UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

AIMCO Properties, L.P.

(Exact name of registrant as specified in its charter)

Delaware		84-1275621
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado		80237
(Address of principal executive offices)		(Zip Code)

(303) 757-8101
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of Partnership Common Units outstanding as of April 28, 2010: 122,839,950

 

 

AIMCO PROPERTIES, L.P.

TABLE OF CONTENTS

FORM 10-Q

		Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009 (Unaudited)			2
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009 (Unaudited)			3
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (Unaudited)			4
Notes to Condensed Consolidated Financial Statements (Unaudited)			5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			29
ITEM 4. Controls and Procedures			29
PART II. OTHER INFORMATION
ITEM 1A. Risk Factors			30
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			30
ITEM 6. Exhibits			31
Signatures			32
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 99.1

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31,				December 31,
		2010				2009
ASSETS
Real estate:
Buildings and improvements		$	7,491,474			$	7,395,026
Land			2,186,724				2,168,251
Total real estate			9,678,198				9,563,277
Less accumulated depreciation			(2,764,323	)			(2,661,259	)
Net real estate ($928,404 and $856,377 related to VIEs)			6,913,875				6,902,018
Cash and cash equivalents ($38,433 and $23,366 related to VIEs)			77,875				81,260
Restricted cash ($60,046 and $56,183 related to VIEs)			221,062				219,685
Accounts receivable, net ($18,143 and $20,766 related to VIEs)			44,853				59,822
Accounts receivable from affiliates, net			18,767				23,744
Deferred financing costs, net			52,158				52,244
Notes receivable from unconsolidated real estate partnerships, net			12,137				14,295
Notes receivable from non-affiliates, net			129,271				125,269
Notes receivable from Aimco			16,583				16,371
Investment in unconsolidated real estate partnerships ($127,739 and $99,460 related to VIEs)			131,972				104,193
Other assets			201,317				185,816
Deferred income tax assets, net			45,909				42,015
Assets held for sale			35,184				95,407
Total assets		$	7,900,963			$	7,922,139
LIABILITIES AND PARTNERS’ CAPITAL
Property tax-exempt bond financing ($214,017 and $211,691 related to VIEs)		$	577,221			$	574,926
Property loans payable ($463,884 and $391,861 related to VIEs)			5,018,676				4,926,737
Term loans			45,000				90,000
Credit facility			14,800				—
Other borrowings ($23,733 and $15,665 related to VIEs)			63,260				53,057
Total indebtedness			5,718,957				5,644,720
Accounts payable			20,662				29,819
Accrued liabilities and other ($93,894 and $62,503 related to VIEs)			293,255				286,326
Deferred income			173,656				182,378
Security deposits			36,123				35,335
Liabilities related to assets held for sale			26,708				76,531
Total liabilities			6,269,361				6,255,109
Redeemable preferred units			116,483				116,656
Commitments and contingencies (Note 5)			—				—
Partners’ capital:
Preferred units			660,500				660,500
General Partner and Special Limited Partner			432,044				521,692
Limited Partners			110,584				95,990
High Performance Units			(42,011	)			(40,313	)
Investment in Aimco Class A Common Stock			(4,565	)			(4,621	)
Partners’ capital attributable to the Partnership			1,156,552				1,233,248
Noncontrolling interests in consolidated real estate partnerships			358,567				317,126
Total partners’ capital			1,515,119				1,550,374
Total liabilities and partners’ capital		$	7,900,963			$	7,922,139

See notes to condensed consolidated financial statements.

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended
		March 31,
		2010				2009
REVENUES:
Rental and other property revenues		$	288,719			$	283,912
Asset management and tax credit revenues			4,257				9,539
Total revenues			292,976				293,451
OPERATING EXPENSES:
Property operating expenses			140,415				135,630
Investment management expenses			3,229				3,789
Depreciation and amortization			109,019				104,860
Provision for operating real estate impairment losses			—				510
General and administrative expenses			11,735				16,260
Other expenses, net			3,144				1,583
Total operating expenses			267,542				262,632
Operating income			25,434				30,819
Interest income			3,436				3,514
Provision for losses on notes receivable, net			(426	)			(150	)
Interest expense			(80,314	)			(80,717	)
Equity in income (losses) of unconsolidated real estate partnerships			7,951				(2,040	)
Gain on dispositions of unconsolidated real estate and other, net			2,642				10,864
Loss before income taxes and discontinued operations			(41,277	)			(37,710	)
Income tax benefit			3,771				2,475
Loss from continuing operations			(37,506	)			(35,235	)
Income from discontinued operations, net			20,958				2,867
Net loss			(16,548	)			(32,368	)
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships			(12,134	)			6,281
Net loss attributable to the Partnership			(28,682	)			(26,087	)
Net income attributable to the Partnership’s preferred unitholders			(14,615	)			(14,235	)
Net loss attributable to the Partnership’s common unitholders		$	(43,297	)		$	(40,322	)
Earnings (loss) per common unit — basic and diluted (Note 6):
Loss from continuing operations attributable to the Partnership’s common unitholders		$	(0.44	)		$	(0.33	)
Income (loss) from discontinued operations attributable to the Partnership’s common unitholders			0.09				(0.01	)
Net loss attributable to the Partnership’s common unitholders		$	(0.35	)		$	(0.34	)
Weighted average common units outstanding, basic and diluted			124,400				119,661
Distributions declared per common unit		$	0.00			$	0.00

