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TABLE OF CONTENTS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY INDEX TO FINANCIAL STATEMENTS

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

For the transition period from                             to                              

Commission File Number 1-13232

Apartment Investment and Management Company
(Exact name of registrant as specified in its charter)

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: none

        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 ý 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. o

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

        The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, was approximately $3.2 billion as of June 30, 2003. As of February 27, 2004, there were 93,577,271 shares of Class A Common Stock outstanding.

Documents Incorporated by Reference

        Portions of the registrant's definitive proxy statement to be issued in conjunction with the registrant's annual meeting of stockholders to be held April 30, 2004 are incorporated by reference into Part III of this Annual Report.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

TABLE OF CONTENTS

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended December 31, 2003

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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, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership. Readers should carefully review our financial statements and the notes thereto, as well as the 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

        Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. We are a self-administered and self-managed real estate investment trust, or REIT, engaged in the acquisition, ownership, management and redevelopment of apartment properties. As of December 31, 2003, we owned or managed a real estate portfolio of 1,629 apartment properties containing 287,560 apartment units located in 47 states, the District of Columbia and Puerto Rico. Based on apartment unit data compiled by the National Multi Housing Council, as of December 31, 2003, we were the largest REIT owner and operator of apartment properties in the United States. Our portfolio includes garden style, mid-rise and high-rise properties and we serve approximately one million residents per year.

        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, or consolidated properties. In addition, we have an equity interest in, but do not consolidate, certain properties that are accounted for under the equity method. These properties represent the investment in unconsolidated real estate partnerships in our financial statements, or 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

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percent of the operations of such properties through a partnership syndication or other fund. The equity holdings and managed properties are as follows as of December 31, 2003:

        We own a majority of the ownership interests in AIMCO Properties, L.P., which we refer to as the Aimco Operating Partnership. Through our wholly owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP, Inc, we held approximately an 89% interest in the common partnership units and equivalents of the Aimco Operating Partnership as of December 31, 2003. We conduct substantially all of our business and own substantially all of our assets through the Aimco Operating Partnership. Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as "OP Units." Generally after a holding period of twelve months, holders of common OP Units may redeem such units for cash or, at our option, Aimco Class A Common Stock, which we refer to as "Common Stock." At December 31, 2003, 93,887,040 shares of our Common Stock were outstanding and the Aimco Operating Partnership had 11,654,216 common OP Units and equivalents outstanding for a combined total of 105,541,256 shares of Common Stock and OP Units outstanding (excluding preferred OP Units).

        Since our 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 1,629 properties with 287,560 apartment units as of December 31, 2003. These acquisitions 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 Aimco, the Aimco Operating Partnership 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

        Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to any of those reports that we file with the Securities and Exchange Commission are available free of charge as soon as reasonably practicable through our website at www.aimco.com. The information contained on our website is not incorporated into this Annual Report. Our Common Stock is listed on the New York Stock Exchange under the symbol "AIV." In 2003, our Common Stock was added to the S&P 500, an index of 500 companies in leading industries of the United States economy.

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 and other related information on the various components of our operations, see Note 18 of the consolidated

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financial statements in Item 8, and Management's Discussion and Analysis in Item 7, of this Annual Report.

Business Overview

        Our principal objective is to increase long-term stockholder 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 share of Common Stock, less capital spending for replacements and enhancements. 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 of this Annual Report.

        We strive to meet our objectives by focusing on property operations, portfolio management, reinvestment in properties, and by using leverage that is largely long-term, non-recourse and property specific.

Property Operations: Conventional and Aimco Capital

        Our property operations are divided into two business components: conventional and affordable. Our conventional operations, which typically are market-rate apartments with rents paid by the resident, include 632 properties and 178,397 units. Our affordable operations, which typically are apartments with rents set by a government agency and frequently subsidized or paid by a government agency, include 488 properties with 58,598 units organized under Aimco Capital.

        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 $1,200 per month, and reaching as much as $2,900 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 15 regional operating centers, or ROCs, each of which 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. In 2003, we renewed our focus on the ROCs overseeing our conventional operations. To manage our nationwide portfolio more efficiently and to increase the benefits from our local management expertise, we increased the level of accountability at the regional operating center level by giving 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, we narrowed the ROC mission and provided the ROCs with more resources, better systems, greater focus, and in many cases new leadership. In particular, we hired a dedicated regional financial officer to support each RVP, by improving financial control and budgeting. We also developed an expanded construction services group to handle all site work beyond routine maintenance, thus eliminating the need for RVPs to spend time on oversight of construction projects. We improved 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. We believe that these changes will enable our regional and community managers to benefit from more organizational clarity, more and better information, and more tools to help them make

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quicker, better decisions closer to the property and to the customer, including the areas discussed below.

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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 focuses on resident acquisition and retention—attracting and retaining residents who are good neighbors and are credit worthy. We standardized residential financial stability requirements and raised the standard across our portfolio to reduce turnover costs and improve retention. We believe that the costs exceed the benefits when higher occupancy results from financially riskier residents or lowering financial stability standards.



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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 implemented 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.



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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 automating our supply chain to provide better control over purchasing decisions and to take advantage of volume discounts.



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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.

Aimco Capital

        Aimco is 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 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 through four ROCs. 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 such as dispositions, tax credit redevelopment and refinancings.

Portfolio Management

        Starting in 2003, we began to 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

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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, 2003, we had 368 conventional core properties in 46 selected markets. Within our core portfolio, the largest single market (Washington, D.C.) contributed approximately 13%, and the five largest markets (Washington, D.C., greater Los Angeles, New England, Philadelphia and Chicago) together contributed approximately 43%, to income before depreciation and interest expense. Non-core properties are those properties located in other markets or in less favored locations within the 46 selected markets, which we generally intend to hold for investment for the intermediate term. At December 31, 2003, we had 264 conventional 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 two ways:

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the direct acquisition of a property or 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



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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 2,700 tender offers with respect to various partnerships resulting in over 160,000 transactions totaling $853 million in cash paid and OP Units issued to purchase additional interests in such partnerships.

        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. The sales of non-core properties, partially fund our acquisitions. In 2003, we sold 77 non-core properties, generating net cash proceeds to us, after repayment of existing debt, payment of transaction costs and distributions to limited partners, of $281 million. As of December 31, 2003, we had approximately 75 non-core properties being marketed for sale. In addition, we had approximately 200 affordable properties being marketed for sale.

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 2003, we spent $563 per owned apartment unit for Capital Replacements, which are expenditures required to maintain the related asset, and $17 per owned apartment unit for Capital Enhancements, which are expenditures that add a new feature or revenue source.

        In addition to upkeep and maintenance 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. As of December 31, 2003, we had under redevelopment eight conventional properties with 5,187 units (which includes three properties for which redevelopment activities were complete but the operations of which had not yet stabilized) and two affordable properties with 467 units. During 2003, we completed redevelopment projects with approximately $73 million in cumulative spending to date, including major projects in Cincinnati, Ohio; Atlanta, Georgia; and Indianapolis, Indiana. Redevelopment expenditures for five conventional properties with

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ongoing redevelopment activities will require an estimated total investment (redevelopment spending) of $323 million, of which approximately $48 million remains to be spent. Our share of the estimated total spending on those five properties is $243 million of which approximately $31 million remains to be spent. In 2003, our specialized redevelopment team was expanded to include a Construction Services Group to oversee both major capital replacement and redevelopment projects. These experts include engineers, architects and construction managers. In 2004, we plan to commence as many as 40 redevelopments with spending per project in the $2 million to $10 million range.

