Association from 1996 to 1997 and the Denver Bar Association from 1982 to 1983.

     Randall J. Fein. Mr. Fein was appointed Executive Vice President—University Communities in October 2003 and is responsible for the operation of Aimco’s student housing related portfolio, including its joint venture activities. From 1989 through 2003, Mr. Fein served as general partner of Income Apartment Investors L.P., and Texas First Properties L.P., which operated student and non-student housing.

     Patti K. Fielding. Ms. Fielding was appointed Executive Vice President—Securities and Debt in February 2003 and Treasurer in January 2005. She is responsible for debt financing and the treasury department. From January 2000 to February 2003, Ms. Fielding served as Senior Vice President—Securities and Debt. Ms. Fielding joined the Company as a Vice President in February 1997.

     Lance J. Graber. Mr. Graber has been Executive Vice President since October 1999 and focuses on transactions related to Aimco Capital’s portfolio of affordable properties in the eastern portion of the country. Prior to joining the Company, Mr. Graber was a Director at Credit Suisse First Boston from 1994 to May 1999.

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     Thomas M. Herzog. Mr. Herzog was appointed Senior Vice President and Chief Accounting Officer in January 2004. Prior to joining Aimco, Mr. Herzog was at GE Real Estate, serving as Chief Accounting Officer & Global Controller from April 2002 to January 2004 and as Chief Technical Advisor from March 2000 to April 2002. Prior to joining GE Real Estate, Mr. Herzog was at Deloitte & Touche LLP from 1990 until 2000.

     Paul J. McAuliffe. Mr. McAuliffe became a director of our General Partner in October 2004. Mr. McAuliffe has been Executive Vice President since February 1999 and was appointed Chief Financial Officer in October 1999. From May 1996 until he joined Aimco, Mr. McAuliffe was Senior Managing Director of Secured Capital Corp.

     James G. Purvis. Mr. Purvis was appointed Executive Vice President—Human Resources in February 2003. Prior to joining Aimco, from October 2000 to February 2003, Mr. Purvis served as the Vice President of Human Resources at SomaLogic, Inc. a privately held biotechnology company in Boulder, Colorado. From July 1997 to October 2000, Mr. Purvis was the principal consultant for O³C Global Organization Solutions, a global human resources strategy and technology consulting company based in Colorado and London.

     David Robertson. Mr. Robertson has been Executive Vice President since February 2002 and President and Chief Executive Officer of Aimco Capital since October 2002. Prior to joining the Company, from 1991 to 1996, Mr. Robertson was a member of the investment-banking group at Smith Barney. Since February 1996, Mr. Robertson has been Chairman of Robeks Corporation, a privately held chain of specialty food stores.

     Section 16(a) Compliance. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the General Partner’s executive officers and directors, and persons who own more than ten percent of OP Units, to file reports (Forms 3, 4 and 5) of unit ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Officers, directors and beneficial owners of more than ten percent of the OP Units are required by SEC regulations to furnish us with copies of all such forms that they file.

     Based solely on our review of the copies of Forms 3, 4 and 5 and the amendments thereto received by it for the year ended December 31, 2004, or written representations from certain reporting persons that no Forms 5 were required to be filed by those persons, we believe that during the period ended December 31, 2004, all filing requirements were complied with by our executive officers and directors and we are not aware of any beneficial owner of more than ten percent of the OP Units.

     Audit Committee. The board of directors of the General Partner does not have a separate audit committee because the audit committee of Aimco’s board of directors makes recommendations concerning the engagement of independent auditors for Aimco and its subsidiaries, including the Partnership. In addition, the Aimco audit committee reviews with the independent auditors the plans and results of the audit engagement, reviews the independence of the independent public accountants, considers the range of audit and non-audit fees and reviews the adequacy of internal accounting controls. Beginning in 2003, the Aimco audit committee assumed sole responsibility for the engagement of the Partnership’s independent auditors. The Aimco audit committee currently consists of James N. Bailey, Richard S. Ellwood, J. Landis Martin, Thomas L. Rhodes and Michael A. Stein. Aimco’s board of directors has determined that Michael A. Stein is an “audit committee financial expert.”