See notes to condensed consolidated financial statements.

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three Months Ended
		March 31,
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(16,548	)		$	(32,368	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			109,019				104,860
Gain on dispositions of unconsolidated real estate and other			(2,642	)			(10,864	)
Discontinued operations			(19,384	)			10,914
Other adjustments			(6,504	)			10,126
Net changes in operating assets and operating liabilities			(37,163	)			(100,442	)
Net cash provided by (used in) operating activities			26,778				(17,774	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(39,057	)			(68,370	)
Proceeds from dispositions of real estate			27,682				53,630
Purchases of partnership interests and other assets			(1,148	)			(1,350	)
Originations of notes receivable from unconsolidated real estate partnerships			(220	)			(3,146	)
Proceeds from repayment of notes receivable			117				1,468
Proceeds from sales of interests in unconsolidated real estate partnerships			2,065				8,676
Net increase in cash from consolidation and deconsolidation of entities (Note 2)			13,118				—
Distributions received from Aimco			56				320
Other investing activities			6,269				193
Net cash provided by (used in) investing activities			8,882				(8,579	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from property loans			49,854				173,149
Principal repayments on property loans			(35,369	)			(187,926	)
Principal repayments on tax-exempt bond financing			(886	)			(4,319	)
Payments on term loans			(45,000	)			(50,000	)
Net borrowings on revolving credit facility			14,800				15,000
Payment of distributions to General Partner and Special Limited Partner			(11,705	)			(60,703	)
Payment of distributions to High Performance Units			(234	)			(4,877	)
Payment of distributions to Limited Partners			(595	)			(14,850	)
Payment of distributions to preferred units			(14,614	)			(15,028	)
Payment of distributions to noncontrolling interests			(9,517	)			(36,562	)
Other financing activities			14,221				6,026
Net cash used in financing activities			(39,045	)			(180,090	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(3,385	)			(206,443	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			81,260				299,676
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	77,875			$	93,233

See notes to condensed consolidated financial statements.

AIMCO PROPERTIES, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — Organization

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

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

Aimco frequently consummates transactions for our benefit. For legal, tax or other business reasons, Aimco may hold title or ownership of certain assets until they can be transferred to us. However, we have a controlling financial interest in substantially all of Aimco’s assets in the process of transfer to us. Except as the context otherwise requires, “we,” “our” and “us” refer to the Partnership, and the Partnership’s consolidated entities, collectively. Except as the context otherwise requires, “Aimco” refers to Aimco and Aimco’s consolidated entities, collectively.

We are focused on the ownership and management of market-rate apartment communities located in the 20 largest markets in the United States (as measured by total market capitalization, which is the total market value of institutional-grade apartment properties in a particular market) with average rents that are 100% — 125% of local market average rents. We upgrade the quality of our portfolio through the sale of communities with rents below average market rents and the reinvestment of capital within these 20 target markets through redevelopment and acquisitions. Our apartment properties are generally financed with property-level, non-recourse, long-dated, fixed-rate, amortizing debt.

As of March 31, 2010, we:

	•		owned an equity interest in 239 conventional real estate properties with 73,234 units;
	•		owned an equity interest in 259 affordable real estate properties with 30,186 units; and
	•		provided services for or managed 28,655 units in 338 properties, primarily pursuant to long-term asset management agreements. In certain cases, we may indirectly own generally less than one percent of the operations of such properties through a syndication or other fund.

Of these properties, we consolidated 237 conventional properties with 71,930 units and 201 affordable properties with 24,367 units. These consolidated conventional and affordable properties generated 84% and 16%, respectively, of our consolidated property net operating income during the three months ended March 31, 2010, or 88% and 12% respectively, of the amounts of property net operating income attributed to the Partnership’s common unitholders.

At March 31, 2010, after elimination of units held by consolidated subsidiaries, we had outstanding 122,838,645 common OP Units, 28,079,833 preferred OP Units and 2,339,950 High Performance Units. At March 31, 2010, Aimco owned 116,831,905 of the common OP Units and 24,940,134 of the preferred OP Units.