Our Taxation

        We have 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 our taxable year ended December 31, 1994, and intend to continue to operate in such a manner. Our current and continuing qualification as a REIT depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership. If we qualify for taxation as a REIT, we will generally not be subject to United States Federal corporate income tax on our 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 we qualify as a REIT, we may be subject to United States Federal income and excise taxes in various situations, such as on our undistributed income. We also will be required to pay 100% tax on non-arms length transactions between us and a TRS (described below) and on any net income from sales of property that the IRS successfully asserts was property held for sale to customers in the ordinary course. We and our stockholders may be subject to state or local taxation in various state or local jurisdictions, including those in which we or they transact business or reside. Any taxes imposed on us would reduce our operating cash flow. The state and local tax treatment that we and our stockholders receive may not conform to the United States Federal income tax treatment.

        Certain of our 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. We use the TRS format to facilitate our ability to offer certain services and activities to our 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 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.

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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 cash flows from 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 been named as a defendant in lawsuits that have alleged personal injury as a result of the presence of mold. Prior to March 31, 2002, we generally were insured against claims arising from the presence of mold due to water intrusion. However, since March 31, 2002, our insurance coverage for property damage loss claims arising from the presence of mold has become more limited and generally includes only limited coverage for catastrophic property damage due to mold. In addition, since December 31, 2002, our insurance coverage for personal injury claims related to mold exposure has also become more limited.

        We have implemented 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 taken as a whole.

Insurance

        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. Beginning in March 2004, for property insurance at our conventional properties, we have a retention of $250,000. Third party insurance covers losses in excess of our $250,000 retention up to a limit of $350 million. Also, if a specific covered loss in our conventional portfolio exceeds $2.75 million, we have an annual aggregate retention of $2 million, and third party insurance covers losses in excess of that $2 million retention, again up to a limit of $350 million. With respect to property insurance at our affordable properties,

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each property has a deductible of $25,000 per loss. Third party insurance covers losses in excess of that deductible, subject to the same annual aggregate retention of $2 million as described above, but for losses above $2.5 million, and up to a limit of $350 million. In addition, beginning in 2004, we have self-insured retentions for workers' compensation and general liability coverage of $500,000 each per incident. Third party insurance covers losses in excess of our $500,000 retention. We have established loss prevention, loss mitigation, claim handling, litigation management, and loss reserving procedures to manage our exposure.

Employees

        We currently have approximately 7,300 employees, of which approximately 6,300 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 fewer than 200 of our employees. We have never experienced a work stoppage and believe we maintain satisfactory relations with our employees.

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:

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the general economic climate;



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competition from other apartment communities and other housing options;



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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;



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changes in governmental regulations and the related cost of compliance;



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increases in operating costs (including real estate taxes) due to inflation and other factors, which may not necessarily be offset by increased rents;



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changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multifamily housing;



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changes in interest rates and the availability of financing; and



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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

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increase our net income on a per share 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:

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costs may exceed original estimates;



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occupancy and rental rates at the property may be below our projections;



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financing may not be available on favorable terms or at all;



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redevelopment and leasing of the properties may not be completed on schedule; and



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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 our 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 1,629 properties with 287,560 apartment units as of December 31, 2003. These acquisitions have included purchases of properties and interests in entities that own or manage properties, as well as corporate mergers. Our ability to integrate successfully acquired businesses and properties depends, among other things, on our ability to:

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attract and retain qualified personnel;



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integrate the personnel and operations of the acquired businesses;



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maintain standards, controls, procedures and policies; and



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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.

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 stock dividends of greater than 2:1 and to match debt maturities to the character of the assets financed. For the year ended December 31, 2003, however, we had a ratio of free cash flow to combined interest expense and preferred stock dividends of 1.5:1, and this ratio in prior periods

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has also deviated from our goal. In addition, our Board of Directors 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 our 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, 2003, 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, 2003, we had approximately $1,599.0 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 $16.0 million on an annual basis and could reduce our ability to service our indebtedness and make dividends or other distributions. Of the total debt subject to variable interest rates, floating rate tax-exempt bond financing was $817.5 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 54.0% of the 10-year Treasury Yield. If this relationship continues, an increase in interest rates of 1% (0.54% in tax-exempt interest rates) would result in our income before minority interests and cash flows being reduced by $11.2 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 revolving credit facility and term loans provide that we may make distributions to our investors during any 12-month period in an aggregate amount that does not exceed the greater of 90% of our Funds From Operations for such period or such amount as may be necessary to maintain our REIT status. Pursuant to the amendments of our credit facilities, effective September 2003, the credit facilities prohibit all distributions (as defined in the credit facilities) if certain financial covenants are not satisfied.

        Our outstanding classes of preferred stock prohibit the payment of dividends on our Common Stock if we fail to pay the dividends to which the holders of the preferred stock are entitled. In addition, our 6¹/2% convertible debentures prohibit the payment of dividends on our capital stock if we elect to defer payments of interest on these convertible debentures, which we may have the right to do for up to 60 months. If we are unable to pay dividends on our Common Stock, we may fail to qualify as a REIT. This would subject us to corporate taxation and reduce our ability to make distributions to our investors.

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

        All of our properties are owned, and all of our operations are conducted, by the Aimco Operating Partnership and our other subsidiaries. As a result, 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

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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, 2003, we owned an equity interest in 488 properties and managed for third parties and affiliates 474 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, our chief executive officer. 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.

We may fail to qualify as a REIT.

        We believe that we operate, and have always operated, in a manner that enables us to meet the requirements for qualification as a REIT for Federal income tax purposes. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, investment, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis. Moreover, the proper classification of an instrument as debt or equity for Federal income tax purposes may be uncertain in some circumstances, which could affect the application of the REIT qualification

12

requirements. Accordingly, there can be no assurance that the Internal Revenue Service, or the IRS, will not contend that our interests in subsidiaries or other issuers constitutes a violation of the REIT requirements. Moreover, future economic, market, legal, tax or other considerations may cause us to fail to qualify as a REIT, or our Board of Directors may determine to revoke our REIT status. If we fail to qualify as a REIT, we will not be allowed a deduction for dividends paid to our stockholders in computing our taxable income, and we will be subject to Federal income tax at regular corporate rates, including any applicable alternative minimum tax. This would substantially reduce our funds available for payment to our investors. Unless entitled to relief under certain provisions of the Code, we would also be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT.

        In addition, our failure to qualify as a REIT would trigger the following consequences:

•

we would be obligated to repurchase a material amount of our 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.

REIT distribution requirements limit our available cash.

        As a REIT, we are subject to annual distribution requirements, which limit the amount of cash we retain for other business purposes, including amounts to fund our growth. We generally must distribute annually at least 90% of our net REIT taxable income, excluding any net capital gain, in order for corporate income tax not to apply to earnings that we distribute. We intend to make distributions to our stockholders to comply with the requirements of the Code. However, differences in timing between the recognition of taxable income and the actual receipt of cash could require us to sell assets or borrow funds on a short-term or long-term basis to meet the 90% distribution requirement of the Code.

Legislative or other actions affecting REITs could have a negative effect on us.

        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 our investors or us. We cannot predict how changes in the tax laws might affect our investors or us. For example, under legislation effective January 1, 2001, if any of our taxable REIT subsidiaries were deemed to operate or manage a health care or lodging facility, we would fail to qualify as a REIT. Although we believe that, since January 1, 2001, none of our 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, we cannot assure that the IRS will not contend that any of our taxable REIT subsidiaries operate or manage a health care or lodging facility, resulting in our 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.

        On May 6, 2002 and February 7, 2003, the Federal Bureau of Investigation and the United States Department of Homeland Security issued 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. The enactment by the United States Congress of the Terrorism Risk Insurance Act, or TRIA,

13

resulted in terrorism coverage exclusions being invalidated and quotes at each policy renewal have been offered. Prior to the enactment of TRIA, and because we have a highly diversified and geographically dispersed portfolio of residential properties, our lenders generally had not required us to purchase terrorism insurance. However, since the enactment of TRIA and increased scrutiny of lenders regarding terrorism exposure, 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 taken as a whole.

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, deductible and coverage. For certain types of coverage, such as property coverage, we are currently experiencing 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 shares in our charter may result in the loss of economic and voting rights by purchasers that violate those limits.