     Aimco’s board of directors has also affirmatively determined that Messrs. Bailey, Ellwood, Martin, Rhodes and Stein are independent directors. Aimco’s board has determined that to be considered independent, an outside director may not have a direct or indirect material relationship with Aimco or its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with Aimco). A material relationship is one that impairs or inhibits, or has the potential to impair or inhibit, a director’s exercise of critical and disinterested judgment on behalf of Aimco and its stockholders. In determining whether a material relationship exists, Aimco’s board of directors considers, for example, whether the director or a family member is a current or former employee of Aimco, family member relationships, compensation, business relationships and payments, and charitable contributions between Aimco and an entity with which a director is affiliated (as an executive officer, partner or substantial stockholder) and whether a director is a former employee of Aimco. Aimco’s board consults with Aimco’s counsel to ensure that such determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent director,” including but not limited to those set forth in pertinent listing standards of the New York Stock Exchange as in effect from time to time.

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Code of Ethics

     Effective November 6, 2003, Aimco’s board of directors adopted a code of ethics entitled “Code of Business Conduct and Ethics” that applies to the Partnership, the General Partner, the members of the General Partner’s board, all of Aimco’s executive officers and all of Aimco’s (or its subsidiaries) employees, including the equivalent of our principal executive officer, principal financial officer and principal accounting officer. The Code of Business Conduct and Ethics is posted on Aimco’s website (www.aimco.com). If, in the future, we or Aimco amends, modifies or waives a provision in the Code of Business Conduct and Ethics, rather than filing a Current Report on Form 8-K, we intend to satisfy any applicable disclosure requirement under Item 5.05 of Form 8-K by posting such information on Aimco’s website (www.aimco.com), as necessary.

ITEM 11. Executive Compensation

SUMMARY COMPENSATION TABLE

     The following table sets forth the compensation earned with respect to each of the last three fiscal years, ending on December 31, 2004, 2003 and 2002, respectively, by the directors of the General Partner and the Chief Executive Officer and each of the four most highly compensated executive officers, or the Named Executive Officers, of the General Partner and Aimco. All references to stock and stock-based compensation are to shares of stock of Aimco. Information regarding stock options and other stock based compensation payable by Aimco has been included for informational purposes since we will issue to Aimco additional OP Units upon exercise of such stock options and the contribution to us of the net proceeds therefrom.

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OPTION/SAR GRANTS IN LAST FISCAL YEAR

     Information on options to purchase shares of Aimco stock granted in fiscal year 2004 to the Named Executive Officers is set forth in the following table.

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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES

     Information on Aimco’s option exercises during 2004 by the Named Executive Officers, and the value of unexercised Aimco options held by Named Executive Officers at December 31, 2004 is set forth in the following table.

EMPLOYMENT ARRANGEMENTS

     Mr. Considine receives annual cash compensation pursuant to an employment contract with the Company. The initial two-year term of this contract expired in July 1996 but the contract is automatically renewed for successive one-year terms unless Mr. Considine is terminated by the Company. The base salary payable under the employment contract is subject to annual review and adjustment by the Compensation and Human Resources Committee of the Board of Directors of Aimco. For 2004, Mr. Considine received $300,000 base salary. Mr. Considine is also eligible for a bonus set by the Compensation and Human Resources Committee of the Board of Directors of Aimco. See “Compensation and Human Resources Committee Report to Stockholders.”

     This employment contract provides that upon a change in control of the Aimco or a termination of employment under certain circumstances, Mr. Considine will be entitled to a payment equal to three times the average annual salary for the previous three years. The contract provides that during the term of the contract and for one year thereafter in no event will Mr. Considine engage in the acquisition, development, operation or management of other multifamily rental apartment properties outside of Aimco. In addition, the contract provides that the Mr. Considine will not engage in any active or passive investment in property relating to multifamily rental apartment properties, with the exception of the ownership of up to 1% of the securities of any publicly-traded company involved in those activities.