NOTE 2 — Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

The balance sheet at December 31, 2009, has been derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009. Certain 2009 financial statement amounts have been reclassified to conform to the 2010 presentation, including adjustments for discontinued operations, and certain 2009 unit and per unit information has been revised as compared to the amounts previously reported, as further discussed in Note 6.

During the three months ended March 31, 2010, we reduced the investment and noncontrolling interest balances for certain of our consolidated partnerships by $38.7 million related to excess amounts allocated to the investments upon our consolidation of such partnerships. Additionally, during the three months ended March 31, 2010, we reversed approximately $11.2 million of excess equity in losses recognized during 2008 and 2009 related to these partnerships, with a corresponding adjustment to net income attributed to noncontrolling interests in consolidated real estate partnerships. These adjustments had no significant effect on partners’ capital or net income or loss attributable to the Partnership during the affected periods.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Partnership and its consolidated entities. Pursuant to a Management and Contribution Agreement between the Partnership and Aimco, we have acquired, in exchange for interests in the Partnership, the economic benefits of subsidiaries of Aimco in which we do not have an interest, and Aimco has granted us a right of first refusal to acquire such subsidiaries’ assets for no additional consideration. Pursuant to the agreement, Aimco has also granted us certain rights with respect to assets of such subsidiaries. We consolidate all variable interest entities for which we are the primary beneficiary. Generally, we consolidate real estate partnerships and other entities that are not variable interest entities when we own, directly or indirectly, a majority voting interest in the entity or are otherwise able to control the entity. All significant intercompany balances and transactions have been eliminated in consolidation.

Interests in consolidated real estate partnerships held by third parties are reflected in the accompanying balance sheets as noncontrolling interests in consolidated real estate partnerships. The assets of consolidated real estate partnerships owned or controlled by Aimco or us generally are not available to pay creditors of Aimco or the Partnership.

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 partner in a limited partnership or a member in a limited liability company.

Variable Interest Entities

We consolidate all variable interest entities for which we are the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.

Effective January 1, 2010, we adopted the provisions of FASB Accounting Standards Update 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, or ASU 2009-17, on a prospective basis. ASU 2009-17, which modified the guidance in FASB ASC Topic 810, introduces a more qualitative approach to evaluating VIEs for consolidation and requires a company to perform an analysis to determine whether its variable interests give it a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether it has the power to direct the activities of the VIE that most significantly affect the VIE’s performance, ASU 2009-17 requires a company to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed, requires continuous reassessment of primary beneficiary status rather than periodic, event-driven assessments as previously required, and incorporates expanded disclosure requirements.

In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIEs economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

As a result of our adoption of ASU 2009-17 during the three months ended March 31, 2010, we concluded we are the primary beneficiary of, and therefore consolidated, approximately 49 previously unconsolidated partnerships. Those partnerships own, or control other entities that own, 31 apartment properties. Our direct and indirect interests in the profits and losses of those partnerships range from less than 1% to 35%, and average approximately 7%. We applied the practicability exception for initial measurement of consolidated VIEs to partnerships that own 13 properties and accordingly recognized the consolidated assets, liabilities and noncontrolling interests at fair value effective January 1, 2010 (refer to the Fair Value Measurements section for further information regarding certain of the fair value amounts recognized upon consolidation). We deconsolidated partnerships that own ten apartment properties in which we hold an average interest of approximately 55%. The initial consolidation and deconsolidation of these partnerships resulted in increases (decreases), net of intercompany eliminations, in amounts included in our consolidated balance sheet as of January 1, 2010, as follows (in thousands):

		Consolidation				Deconsolidation
Real estate, net		$	144,292			$	(86,151	)
Cash and cash equivalents and restricted cash			25,047				(7,425	)
Accounts and notes receivable			(13,456	)			6,002
Investment in unconsolidated real estate partnerships			47,974				11,302
Other assets			4,190				(1,084	)
Total assets		$	208,047			$	(77,356	)
Total indebtedness		$	131,710			$	(56,938	)
Accrued and other liabilities			37,504				(15,005	)
Total liabilities			169,214				(71,943	)
Cumulative effect of a change in accounting principle:
Noncontrolling interests			76,051				(8,501	)
The Partnership			(37,218	)			3,088
Total partners’ capital			38,833				(5,413	)
Total liabilities and partners’ capital		$	208,047			$	(77,356	)