        Our charter limits ownership of our Common Stock by any single stockholder to 8.7% of our outstanding shares of Common Stock, or 15% in the case of certain pension trusts, registered investment companies and Mr. Considine. Our charter also limits ownership of our 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 of our capital stock if the purchase would result in us losing our REIT status. This could happen if a transaction results in fewer than 100 persons owning all of our shares of capital stock or results in five or fewer persons, applying certain attribution rules of the Code, owning 50% or more of the value of all of our shares of capital stock. 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;



•

we will not reflect the transaction on our books;



•

we may institute legal action to enjoin the transaction;



•

we may demand repayment of any dividends received by the affected person on those shares;



•

we may redeem the shares;



•

the affected person will not have any voting rights for those shares; and



•

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.

        We may purchase the shares of capital stock 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 of capital stock, the affected person will receive the lesser of the price paid for the shares or the

14

then current market price. An individual who acquires shares of capital stock 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 us any distributions received from us as a result of his or her ownership of the shares.

Our charter may limit the ability of a third party to acquire control of us.

        The 8.7% ownership limit discussed above may have the effect of precluding acquisition of control of us by a third party without the consent of our Board of Directors. Our charter authorizes our Board of Directors to issue up to 510,587,500 shares of capital stock. As of December 31, 2003, 444,962,738 shares were classified as Common Stock and 65,624,762 shares were classified as preferred stock. Under our charter, our Board of Directors has the authority to classify and reclassify any of our unissued shares of capital stock into shares of capital stock with such preferences, rights, powers and restrictions as our Board of Directors may determine. The authorization and issuance of a new class of capital stock could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our stockholders' best interests.

Maryland business statutes may limit the ability of a third party to acquire control of us.

        As a Maryland corporation, we are subject to various Maryland laws that may have the effect of discouraging offers to acquire us and increasing the difficulty of consummating any such offers, even if our acquisition would be in our stockholders' best interests. The Maryland General Corporation Law restricts mergers and other business combination transactions between us and any person who acquires beneficial ownership of shares of our stock representing 10% or more of the voting power without our 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 66²/3% 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 our capital 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. Additionally, 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;

15

•

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, we have not made any of the elections described above.

Other

        On February 26, 2004, we announced that, as part of our previously stated plan to hire a chief operating officer, effective April 1, 2004, Peter Kompaniez, our president and vice chairman will relinquish the title of president. Mr. Kompaniez will continue in the role of vice chairman of the board of directors and will serve us on a variety of special and ongoing projects in an operating role. We have initiated a search process for a chief operating officer, which we expect to complete no later than year-end. Pending that appointment, Mr. Considine will serve as president, in addition to his continued duties as chairman and chief executive officer.

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ITEM 2. Properties

        Our properties are located in 47 states, the District of Columbia and Puerto Rico. Conventional properties are operated through 15 regional operating centers. 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, 2003:

        At December 31, 2003, we owned an equity interest in and consolidated 679 properties containing 174,172 apartment units, which we refer to as "consolidated." These consolidated properties contain, on average, 259 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, 2003, we held an equity interest in and did not consolidate 441 properties containing 62,823 apartment units, which we refer to as "unconsolidated." In addition, we provided property management services for third parties owning 96 properties containing 11,137 apartment units, and asset management services for third parties owning 413 properties containing 39,428 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.

17

        Substantially all of our consolidated properties are encumbered by mortgage indebtedness. At December 31, 2003, our consolidated properties were encumbered by aggregate mortgage indebtedness totaling $5,648.9 million. Such mortgage indebtedness was secured by 657 properties with a combined net book value of $8,686.6 million, having an aggregate weighted average interest rate of 6.11%, not including $40.7 million of mortgage indebtedness included within liabilities related to assets held for sale. As of December 31, 2003, we had a total of 45 mortgage loans, with an aggregate principal balance outstanding of $548.3 million, that were each secured by property and cross-collateralized with certain other mortgage loans. See Note 6 of the consolidated financial statements in Item 8 of this Annual Report for additional information about our indebtedness.

ITEM 3. Legal Proceedings

        See the information under the caption "Legal" in Note 9 of the consolidated financial statements in Item 8 of this Annual Report 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

        Our Common Stock has been listed and traded on the NYSE under the symbol "AIV" since July 22, 1994. The following table sets forth the quarterly high and low sales prices of our Common Stock, as reported on the NYSE, and the dividends declared for the periods indicated:

        On February 27, 2004, the closing price of our Common Stock was $32.40 per share, as reported on the NYSE and there were 93,577,271 shares of Common Stock outstanding, held by 3,847 stockholders of record. The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agency, but does include each such broker or clearing agency as one recordholder.

        As a REIT, we are required to distribute annually to holders of common stock at least 90% of our "real estate investment trust taxable income," which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income. We measure our economic profitability and intend to pay regular dividends to our stockholders based on Funds From Operations, less Capital Replacements during the relevant period. Future payment of dividends are at the discretion of our Board of Directors and will depend on numerous factors including our financial condition, capital requirements, the annual distribution requirements under the provisions of the Code applicable to REITs and such other factors as our Board of Directors deems relevant.

        From time to time, we issue shares of Common Stock in exchange for common and preferred OP Units tendered to the Aimco Operating Partnership for redemption in accordance with the terms and provisions of the agreement of limited partnership of the Aimco Operating Partnership. Such shares are issued based on an exchange ratio of one share for each common OP Unit or applicable conversion ratio for preferred OP Units. The shares are generally issued in exchange for OP Units in private transactions exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. During the three and twelve months ended December 31, 2003, approximately 219,000 and 338,000 shares of Common Stock were issued in exchange for common OP Units. During the three and twelve months ended December 31, 2003, approximately 14,000 and 22,000 shares of Common Stock were issued in exchange for preferred OP Units.

        Our Board of Directors has, from time to time, authorized us to repurchase shares of our outstanding capital stock. Currently, we are authorized to repurchase up to a total of approximately 1.9 million shares, of which up to 1.9 million shares may be Common Stock and up to 1.7 million shares may be preferred stock. These repurchases may be made from time to time in the open market or in privately negotiated transactions, subject to applicable law.

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        During the year ended December 31, 2003, we accepted approximately 532,000 shares of Common Stock as payment in full of a $25 million obligation pursuant to the terms of the settlement agreement associated with the REAL Litigation (as defined and described in Note 9 of the consolidated financial statements in Item 8 of this Annual Report).

        See Note 22 of the consolidated financial statements in Item 8 of this Annual Report for information on Common Stock repurchased subsequent to the year ended December 31, 2003.

        Additional information required by this item is presented under the caption "Securities Authorized for Issuance Under Equity Compensation Plans" in the proxy statement for our 2004 annual meeting of stockholders and is incorporated herein by reference.

20

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.

(1)

Certain reclassifications have been made to 2002, 2001, 2000, and 1999 amounts to conform to the 2003 presentation. These reclassifications primarily represent presentation changes related to discontinued operations resulting from the 2002 adoption of Statement of Financial Accounting Standard No. 144. Also, effective January 1, 2001, as a result of the REIT Modernization Act permitting REITs to own taxable REIT subsidiaries, we began consolidating our previously unconsolidated taxable REIT subsidiaries. Prior to this date, we did not control such subsidiaries, which were accounted for under the equity method, and as a result, the periods prior to 2001 are not comparable.

(2)

In 2003 and 2002, includes approximately 29,000 and 33,000 units, respectively, that were acquired as part of the March 2002 acquisition of Casden Properties, Inc., and are asset managed by us only, and not also property managed, although in certain cases we may indirectly own generally less than one percent of the operations of such properties through a partnership syndication or other fund.

21

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

Executive Overview

        We are a self-administered and self-managed real estate investment trust, or REIT, 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, 2003, we owned or managed a real estate portfolio of 1,629 apartment properties containing 287,560 units located in 47 states, the District of Columbia and Puerto Rico. Our primary sources of income and cash are rents associated with apartment leases.