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     The December 31, 2004, grant to Mr. Robertson of 52,563 shares of restricted stock vests 25% on each anniversary of the grant date, beginning with the first and is subject to acceleration upon termination of employment under certain circumstances and upon a change in control. In addition, the form of restricted stock agreement used for restricted stock awards, including grants those to Messers. Considine, Robertson, McAuliffe, Cortez and Graber, includes a provision for accelerated vesting upon a change in control.

     Effective in January 2002, Aimco entered into certain non-competition and non-solicitation agreements with a number of employees, including Messrs. Considine, Robertson, McAuliffe, Cortez and Graber. Pursuant to the agreements, in consideration for payment of certain bonus and restricted stock, each of these executives agreed that during the term of his employment with Aimco and for a period of two (2) years following the termination of his employment, except in circumstances where there was a change in control of Aimco, he could not (i) be employed by a competitor of Aimco named on a schedule to the agreement, (ii) solicit other employees to leave Aimco’s employ or (iii) solicit customers of Aimco to terminate their relationship with Aimco. The agreements further required that the executives protect Aimco’s trade secrets and confidential information.

     The agreements provide that in order to enforce the above-noted non-competition condition following the executive’s termination of employment by the Company without cause, each of Messrs. Considine, Robertson, McAuliffe, Cortez and Graber will receive, for a period not to exceed the earlier of twenty-four (24) months following such termination or the date of acceptance of employment with a non-competitor, (i) severance pay in an amount, if any, to be determined by Aimco in its sole discretion and (ii) a monthly payment equal to two-thirds (2/3) of such executive’s monthly base salary at the time of termination.

     For purposes of these agreements, “cause” is defined to mean, among other things, the executive’s (i) breach of the agreement, (ii) failure to perform required employment services, (iii) misappropriation of funds or property, (iv) indictment, conviction, plea of guilty or plea of no contest to a crime involving fraud or moral turpitude, or (v) negligence, fraud, breach of fiduciary duty, misconduct or violation of law.

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     ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     The following table sets forth certain information available to the Company, as of March 4, 2005, with respect to OP Units of the Company beneficially owned by (i) each director and nominee, the chief executive officer of the General Partner and the Named Executive Officers of the General Partner who were serving as of March 1, 2005, and (ii) all directors and executive officers as a group. The table also sets forth certain information available to the Company, as of March 4, 2005, with respect to OP Units held by each person known to the Company to be the beneficial owner of more than 5% of such OP Units. This table does not reflect options that are not exercisable within 60 days. Unless otherwise indicated, each person has sole voting and investment power with respect to the securities beneficially owned by that person. The business address of each of the following directors and executive officers is 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, unless otherwise specified.

(1)	Represents the number of OP Units and Class I High Performance Partnership Units or the Class I Units, beneficially owned, divided by the total number of OP Units and Class I Units outstanding.
(2)	Includes 850,185 common OP Units and 1,589,372 Class I Units that represent 10.1% of OP Units outstanding and 66.8% of Class I Units outstanding, respectively. The 850,185 common OP Units include 510,452 common OP Units held directly, 179,735 common OP Units held by an entity in which Mr. Considine has sole voting and investment power, 2,300 common OP Units held by Titahotwo, and 157,698 common OP Units held by Mr. Considine’s spouse, for which Mr. Considine disclaims beneficial ownership. All Class I Units are held by Titahotwo.
(3)	Represents Class I Units, which constitute less 1% of the class outstanding.
(4)	Includes 850,466 common OP Units and 1,716,911 Class I Units, which represent 10.1% of OP Units outstanding and 72.2% of Class I Units outstanding, respectively.
(5)	Represents OP Units.

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     There are no compensation plans under which equity securities of the Partnership are authorized for issuance. Information on equity compensation plans as of the end of the 2004 fiscal year under which equity securities of Aimco are authorized for issuance is set forth in the following table.