In periods prior to 2009, when consolidated real estate partnerships made cash distributions to partners in excess of the carrying amount of the noncontrolling interest, we generally recorded a charge to earnings equal to the amount of such excess distribution, even though there was no economic effect or cost. Also prior to 2009, we allocated the noncontrolling partners’ share of partnership losses to noncontrolling partners to the extent of the carrying amount of the noncontrolling interest. Consolidation of a partnership does not ordinarily result in a change to the net amount of partnership income or loss that is recognized using the equity method. However, prior to 2009, when a partnership had a deficit in partners’ capital, GAAP may have required the controlling partner that consolidates the partnership to recognize any losses that would otherwise be allocated to noncontrolling partners, in addition to the controlling partner’s share of losses. Certain of the partnerships that we consolidated in accordance with ASU 2009-17 had deficits in equity that resulted from losses or deficit distributions during prior periods when we accounted for our investment using the equity method. We would have been required to recognize the noncontrolling partners’ share of those losses had we consolidated those partnerships in those periods prior to 2009. In accordance with our prospective transition method for the adoption of ASU 2009-17 related to our consolidation of previously unconsolidated partnerships, we recorded a $37.2 million charge to our partners’ capital, the majority of which was attributed to the cumulative amount of additional losses that we would have recognized had we applied ASU 2009-17 in periods prior to 2009. Substantially all of those losses were attributable to real estate depreciation expense.

Our consolidated statement of operations for the three months ended March 31, 2010, includes the following amounts for the entities and related real estate properties consolidated as of January 1, 2010, in accordance with ASU 2009-17 (in thousands):

Rental and other property revenues		$	8,050
Operating expenses			(4,625	)
Depreciation and amortization			(2,248	)
Other expenses			(659	)
Operating income			518
Interest income			109
Interest expense			(2,165	)
Equity in losses of unconsolidated real estate partnerships			(1,218	)
Gain on disposition of unconsolidated real estate and other			1,348
Net loss			(1,408	)
Net loss attributable to noncontrolling interests in consolidated real estate partnerships			1,663
Net income attributable to the Partnership		$	255

Our equity in the results of operations of the partnerships and related properties we deconsolidated in connection with our adoption of ASU 2009-17 is included in equity in earnings or losses of unconsolidated real estate partnerships in our consolidated statement of operations for the three months March 31, 2010. Based on our effective ownership in these entities, these amounts are not significant.

As of March 31, 2010, we were the primary beneficiary of, and therefore consolidated, approximately 144 VIEs, which owned 103 apartment properties with 14,896 units. Real estate with a carrying value of $928.4 million collateralized $677.9 million of debt of those VIEs. Any significant amounts of assets and liabilities related to our consolidated VIEs are identified parenthetically on our accompanying condensed consolidated balance sheets. The creditors of the consolidated VIEs do not have recourse to our general credit.

As of March 31, 2010, we also held variable interests in 301 VIEs for which we were not the primary beneficiary. Those VIEs consist primarily of partnerships that are engaged, directly or indirectly, in the ownership and management of 354 apartment properties with 22,678 units. We are involved with those VIEs as an equity holder, lender, management agent, or through other contractual relationships. The majority of our investment in unconsolidated VIEs, or approximately $102.6 million at March 31, 2010, is held through consolidated tax credit funds that are VIEs and in which we generally hold a 1% or less general partner or equivalent interest. Accordingly, substantially all of these investment balances are attributed to the noncontrolling interests in the consolidated partnerships through which we hold an interest in these unconsolidated VIEs. Our maximum risk of loss related to our investment in these VIEs is generally limited to our equity interest, which is insignificant. The remainder of our investment in unconsolidated VIEs, or approximately $25.1 million at March 31, 2010, is held through consolidated tax credit funds that are VIEs and in which we hold substantially all of the economic interests. Our maximum risk of loss related to our investment in these VIEs is limited to our recorded investment in such entities.

In addition to our investments in these unconsolidated VIEs discussed above, at March 31, 2010, we had in aggregate $97.5 million of receivables from these VIEs and we had a contractual obligation to advance funds to certain VIEs totaling $4.4 million. Our maximum risk of loss associated with our lending and management activities related to these unconsolidated VIEs is limited to these amounts. We may be subject to additional losses to the extent of any receivables relating to future provision of services to these entities or financial support that we voluntarily provide.