        The key financial indicators that we use in managing our business and in evaluating our financial condition and operating performance are: Funds From Operations, or FFO, less spending for Capital Replacements and Capital Enhancements; same store property operating results; net operating income less spending for Capital Replacements and Capital Enhancements, or Free Cash Flow; 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 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 which we negotiate for our equity and debt financings.

        We have grown rapidly over the past decade, and during the past three years our growth has moderated. In 2003, the apartment industry continued to face a challenging operating environment—unemployment, job growth at a pace slower than anticipated, low interest rates and an abundant supply of housing alternatives. In addition, we experienced greater difficulty as compared to our peers because our property operating systems and structure were not as effective as our peers in meeting the challenges presented by the apartment markets.

        We are adjusting our business strategies to compete successfully in challenging times and to be ready to maximize our opportunities as the economy improves. We are focused on improving our conventional property operations, which are conducted through 15 regional operating centers, or ROCs. This structure provides us with the opportunity to keep decision-making close to the customers we serve and the properties we maintain. We are focused on providing our ROCs with more resources and better systems and reducing employee turnover. We are standardizing numerous processes, including such items as price setting and resident selection. Our focus on resident selection is designed to make our communities more desirable places to live and work, which will result in better financial performance due to higher and more stable occupancy levels, increased pricing power and reduced costs.

        We were highly focused throughout 2003 in addressing property operations and those efforts will continue throughout 2004. In addition, we will continue to seek opportunities to reinvest in our properties through redevelopment 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 incorporated by reference in Item 8 of this Annual Report.

22

Results of Operations

Overview

2003 compared to 2002

        We recognized net income attributable to common stockholders of $65.3 million for the year ended December 31, 2003, compared with $75.5 million for the year ended December 31, 2002, a decrease of $10.2 million, or 13.5%. This decrease was principally due to:

•

a decline in consolidated same store net operating results of 11.6% in 2003 compared to 2002;



•

higher depreciation and interest expenses due to the acquisition of apartment properties;



•

lower interest income as a result of a decline in accretion income recognized on general partner notes receivable; and



•

a decrease in the operations of our investment management business.

        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) due to property sales;



•

an increase in net operating income due to the acquisition of apartment properties; and



•

lower minority interest allocations as a result of lower property operating results.

2002 compared to 2001

        We recognized net income attributable to common stockholders of $75.5 million for the year ended December 31, 2002, compared with $17.0 million for the year ended December 31, 2001, an increase of $58.5 million. This increase was principally due to:

•

an increase in net operating income due to the acquisition of apartment properties;



•

lower depreciation expense due to a change in estimate related to the useful lives of real estate assets;



•

higher equity in earnings in our unconsolidated real estate partnerships due to a change in estimate related to the useful lives of real estate assets;



•

lower minority interest allocations as a result of lower property operating results;



•

a decrease in deficit distributions to minority partners; and



•

a reduction in amortization of intangibles.

        These increases were partially offset by:

•

an increase in loss on disposition of real estate (including the loss recognized in discontinued operations and the loss relating to unconsolidated entities) due primarily to a 2002 change in estimate associated with historical estimated gain or loss on the sale of properties and the sale of certain senior living facilities in 2002;



•

a decline in consolidated same store net operating results of 6.5% in 2002 compared to 2001;



•

higher depreciation and interest expenses due to the acquisition of apartment properties; and



•

a decrease in the operations of our investment management business.

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

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Rental Property Operations

        Our net income is primarily generated from the operations of our consolidated properties. The principal components within our total consolidated property operations are as follows:

Consolidated same store properties—consist of all conventional properties that were owned, stabilized and consolidated for all periods presented.

Acquisition Properties—consist of all consolidated properties that were owned less than three years as of the end of the most recent year. For purposes of this discussion, acquisition properties are principally comprised of: three properties directly purchased in 2003; those properties acquired in the March 2002 acquisition of Casden Properties, Inc. and certain related transactions, which we refer to collectively, as the Casden Merger; those properties acquired in the August 2002 acquisition of New England area properties, which we refer to as the New England Properties Acquisition; two properties directly purchased in 2002 and three properties directly purchased in 2001.

Newly Consolidated Properties—consist of all properties consolidated for less than three years as of the end of the most recent year. These properties had been previously unconsolidated and accounted for by the equity method. For purposes of this discussion, newly consolidated properties include 10 properties that were first consolidated in 2003, 78 properties that were first consolidated in 2002 and five properties that were first consolidated in 2001.

Affordable properties—consist of all affordable properties (which are properties that benefit from governmental programs designed to provide housing for people with low or moderate incomes) that were owned, stabilized and consolidated for all periods presented.

Redevelopment properties—consist of all consolidated properties where (i) a substantial number of available units have been vacated for major renovations and have not been stabilized for at least one year as of the earliest period presented, or (ii) other significant renovation (such as exteriors, common areas or unit improvements (on lease expirations)) is underway or has been complete for less than one year as of the earliest period presented. In both cases, the properties have been removed from same store properties.

Other properties—consist of all consolidated properties that are not included in the above categories and in some cases are not multifamily properties (such as commercial properties and retail space).

Partnership expenses—consist of expenses incurred at the partnership level either directly or indirectly (such as partnership audit, tax and legal expenses).

Property management expenses—consist of off-site expenses associated with the self-management of consolidated properties.

        The following table summarizes the overall performance of our consolidated properties for the years ended December 31, 2003, 2002 and 2001 (in thousands):

24

        The following table shows the components of consolidated property net operating income for the years ended December 31, 2003, 2002 and 2001 (in thousands):

        During 2003 as compared to 2002, net operating income for our consolidated property operations increased by $26.1 million, or 3.4%. This increase was principally due to $52.6 million and $44.6 million related to operations of newly consolidated properties and operations of acquisition properties, respectively. This was offset by a $74.3 million, or 11.6%, decrease in consolidated same store net operating income. See further discussion of same store results under the heading "Conventional Same Store Property Operating Results."

        During 2002 as compared to 2001, net operating income for our consolidated property operations increased by $82.1 million, or 11.8%. This increase was principally due to $92.6 million and $38.7 million related to operations of acquisition properties and operations of newly consolidated properties, respectively. This was offset by a $44.4 million, or 6.5%, decrease in consolidated same store net operating income. See further discussion of same store results under the heading "Conventional Same Store Property Operating Results."

Conventional Same Store Property Operating Results

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

25

component of 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, 2003, compared to the year ended December 31, 2002, our share of same store net operating income decreased $76.5 million, or 11.3%. Revenues decreased $36.9 million, or 3.4%, primarily due to lower average rent (down $16 per unit), lower occupancy (down 0.8%), and increased bad debt. Expenses increased by $39.6 million, or 9.9%, primarily due to: an increase of $12.5 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; $8.8 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; $6.7 million in utilities due to the increase in the cost of natural gas, electric, water and sewer; and $4.0 million in property hazard insurance due to increased casualty losses.

        For the year ended December 31, 2002, compared to the year ended December 31, 2001, our share of same store net operating income decreased $39.6 million, or 5.5%. Revenues decreased $22.3 million, or 2.0%, primarily due to lower occupancy (down 0.9%), and increased bad debt. Expenses increased by $17.3 million, or 4.5%, primarily due to: an increase of $4.8 million in property taxes; $3.8 million in insurance expense, as the cost of property hazard insurance coverage rose in March 2002; and $5.4 million in contract services and repairs and maintenance. These increases were somewhat offset by reductions in utilities.

Investment Management Business

        We earn income from our consolidated investment management business 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 and asset management. Asset management involves the financial management of properties, as opposed to the day-to-day property operations, and results in fees from a variety of transactions including refinancing fees, developer fees and syndication fees. These transactions occur on varying timetables and thus the income generated may vary from period to period. Our revenue from the investment management business decreases as we increase our ownership of properties and the income generated is therefore eliminated in consolidation. We expect this trend to continue as we increase our ownership in more of these partnerships or otherwise determine that consolidation is required by GAAP. Offsetting the revenue earned in the investment management business are the expenses associated with property and asset management, as well as expenses related to our risk management and other insurance programs.