Partners’ Capital (including Noncontrolling Interests)

The following table presents a reconciliation of our December 31, 2009 and March 31, 2010 consolidated partners’ capital accounts:

		Temporary
		capital				Partners’ Capital
										Noncontrolling
						Partners’ capital				interests in
		Redeemable				attributable to the				consolidated real				Total partners’
		preferred units				Partnership				estate partnerships				capital
Balance, December 31, 2009		$	116,656			$	1,233,248			$	317,126			$	1,550,374
Contributions			—				—				3,805				3,805
Distributions			(1,692	)			(13,751	)			(9,517	)			(23,268	)
Repurchases of common units			—				(650	)			—				(650	)
Repurchase of preferred units			(174	)			—				—				—
Stock based compensation cost			—				1,972				—				1,972
Effect of entities newly consolidated			—				—				6,324				6,324
Cumulative effect of a change in accounting principle			—				(34,130	)			67,550				33,420
Adjustment of noncontrolling interests related to adjustment of investment balances			—				—				(38,718	)			(38,718	)
Change in accumulated other comprehensive loss			—				(113	)			(43	)			(156	)
Other			—				351				(94	)			257
Net income (loss)			1,693				(30,375	)			12,134				(18,241	)
Balance, March 31, 2010		$	116,483			$	1,156,552			$	358,567			$	1,515,119

Derivative Financial Instruments

We primarily use long-term, fixed-rate and self-amortizing non-recourse debt to avoid, among other things, risk related to fluctuating interest rates. For our variable rate debt, we are sometimes required by our lenders to limit our exposure to interest rate fluctuations by entering into interest rate swap or cap agreements. The interest rate swap agreements moderate our exposure to interest rate risk by effectively converting the interest on variable rate debt to a fixed rate. The interest rate cap agreements effectively limit our exposure to interest rate risk by providing a ceiling on the underlying variable interest rate. The fair values of the interest rate swaps are reflected as assets or liabilities in the balance sheet, and periodic changes in fair value are included in interest expense or partners’ capital, as appropriate. The interest rate caps are not material to our financial position or results of operations.

At March 31, 2010 and December 31, 2009, we had interest rate swaps with aggregate notional amounts of $52.3 million, and recorded fair values of $1.8 million and $1.6 million, respectively, reflected in accrued liabilities and other in our condensed consolidated balance sheets. At March 31, 2010, these interest rate swaps had a weighted average term of 10.9 years. We have designated these interest rate swaps as cash flow hedges and recognize any changes in their fair value as an adjustment of accumulated other comprehensive income within partners’ capital to the extent of their effectiveness. For the three months ended March 31, 2010 and 2009, we recognized changes in fair value of $0.2 million and $0.1 million, respectively, of which $0.2 million and $0.4 million, respectively, resulted in an adjustment to consolidated partners’ capital. We recognized no ineffectiveness as an adjustment of interest expense during the three months ended March 31, 2010 and we recognized $0.5 million ineffectiveness during the three months ended March 31, 2009. Our consolidated comprehensive loss for the three months ended March 31, 2010, totaled $16.7 million and consolidated comprehensive loss for the three months ended March 31, 2009, totaled $32.0 million before the effects of noncontrolling interests. If the forward rates at March 31, 2010 remain constant, we estimate that during the next twelve months, we would reclassify into earnings approximately $1.5 million of the unrealized losses in accumulated other comprehensive income.

We have entered into total rate of return swaps on various fixed-rate secured tax-exempt bonds payable and fixed-rate notes payable to convert these borrowings from a fixed rate to a variable rate and provide an efficient financing product to lower our cost of borrowing. In exchange for our receipt of a fixed rate generally equal to the underlying borrowing’s interest rate, the total rate of return swaps require that we pay a variable rate, equivalent to the Securities Industry and Financial Markets Association Municipal Swap Index, or SIFMA, rate for tax-exempt bonds payable and the 30-day LIBOR rate for notes payable, plus a risk spread. These swaps generally have a second or third lien on the property collateralized by the related borrowings and the obligations under certain of these swaps are cross-collateralized with certain of the other swaps with a particular counterparty. The underlying borrowings are generally callable at our option, with no prepayment penalty, with 30 days advance notice, and the swaps generally have a term of less than five years. The total rate of return swaps have a contractually defined termination value generally equal to the difference between the fair value and the counterparty’s purchased value of the underlying borrowings, which may require payment by us or to us for such difference. Accordingly, we believe fluctuations in the fair value of the borrowings from the inception of the hedging relationship generally will be offset by a corresponding fluctuation in the fair value of the total rate of return swaps.

We designate total rate of return swaps as hedges of the risk of overall changes in the fair value of the underlying borrowings. At each reporting period, we estimate the fair value of these borrowings and the total rate of return swaps and recognize any changes therein as an adjustment of interest expense.

As of March 31, 2010 and December 31, 2009, we had borrowings payable subject to total rate of return swaps with aggregate outstanding principal balances of $352.7 million. At March 31, 2010, the weighted average fixed receive rate under the total return swaps was 6.8% and the weighted average variable pay rate was 1.0%, based on the applicable SIFMA and 30-day LIBOR rates effective as of that date. Information related to the fair value of these instruments at March 31, 2010 and December 31, 2009, is discussed further below.