26

        The following table summarizes the overall performance of our consolidated investment management business for the years ended December 31, 2003, 2002 and 2001 (in thousands):

        During 2003 as compared to 2002, income from investment management business decreased by $11.5 million, or 36.7%. This decrease was principally a result of the following:

•

$16.0 million due to an increase in consolidated real estate partnerships, which required additional elimination of fee income and associated property operating expense related to such partnerships;



•

$8.0 million due to increased consulting fees associated with the implementation of site level software and legal fees; and



•

$3.2 million related to insurance, of which $7.5 million was related to an increase in general liability, worker's compensation and director and officer insurance premium expenses offset by $4.3 million of a reduction in casualty losses in the property hazard program.

        These decreases were partially offset by:

•

$4.6 million of increased activity based fees related to syndication, acquisition and deferred asset management fees from transactions closed in 2003; and



•

$15.1 million due to income tax benefits including: $8.0 million of an income tax valuation reserve reversal in first quarter 2003 (see Note 10 of the consolidated financial statements in Item 8 of this Annual Report); and $7.1 million of an income tax benefit resulting from losses recorded at our taxable REIT subsidiaries.

        During 2002 as compared to 2001, income from the investment management business decreased by $20.8 million, or 39.8%. This decrease was principally a result of the following:

•

$13.2 million of reduced fees billed for construction management services in 2002. We calculated and billed these fees to the real estate partnerships based on a percentage of volume of construction activities. In addition, lower costs were incurred and therefore lower billings occurred as a result of the ongoing management initiative to contain costs;



•

$7.3 million due to an increase in insurance costs in the property hazard program. These increased costs were the result of increased reserves due to historical casualty losses from prior years;



•

$5.5 million due to an increase in consolidated real estate partnerships, which required additional elimination of fee income and associated property operating expense related to such real estate partnerships;



•

$4.5 million due to a net reduction in fees including: $6.9 million decrease in refinancing and disposition fees, due to decreased refinancing transactions (28 in 2002 compared to 59 in 2001) resulting in lower fees earned; and a $7.7 million decrease in fees earned for services provided to third parties due to a planned reduction in third party asset management. These decreases were offset by a $10.1 million increase in asset management and developer fees related to the 2002 acquisition of National Partnership Investments Corp. as part of the Casden Merger.

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        These decreases were partially offset by $9.3 million of lower compensation and health insurance expense resulting from a change in plan administrator and a reduction in work force, in part due to a planned reduction in third party property management and management cost reduction initiatives.

Depreciation of Rental Property

        For the year ended December 31, 2003, as compared to the year ended December 31, 2002, depreciation of rental property increased $62.0 million, or 23.3%. 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.

        For the year ended December 31, 2002, as compared to the year ended December 31, 2001, depreciation of rental property decreased $36.2 million, or 12.0%. This decrease was principally due to a $69.0 million decrease related to the change in useful lives of assets made in 2001. During 2001, we completed a comprehensive review of our real estate related depreciation. As a result of this review, we changed our estimate of the remaining useful lives for our buildings. We believe the change better reflects the remaining useful lives of the assets and is consistent with prevailing industry practice. This change in useful lives increased net income by approximately $74.3 million, net of minority interest, in 2002 over 2001, of which a portion was recognized as an increase to equity in earnings of unconsolidated real estate partnerships. The recognition of this change in useful lives resulted in an increase in basic and diluted earnings per share of $0.87 and $0.86, respectively, for the year ended December 31, 2002.

        This decrease was partially offset by additional depreciation related to the acquisition properties and the newly consolidated properties of $24.0 million and $11.8 million, respectively.

Amortization of Intangibles

        For the year ended December 31, 2003, as compared to the year ended December 31, 2002, amortization of intangibles increased $2.7 million, or 66.5%. This increase was principally a result of additional amortization recognized due to the termination of certain management contracts acquired in the Casden Merger.

        For the year ended December 31, 2002, as compared to the year ended December 31, 2001, amortization of intangibles decreased $14.7 million, or 78.5%. Of the total decrease, $6.8 million was due to property management and asset management contract intangibles that were fully amortized in 2001, and $7.9 million was attributable to the elimination of goodwill amortization in accordance with the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

Provision for Losses on Accounts, Fees and Notes Receivable

        For the year ended December 31, 2003, as compared to the year ended December 31, 2002, provision for losses on accounts, fees and notes receivable decreased $6.8 million, or 75.8%. For the year ended December 31, 2002 as compared to the year ended December 31, 2001, provision for losses on accounts, fees and notes receivable increased $2.4 million, or 35.5%.

        In 2001, the entire provision of $6.6 million related to additional allowance for possible losses on accounts, fees and other contingencies. In 2002, the entire provision of $9.0 million related to provision for losses on notes receivable, which provision was determined based on our review in 2002 of the collectibility of each loan made to affiliated partnerships within our loan receivable portfolio. In 2003, we recorded a $2.2 million provision for losses on notes receivable. We continue to monitor these loans

28

and assess the collectibility of each loan on a periodic basis and may record a provision due to changes in the market environment that affect operating cash flows.

Interest Expense

        For the year ended December 31, 2003, as compared to the year ended December 31, 2002, interest expense, which includes the amortization of deferred financing costs, increased $48.3 million, or 14.9%. This increase was principally due to $26.6 million and $21.3 million of additional interest on the debt related to the newly consolidated properties and the acquisition properties, respectively.

        For the year ended December 31, 2002, as compared to the year ended December 31, 2001, interest expense, which includes the amortization of deferred financing costs, increased $44.4 million, or 15.8%. This increase was principally due to $34.8 million and $16.4 million of additional interest on the debt related to the acquisition properties and the newly consolidated properties, respectively. This increase was partially offset by a $10.9 million reduction related to an overall decrease in variable interest rates of approximately 1.5% from the prior year.

Interest and Other Income

        A component of interest and other income is our accretion income on general partner notes receivable. 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, 2003, as compared to the year ended December 31, 2002, interest and other income decreased $52.3 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.

        For the year ended December 31, 2002, as compared to the year ended December 31, 2001, interest and other income increased $3.4 million, or 4.6%. This increase was principally a result of $26.9 million in increased accretion income. This increase was offset by $18.4 million of a decrease related to a lower gain recognized on certain tax-exempt bonds that were sold in 2002 as compared to certain tax-exempt bonds sold in 2001. In addition there was a $3.8 million decrease related to lower interest on money market and interest bearing accounts, as interest rates on deposit accounts had decreased approximately 1.5% from the prior year, while the average cash balances outstanding for both periods remained consistent.

Equity in Earnings (Losses) of Unconsolidated Real Estate Partnerships

        For the year ended December 31, 2003, as compared to the year ended December 31, 2002, equity in losses of unconsolidated real estate partnerships increased $7.1 million. 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.

        For the year ended December 31, 2002, as compared with the year ended December 31, 2001, equity in earnings of unconsolidated real estate partnerships increased $17.4 million. This increase was principally due to the change in estimate of useful lives of the underlying real estate assets completed by us in 2001, which resulted in lower depreciation expense of approximately $16.0 million. See the

29

previous discussion on the change in estimate of useful lives of assets under the heading "Depreciation of Rental Property."

Deficit Distributions to Minority Partners

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

        For the year ended December 31, 2003, as compared to the year ended December 31, 2002, deficit distributions to minority partners decreased $4.3 million, or 16.0%. For the year ended December 31, 2002, as compared to the year ended December 31, 2001, deficit distributions to minority partners decreased $19.4 million. 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.

Gain (Loss) on Dispositions of Real Estate

        For the year ended December 31, 2003, as compared to the year ended December 31, 2002, gain on dispositions of real estate increased $25.5 million. In 2002, gain (loss) on dispositions of real estate included 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 share of $0.28 for the year ended December 31, 2002.

        For the year ended December 31, 2002 as compared to the year ended December 31, 2001, gain on dispositions of real estate decreased $39.8 million. Effective January 1, 2002, we adopted Statement of Financial Accounting Standard No. 144, Accounting for the Impairment of Long-Lived Assets to be Disposed Of, or SFAS 144. Pursuant to SFAS 144 we now report as discontinued operations assets held for sale (as defined by SFAS 144) and assets sold in the current period (see below discussion). As a result of SFAS 144, for the year ended December 31, 2002, gain (loss) on dispositions of real estate does not include any gain or loss associated with the disposal of consolidated properties that were classified as discontinued operations during 2002. For 2001, however, gain (loss) on dispositions of real estate included gain or loss associated with the disposal of all properties sold.

        The properties sold in all periods, as well as the properties held for sale, were considered by management to be inconsistent with our long-term investment strategy. Gain (loss) on properties sold was determined on a property by property basis and are not entirely comparable year over year due to individual property differences.

Minority Interest in Consolidated Real Estate Partnerships

        For the year ended December 31, 2003, as compared to the year ended December 31, 2002, minority interest in consolidated real estate partnerships decreased $12.5 million. For the year ended December 31, 2002, as compared to the year ended December 31, 2001, minority interest in consolidated real estate partnerships decreased $22.3 million. Both of these decreases were principally a result of decreased earnings caused by lower property operating results than in the prior year and our purchase of additional interests in consolidated real estate partnerships, thereby reducing the minority interest allocation.

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Discontinued Operations

        For properties accounted for under SFAS 144, the results of operations for properties sold during the period or designated as held for sale at the end of the period are required to be classified as discontinued operations. The property-specific components of net earnings that are classified as discontinued operations include all property-related revenues and operating expenses, depreciation expense recognized prior to the classification as held for sale, property-specific interest expense to the extent there is secured debt on the property and the associated minority interest. In addition, any impairments on assets held for sale, and the net gain on the eventual disposal of properties held for sale is reported as discontinued operations.

        For the years ended December 31, 2003, 2002, and 2001, income from discontinued operations totaled $88.1 million, $9.1 million and $12.2 million, respectively, which includes income from operations of $7.9 million, $23.2 million and $15.5 million, respectively. In 2003, the income from operations included 82 properties that were sold or classified as held for sale during 2003. In 2002, and 2001, the income from operations included 124 properties that were sold or classified as held for sale in 2002 and 2003. Due to varying number of properties and the timing of sales, the income from operations is not comparable year to year.

        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 loss on assets sold or held for sale in 2003. During 2002, we sold 42 properties, resulting in a net loss on sale of approximately $8.5 million (including $2.5 million of related taxes). Additionally, we recognized $2.9 million in impairments on assets sold or held for sale in 2002. There were no gains or losses on assets sold in 2001 included in discontinued operations for the year ended December 31, 2001.

        Gains (losses) on properties sold are determined on a property-by-property basis and are not comparable year over year due to individual property differences. We considered the properties sold, as well as the properties classified as held for sale, to be inconsistent with our long-term investment strategy. See Note 15 of the consolidated financial statements in Item 8 of this Annual Report for more details on discontinued operations.

Critical Accounting Policies and Estimates

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

Impairment of Long-Lived Assets

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

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

•

the general economic climate;



•

competition from other apartment communities and other housing options;

31

•

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 necessarily 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.

Notes Receivable and Interest Income Recognition

        We generally recognize interest income earned from our investments in notes receivable when the collectibility of such amounts is both probable and reasonably estimable. The notes receivable were either extended by us and are carried at the face amount plus accrued interest, which we refer to as par value notes, or were made by predecessors whose positions we acquired usually at a discount, which we refer to as discounted notes.

        On a periodic basis we assess the collectibility or impairment of each note. Under the cost recovery method, we carry the discounted notes at the acquisition amount, less subsequent cash collections, until such time as collectibility of principal and interest is probable and the timing and amounts are reasonably estimable. Based upon closed or pending transactions (which include sales, refinancings, foreclosures and rights offerings), we have determined that certain notes are collectible for amounts greater than their carrying value. Accordingly, we recognize accretion income on a prospective basis over the estimated remaining life of the loans, as the difference between the carrying value of the discounted notes and the estimated collectible value. For the year ended December 31, 2003, if we had not been able to complete certain transactions, our accretion income would have decreased by $3.3 million ($0.03 million per basic and diluted share). Accretion income recognized in any given period 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 estimate the collectibility of notes receivable by assessing the likelihood of ultimate realization of these receivables. We establish an allowance for losses on notes receivable based on an evaluation of a variety of factors, such as: an amount that is adequate to absorb losses in the existing portfolio; an evaluation of the risk inherent in the portfolio, including the current credit-worthiness of each borrower; the composition of the portfolio, including specific impaired notes receivable; current economic conditions; full realizable value or the fair value of the underlying collateral; economic conditions; historical loss experience; our estimate of probable credit losses and other factors. During the years ended December 31, 2003 and 2002, we identified and recorded $2.2 million and $9.0 million in losses on notes receivable, respectively. We will continue to monitor and assess these notes, and we may make changes in required reserves in the future due to changes in the market environment.

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Capitalized Costs

        We capitalize direct and indirect costs (including salaries, interest, real estate taxes and other costs) incurred in connection with redevelopment, initial capital expenditures, disposition capital expenditures, Capital Enhancement 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, timing and costs of such activities. As a result, changes in volume, timing and costs of such activities may have a significant effect on our financial results if the costs being capitalized are not proportionately increased or reduced, as the case may be. Based on the level of capital spending during 2003, if capital activities had increased or decreased during the year by 10%, we could have had additional or lower, respectively, income before minority interest of $6.3 million. See further discussion under the heading "Capital Expenditures."

Funds From Operations

        Funds From Operations, or FFO, is a non-GAAP financial measure that we believe, when considered with the financial data determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers or other personal property. The Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT defines FFO as net income (loss), computed in accordance with GAAP, excluding gains and losses from extraordinary items, gains on dispositions of depreciable real estate, gains on dispositions of real estate from discontinued operations, net of related income taxes, plus real estate related depreciation and amortization (excluding amortization of financing costs), including depreciation for unconsolidated real estate partnerships, joint ventures and discontinued operations. We calculate FFO based on the NAREIT definition, as further adjusted for amortization of intangibles and deficit distributions to minority partners. We calculate FFO (diluted) by subtracting redemption related preferred stock issuance costs and dividends on preferred stock, adding back dividends/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.

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        For the years ended December 31, 2003, 2002 and 2001, our FFO is calculated as follows (amounts in thousands):

Notes:

(1)

Represents our numerator for earnings per common share calculated in accordance with GAAP

(2)

"Minority partners' interest," as referenced on this line item and others in this presentation means minority interest in Aimco's consolidated real estate partnerships

(3)

Represents our denominator for earnings per common share—diluted calculated in accordance with GAAP

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, dividends paid to stockholders and distributions paid to partners, and acquisitions of, and investments in, properties. We use our cash provided by operating activities to meet short-term liquidity needs. In the event that the cash provided by operating activities no longer covers our short-term liquidity demands, we have additional means, such as short-term borrowing availability, proceeds from property sales and refinancings, to help us meet our short-term

34

liquidity demands. We use the Revolver (described below) 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, 2003, we had $114.4 million in cash and cash equivalents (including $16.3 million of cash and cash equivalents that is included within Assets Held for Sale), an increase of $14.9 million from December 31, 2002, which cash is principally from sales and refinancing transactions that has yet to be distributed or applied to the outstanding balance on the Revolver. At December 31, 2003, we had $254.6 million of restricted cash (including $8.8 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 of this Annual Report.