Fair Value Measurements

We measure certain assets and liabilities in our consolidated financial statements at fair value, both on a recurring and nonrecurring basis. Certain of these fair value measurements are based on significant unobservable inputs classified within Level 3 of the valuation hierarchy defined in FASB ASC Topic 820. When a determination is made to classify a fair value measurement within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, Level 3 fair value measurements typically include, in addition to the unobservable or Level 3 components, observable components that can be validated to observable external sources; accordingly, the changes in fair value in the table below are due in part to observable factors that are part of the valuation methodology.

The table below presents information regarding significant items measured in our consolidated financial statements at fair value on a recurring basis (in thousands):

		Level 2				Level 3
		Interest rate				Total rate of				Changes in fair
		swaps (1)				return swaps (2)				value of debt (3)				Total
Fair value at December 31, 2008		$	(2,556	)		$	(29,495	)		$	29,495			$	(2,556	)
Unrealized gains (losses) included in earnings (4)(5)			(472	)			783				(783	)			(472	)
Realized gains (losses) included in earnings			—				—				—				—
Unrealized gains (losses) included in partners’ capital			341				—				—				341
Fair value at March 31, 2009		$	(2,687	)		$	(28,712	)		$	28,712			$	(2,687	)
Fair value at December 31, 2009		$	(1,596	)		$	(24,307	)		$	24,307			$	(1,596	)
Unrealized gains (losses) included in earnings (4)(5)			(13	)			290				(290	)			(13	)
Realized gains (losses) included in earnings			—				—				—				—
Unrealized gains (losses) included in partners’ capital			(156	)			—				—				(156	)
Fair value at March 31, 2010		$	(1,765	)		$	(24,017	)		$	24,017			$	(1,765	)

The table below presents information regarding amounts measured at fair value in our consolidated financial statements on a nonrecurring basis during the three months ended March 31, 2010, all of which were based, in part, on significant unobservable inputs classified within Level 3 of the valuation hierarchy (in thousands):

		Fair value				Total
		measurement				gain (loss)
Real estate (impairments losses) (1)		$	29,335			$	(7,225	)
Real estate (newly consolidated) (2)(3)			117,083				236
Property debt (newly consolidated) (2)(4)			83,890				—

We believe that the aggregate fair value of our cash and cash equivalents, receivables, payables and short-term secured debt approximates their aggregate carrying amounts at March 31, 2010 and December 31, 2009, due to their relatively short-term nature and high probability of realization. We estimate fair value for our notes receivable and debt instruments using present value techniques that include income and market valuation approaches using observable inputs such as market rates for debt with the same or similar terms and unobservable inputs such as collateral quality and loan-to-value ratios on similarly encumbered assets. Because of the significance of unobservable inputs to these fair value measurements, we classify them within Level 3 of the fair value hierarchy. Present value calculations vary depending on the assumptions used, including the discount rate and estimates of future cash flows. In many cases, the fair value estimates may not be realizable in immediate settlement of the instruments. The estimated aggregate fair value of our notes receivable was approximately $128.4 million and $126.1 million at March 31, 2010 and December 31, 2009, respectively, as compared to their carrying amounts of $141.4 million and $139.6 million. The estimated aggregate fair value of our consolidated debt (including amounts reported in liabilities related to assets held for sale) was approximately $5.8 billion and $5.7 billion at March 31, 2010 and December 31, 2009, respectively, as compared to aggregate carrying amounts of $5.7 billion. The fair values of our derivative instruments at March 31, 2010 and December 31, 2009, are included in the table presented above.

Concentration of Credit Risk

Financial instruments that potentially could subject us to significant concentrations of credit risk consist principally of notes receivable and total rate of return swaps. Approximately $87.8 million of our notes receivable at March 31, 2010, are collateralized by 84 buildings with 1,596 residential units in the West Harlem area of New York City. There are no other significant concentrations of credit risk with respect to our notes receivable due to the large number of partnerships that are borrowers under the notes and the geographic diversification of the properties that serve as the primary source of repayment of the notes.

At March 31, 2010, we had total rate of return swap positions with two financial institutions totaling $353.0 million. We periodically evaluate counterparty credit risk associated with these arrangements. At the current time, we have concluded we do not have material exposure. In the event either counterparty were to default under these arrangements, loss of the net interest benefit we generally receive under these arrangements, which is equal to the difference between the fixed rate we receive and the variable rate we pay, may adversely impact our results of operations and operating cash flows. Additionally, the swap agreements with a specific counterparty provide for collateral calls to maintain specified loan-to-value ratios. As of March 31, 2010, we were not required to provide cash collateral pursuant to the total rate of return swaps. In the event the values of the real estate properties serving as collateral under these agreements decline, we may be required to provide additional collateral pursuant to the swap agreements, which may adversely affect our cash flows.

Income Taxes

In March 2008, we were notified by the Internal Revenue Service, or the IRS, that it intended to examine our 2006 Federal tax return. During June 2008, the IRS issued AIMCO-GP, Inc., our general partner and tax matters partner, a summary report including the IRS’s proposed adjustments to our 2006 Federal tax return. In addition, in May 2009, we were notified by the IRS that it intended to examine our 2007 Federal tax return. During November 2009, the IRS issued AIMCO-GP, Inc. a summary report including the IRS’s proposed adjustments to our 2007 Federal tax return. We do not expect the 2006 or 2007 proposed adjustments to have any material effect on our unrecognized tax benefits, financial condition or results of operations.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes thereto. Actual results could differ from those estimates.

NOTE 3 — Real Estate Dispositions

Real Estate Dispositions (Discontinued Operations)

We are currently marketing for sale certain real estate properties that are inconsistent with our long-term investment strategy. At the end of each reporting period, we evaluate whether such properties meet the criteria to be classified as held for sale, including whether such properties are expected to be sold within 12 months. Additionally, certain properties that do not meet all of the criteria to be classified as held for sale at the balance sheet date may nevertheless be sold and included in discontinued operations in the subsequent 12 months; thus, the number of properties that may be sold during the subsequent 12 months could exceed the number classified as held for sale. At March 31, 2010 and December 31, 2009, we had five and 17 properties, with an aggregate of 953 and 2,576 units, respectively, classified as held for sale. Amounts classified as held for sale in the accompanying condensed consolidated balance sheets are as follows (in thousands):

		March 31,				December 31,
		2010				2009
Real estate, net		$	34,691			$	93,621
Other assets			493				1,786
Assets held for sale		$	35,184			$	95,407
Property debt		$	23,880			$	74,767
Other liabilities			2,828				1,764
Liabilities related to assets held for sale		$	26,708			$	76,531

During the three months ended March 31, 2010 and 2009, we sold 12 properties and 10 properties with an aggregate of 1,623 units and 1,992 units, respectively. During the year ended December 31, 2009, we sold 89 consolidated properties with an aggregate of 22,503 units. For the three months ended March 31, 2010 and 2009, discontinued operations includes the results of operations for the periods prior to the date of sale for all properties sold and for properties classified as held for sale as of March 31, 2010.

The following is a summary of the components of income from discontinued operations and the related amounts of income from discontinued operations attributable to the Partnership and to noncontrolling interests for the three months ended March 31, 2010 and 2009 (in thousands):

		Three Months Ended
		March 31,
		2010				2009
Rental and other property revenues		$	4,266			$	57,664
Property operating expenses			(1,418	)			(30,102	)
Depreciation and amortization			(792	)			(18,734	)
Provision for operating real estate impairment (losses) recoveries			(7,225	)			3,364
Other expenses, net			(809	)			(1,894	)
Operating (loss) income			(5,978	)			10,298
Interest income			25				138
Interest expense			(490	)			(12,025	)
Loss before gain on dispositions of real estate and income tax			(6,443	)			(1,589	)
Gain on dispositions of real estate			26,339				4,546
Income tax benefit (expense)			1,062				(90	)
Income from discontinued operations, net		$	20,958			$	2,867
Income from discontinued operations attributable to:
Noncontrolling interests in consolidated real estate partnerships		$	(9,903	)		$	(3,979	)
The Partnership		$	11,055			$	(1,112	)

Gain on dispositions of real estate is reported net of incremental direct costs incurred in connection with the transactions, including any prepayment penalties incurred upon repayment of property loans collateralized by the properties being sold. Such prepayment penalties totaled $0.6 million and $0.1 million for the three months ended March 31, 2010 and 2009, respectively. We classify interest expense related to property debt within discontinued operations when the related real estate asset is sold or classified as held for sale.

In connection with properties sold or classified as held for sale during the three months ended March 31, 2010, we allocated $1.3 million of goodwill related to our conventional and affordable segments to the carrying amounts of the properties sold or classified as held for sale. Of these amounts, $1.2 million was reflected as a reduction of gain on dispositions of real estate and $0.1 million was reflected as an adjustment of impairment losses. The amounts of goodwill allocated to these properties were based on the relative fair values of the properties sold or classified as held for sale and the retained portions of the reporting units to which the goodwill was allocated. No comparable amounts of goodwill were allocated to properties sold or classified as held for sale during the three months ended March 31, 2009.