Operating Activities

        For the year ended December 31, 2003, our net cash provided by operating activities of $430.3 million was primarily due to operating income from our consolidated properties, which is determined by rental rates, occupancy levels and operating expenses related to our portfolio of properties. This was a decrease of $67 million as compared to the year ended December 31, 2002, driven by lower property operating results. We intend for our net cash from operating activities to fund dividends paid to stockholders.

Investing Activities

        For the year ended December 31, 2003, our net cash provided by investing activities of $311.9 million was primarily from proceeds received from sales of properties, offset by investments in our existing real estate assets through capital expenditures and redevelopment (see further discussion on capital expenditures under the heading "Capital Expenditures").

        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, in both cases, as compared to alternative uses for our capital. In the year ended December 31, 2003, we sold 72 consolidated properties, one consolidated land parcel, and 37 unconsolidated properties. These were sold for an aggregate sales price of $939.0 million, of which $697.6 million related to the consolidated properties and land parcel. Our share of the total net proceeds, after repayment of existing debt, payment of transaction costs and distributions to limited partners, was $309.6 million, of which $9.6 million related to the unconsolidated properties, which proceeds were 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 real estate properties that are inconsistent with our long-term investment strategy. Proceeds from 2004 dispositions are expected to be slightly below the levels of 2003, and we plan to use such proceeds to reduce debt, redeem preferred securities, fund capital expenditures on existing assets, fund property and partnership acquisitions, and for other operating needs and corporate purposes.

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Financing Activities

        For the year ended December 31, 2003, net cash used in financing activities of $727.3 million related primarily to payments on our secured notes payable, payment of our dividends and redemptions of preferred stock. These were offset by contributions from minority interest related to our equity financing transaction with GE Real Estate in the form of a joint venture, proceeds from the issuance of Class S Cumulative Redeemable Preferred Stock, which we refer to as the Class S Preferred Stock, and Class T Cumulative Preferred Stock, which we refer to as the Class T Preferred Stock, proceeds from mortgage refinancings and borrowings under a newly established Term Loan (see notes to the consolidated financial statements in Item 8 of this Annual Report for further details on these activities).

Mortgage Debt

        During the year ended December 31, 2003, we refinanced or closed mortgage loans on 60 consolidated properties generating $440.3 million of proceeds from borrowings with a weighted average interest rate of 4.13%. Our net proceeds after repayment of existing debt, payment of transaction costs and distributions to limited partners, was $132.5 million. In addition, we closed mortgage loans on 32 unconsolidated properties, with a weighted average interest rate of 4.38%, for net proceeds of $13.0 million, which proceeds are included in our distributions received from investments in unconsolidated real estate partnerships, within investing activities. Our total net proceeds from these loans of $145.5 million was used to repay existing short-term debt and for other corporate purposes. In 2004 we intend to continue to refinance mortgage debt to generate proceeds in amounts exceeding our scheduled amortizations and maturities.

Revolving Credit Facility and Term Loans

        We have an outstanding revolving credit facility, which we refer to as the Revolver, with a syndicate of financial institutions having aggregate lending commitments of $500 million, of which $445 million has been syndicated. At December 31, 2003, the Revolver had an outstanding principal balance of $81.0 million and an interest rate of 4.00% based on weighted average LIBOR contracts outstanding with various maturities plus 2.85%. The Revolver matures in July 2005. The amount available under the Revolver at December 31, 2003 was $348 million (less $22.4 million outstanding for letters for credit). The maximum amount available for borrowing under the Revolver fluctuates based on established criteria defined therein and is typically the $445 million that has been syndicated.

        In May 2003, we borrowed $250 million through a syndicated term loan, which we refer to as the Term Loan. We used proceeds of this borrowing to pay down the Revolver. The Term Loan matures in May 2008 and is repayable at our option at any time without penalty. At December 31, 2003, the Term Loan had an outstanding principal balance of $250 million and an interest rate of 3.89% (based on a designated LIBOR rate plus 2.85%). All financial covenant requirements of the Term Loan are the same as the Revolver and the term loan we entered into with a syndicate of financial institutions in connection with the Casden Merger in March 2002, which we refer to as the Casden Loan. At December 31, 2003, the Casden Loan had an outstanding principal balance of $104.4 million and an interest rate of 3.98% (based on a designated LIBOR rate plus 2.85%). The Casden Loan matures in March 2004, however, subsequent to December 31, 2003, we extended the maturity of the Casden Loan to March 2005. (See Note 8 to the consolidated financial statements in Item 8 of this Annual Report for further details on the Revolver, Term Loan and Casden Loan).

Equity Transactions

        In April 2003, we issued $100 million of newly created variable rate Class S Preferred Stock. The initial dividend rate on the Class S Preferred Stock is based on three month LIBOR plus 2.75% and

36

then from April 30, 2004 through October 31, 2004 increases to the three-month LIBOR plus 6.0%, with additional increases thereafter. In July 2003, we issued $150 million of newly created 8.00% Class T Preferred Stock. With proceeds from these issuances we redeemed $240 million of outstanding preferred securities in 2003.

        As of December 31, 2003, we had approximately $250 million of debt and equity available and the Aimco Operating Partnership had $500 million of debt available on our shelf registration statement declared effective in 2001. (See Notes 12 and 13 to the consolidated financial statements in Item 8 of this Annual Report for further details on the shelf registration statement and preferred securities.) We intend to continue to issue preferred securities in both public and private offerings to generate proceeds that we will use to redeem higher cost preferred securities, to finance acquisitions of real estate interests and for other corporate purposes.

        In December 2003 we entered into an equity financing with GE Real Estate in the form of a joint venture, which we refer to the as the GE JV. At closing, we contributed to the GE JV 33 of our apartment properties with a total of 9,534 units and GE Real Estate contributed cash of which we received approximately $107 million before transaction costs and funding of reserves. (See Note 3 to the consolidated financial statements in Item 8 of this Annual Report for further details on the GE JV.)

        Our Board of Directors has, from time to time, authorized us to repurchase shares of Common Stock and our preferred stock. Currently, we are authorized to repurchase up to a total of approximately 1.9 million shares, of which up to 1.9 million shares may be Common Stock and up to 1.7 million shares may be preferred stock. These repurchases may be made from time to time in the open market or in privately negotiated transactions, subject to applicable law. During the year ended December 31, 2003, we repurchased no shares of our Common Stock or our preferred stock. See Note 22 of the consolidated financial statements in Item 8 of this Annual Report for information on Common Stock repurchased subsequent to the year ended December 31, 2003.

        In November 2003, our Board of Directors reduced the quarterly cash dividend to align the amount of the dividend with our current level of operating profitability. The dividend paid in February 2004 of $0.60 per share represents a distribution of 103% of diluted Adjusted Funds From Operations, which we refer to as AFFO, (before deducting Capital Enhancements) and 83% of diluted FFO for the quarter ended December 31, 2003. (See Note 18 to the consolidated financial statements in Item 8 of this Annual Report for the definition of AFFO).

Capital Expenditures

        For the year ended December 31, 2003, we spent a total of $86.7 million on Capital Replacements (expenditures required to maintain the related asset) and $2.6 million on Capital Enhancements (expenditures that add a new feature or revenue source at a property). These amounts represent our share of the total spending on both consolidated and unconsolidated partnerships.

        Capital Replacements spending increased slightly over prior periods due to a general increase in spending to maintain our assets. In addition to Capital Replacements, we account for Capital Enhancements, which we distinguish from Capital Replacements. Capital Enhancements are costs incurred to add additional rental square footage or a new revenue producing feature. For example, replacement of existing kitchen appliances is a Capital Replacement, however, if the same replacements are done in connection with an extensive remodeling project that is expected to generate higher rents, then they are characterized as a Capital Enhancement. Because the distinction between Capital Replacements and Capital Enhancements is not consistently applied across REITs and because there is a risk of partial substitution between Capital Replacements and Capital Enhancements, we account for and report both Capital Replacements and Capital Enhancements and deduct both in our calculation of

37

AFFO (see Note 18 to the consolidated financial statements in Item 8 of this Annual Report for the definition of AFFO).

        The table below details our actual spending on Capital Replacements and Capital Enhancements based on a per unit and total dollar basis (based on approximately 154,000 ownership equivalent units) for the year ended December 31, 2003 and reconciles it to our Consolidated Statement of Cash Flows in Item 8 of this Annual Report for the same period (in thousands, except per unit data).

        For the year ended December 31, 2003, we spent a total of $24.8 million for initial capital expenditures, or ICE, which are expenditures at a property that have been identified, at the time the property is acquired, as expenditures to be incurred within a specified period of time following the acquisition, typically one year. In this period, ICE relates primarily to the properties acquired in the Casden Merger and the New England Properties Acquisition. For the year ended December 31, 2003, we spent a total of $86.5 million for redevelopment, which are expenditures that substantially upgrade the property. The following table reconciles our share of the total spending on both consolidated and unconsolidated partnerships to our Consolidated Statement of Cash Flows in Item 8 of this Annual Report for the year ended December 31, 2003 (in millions):

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        In 2003, we began to account for a category of capital expenditures known as Disposition Capital Expenditures, which are those capital expenditures made on conventional and affordable properties sold, held for sale or identified as to-be-sold within one year and capital expenditures on certain of our affordable properties that are expected to be sold upon completion of regulatory requirements. We will review this allocation each quarter and will re-allocate to Capital Replacements any items for those properties not sold or no longer identified as to be sold. In 2003 no amounts were reallocated to Capital Replacements.

        For the year ended December 31, 2003, we spent a total of $25.5 million for Disposition Capital Expenditures of this total, $4.3 million related to properties sold in 2003. The following table reconciles our share of the total spending on both consolidated and unconsolidated partnerships to our Consolidated Statement of Cash Flows in Item 8 of this Annual Report for the year ended December 31, 2003 (in millions):

        Included in above spending for ICE, redevelopment and disposition capital expenditures, is approximately $17.5 million of our share of indirect costs related to these activities for the year ended December 31, 2003.

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

Contractual Obligations

        This table summarizes information contained elsewhere in this Annual Report regarding contractual obligations and commitments as of December 31, 2003 (amounts in thousands):

(1)

The development fee payments above were established in connection with the Casden Merger 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.

        Additionally, in connection with the Casden Merger, we agreed to purchase two properties for minimum consideration of approximately $563 million (of which $163 million related to The Palazzo at Park La Brea, which closed subsequent to December 31, 2003—see Note 22 of the consolidated financial statements in Item 8 of this Annual Report), provide a stand-by facility of $70 million in debt financing associated with development (which was reduced to $64.5 million subsequent to

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December 31, 2003 in connection with the purchase of The Palazzo at Park La Brea) and invest up to $50 million for a 20% limited liability company interest in Casden Properties, LLC. See Note 9 of the consolidated financial statements in Item 8 of this Annual Report for detailed information on these commitments.

Future Capital Needs

        In addition to the items set forth in "Contractual Obligations" above, we expect to fund any future acquisitions, redevelopment and capital improvements principally with proceeds from property sales (including 1031 exchange proceeds), short-term borrowings, debt and equity financings and operating cash flows. As of December 31, 2003, we had under redevelopment eight conventional properties with 5,187 units (which includes three properties for which redevelopment activities were complete but the operations of which had not yet stabilized) and two affordable properties with 467 units. Redevelopment expenditures for five conventional properties with ongoing redevelopment activities will require an estimated total investment (redevelopment spending) of $323 million, of which approximately $48 million remains to be spent. Our share of the estimated total spending on those five properties is $243 million of which approximately $31 million remains to be spent. Additionally, in 2004 we plan to commence as many as 40 redevelopments with average spending per project in the $2 million to $10 million range.

        During 2004 we also intend to redeem the remainder of the Class S Preferred Stock, which anytime after April 30, 2004 has a redemption price of $25 per share (see Note 7 of the consolidated financial statements for additional information). Subsequent to December 31, 2003, we redeemed $25 million of the outstanding Class S Preferred Stock at a redemption price of $24.63 (see Note 22 of the consolidated financial statements in Item 8 of this Annual Report).

Off-Balance Sheet Arrangements

        We own general and limited partner interests in unconsolidated real estate partnerships, which interests were acquired through portfolio acquisitions, direct purchases and separate offers to other limited partners. Our total ownership interests in these unconsolidated real estate partnerships ranges from 1% to 50%. However, based on the provisions of the related partnership agreements, which grant varying degrees of control, we are not deemed to have control of these partnerships sufficient to require or permit consolidation for accounting purposes. In 2003, Financial Accounting Standards Board issued Interpretation No. 46 "Consolidation of Variable Interest Entities," or FIN 46, which changes the criteria for consolidating entities. We are currently evaluating our treatment of these unconsolidated real estate partnerships under FIN 46, which we will adopt in first quarter 2004 (see Note 21 of the consolidated financial statements in Item 8 of this Annual Report). 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 of this Annual Report). 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 of this Annual Report for additional information on our unconsolidated real estate partnerships.

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

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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 or long-term debt financings.

        We had $1,599.0 million of floating rate debt outstanding at December 31, 2003. Of the total floating debt, the major components were floating rate tax-exempt bond financing ($817.5 million), floating rate secured notes ($247.6 million), the revolving credit facility ($81.0 million), term loans ($354.4 million), and the Class S Preferred Stock ($98.5 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 $16.0 million on an annual basis. Historically, changes in tax-exempt interest rates have been at a ratio less than 1:1 with changes in taxable interest rates. Floating rate tax-exempt bond financing is benchmarked against the BMA Index, which since 1981 has averaged 54.0% of the 10-year Treasury Yield. If this relationship continues, an increase in interest rates of 1% (0.54% in tax-exempt interest rates) would result in our income before minority interests and cash flows being reduced by $11.2 million on an annual basis. At December 31, 2003, we had $4,598.9 million of fixed-rate debt outstanding. As of December 31, 2002, based on our level of floating rate debt of $1,411.2 million, an increase in interest rates of 1% would have resulted in our income before minority interests and cash flows being reduced by $14.1 million on an annual basis. The potential reduction of income before minority interests and cash flows due to an increase in interest rates increased $1.9 million for the year ended December 31, 2003 compared to the year ended December 31, 2002, as a result of the additional debt related to our acquisitions and newly consolidated properties and the issuance of the Class S Preferred Stock.

        As of December 31, 2003, 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 auditor'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.

ITEM 9A. Controls and Procedures

        Our management, with the participation of our chief executive officer and chief financial officer, 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, our chief executive officer and chief financial officer have concluded that, as of the end of such period, our disclosure controls and procedures are adequate.

        In addition, 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 2003 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART III

ITEM 10. Directors and Executive Officers of the Registrant

        The information required by this item is presented under the caption "Board of Directors and Officers" in the proxy statement for our 2004 annual meeting of stockholders and is incorporated herein by reference.

ITEM 11. Executive Compensation

        The information required by this item is presented under the captions "Summary Compensation Table," "Option/SAR Grants in Last Fiscal Year," "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values" and "Employment Arrangements" in the proxy statement for our 2004 annual meeting of stockholders and is incorporated herein by reference.

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

        The information required by this item is presented under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Securities Authorized for Issuance Under Equity Compensation Plans" in the proxy statement for our 2004 annual meeting of stockholders and is incorporated herein by reference.

ITEM 13. Certain Relationships and Related Transactions

        The information required by this item is presented under the caption "Certain Relationships and Related Transactions" in the proxy statement for our 2004 annual meeting of stockholders and is incorporated herein by reference.

ITEM 14. Principal Accountant Fees and Services

        The information required by this item is presented under the caption "Principal Accountant Fees and Services" in the proxy statement for our 2004 annual meeting of stockholders and is incorporated herein by reference.

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PART IV

ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

        None.

INDEX TO EXHIBITS(1)