Gain on Dispositions of Unconsolidated Real Estate and Other

During the three months ended March 31, 2010 and 2009, we recognized approximately $2.6 million and $10.9 million, respectively, of gains on the disposition of interests in unconsolidated real estate partnerships and other. The gains on disposition of interests in unconsolidated real estate partnerships for the three months ended March 31, 2009, primarily relates to our receipt in 2009 of $8.6 million of additional proceeds related to our disposition during 2008 of an interest in an unconsolidated real estate partnership for which there was no comparable activity in 2010.

NOTE 4 — Other Significant Transactions

Restructuring Costs

During 2009, in connection with the repositioning of our portfolio, we completed organizational restructuring activities that included reductions in workforce and related costs and the abandonment of additional leased corporate facilities and redevelopment projects. During the three months ended March 31, 2010, we reduced our restructuring accruals by $0.5 million and $4.7 million related to payments on unrecoverable lease obligations and severance and personnel related costs, respectively. As of March 31, 2010, the remaining accruals associated with our restructuring activity are $6.4 million for estimated unrecoverable lease obligations, which will be paid over the remaining terms of the affected leases.

NOTE 5 — Commitments and Contingencies

Commitments

In connection with our redevelopment and capital improvement activities, we have commitments of approximately $3.5 million related to construction projects that are expected to be completed during 2010. Additionally, we enter into certain commitments for future purchases of goods and services in connection with the operations of our properties. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.

We have committed to fund an additional $4.4 million in loans on certain properties in West Harlem in New York City. In certain circumstances, the obligor under these notes has the ability to put properties to us, which would result in a cash payment between $30.0 million and $97.5 million and the assumption of approximately $119.0 million in property debt. The ability to exercise the put and the amount of cash payment required upon exercise is dependent upon the achievement of specified thresholds by the current owner of the properties.

Aimco has a potential obligation to repurchase up to $30.0 million in liquidation preference of its Series A Community Reinvestment Act Preferred Stock at a 30% discount pursuant to a repurchase agreement Aimco entered into in June 2009. If required, these additional repurchases will be for up to $10.0 million in liquidation preference in May 2010, 2011 and 2012. Upon any repurchases required of Aimco under this agreement, we will repurchase from Aimco an equivalent number of our Series A Community Reinvestment Act Perpetual Preferred Units, or CRA Preferred Units. Based on the holder’s ability to require Aimco to repurchase these amounts and our obligation to purchase from Aimco a corresponding number of our CRA Preferred Units, $30.0 million in liquidation preference of CRA Preferred Units, or the maximum redemption value of such perpetual preferred units, is classified within temporary capital in our consolidated balance sheets at March 31, 2010 and December 31, 2009.

Tax Credit Arrangements

We are required to manage certain consolidated real estate partnerships in compliance with various laws, regulations and contractual provisions that apply to our historic and low-income housing tax credit syndication arrangements. In some instances, noncompliance with applicable requirements could result in projected tax benefits not being realized and require a refund or reduction of investor capital contributions, which are reported as deferred income in our consolidated balance sheet, until such time as our obligation to deliver tax benefits is relieved. The remaining compliance periods for our tax credit syndication arrangements range from less than one year to 15 years. We do not anticipate that any material refunds or reductions of investor capital contributions will be required in connection with these arrangements.

Legal Matters

In addition to the matters described below, we are a party to various legal actions and administrative proceedings arising in the ordinary course of business, some of which are covered by our general liability insurance program, and none of which we expect to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Limited Partnerships

In connection with our acquisitions of interests in real estate partnerships, we are sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the partners of such real estate partnerships or violations of the relevant partnership agreements. We may incur costs in connection with the defense or settlement of such litigation. We believe that we comply with our fiduciary obligations and relevant partnership agreements. Although the outcome of any litigation is uncertain, we do not expect any such legal actions to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

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, including lead-based paint. 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, and potential fines or penalties imposed by such agencies in connection therewith, 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 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 have determined that our legal obligations to remove or remediate hazardous substances may be conditional asset retirement obligations, as defined in GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or property casualty, we believe that the fair value of our asset retirement obligations cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. Asset retirement obligations that are reasonably estimable as of March 31, 2010, are immaterial to our consolidated financial condition, results of operations and cash flows.

Mold

Aimco has been named as a defendant in lawsuits that have alleged personal injury and property damage as a result of the presence of mold. In addition, we are aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. We have only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. We have implemented policies, procedures, third-party audits and training, and include a detailed moisture intrusion and mold assessment during acquisition due diligence. We believe these measures will prevent or eliminate mold exposure from our properties and will minimize the effects that mold may 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, results of operations or cash flows.

NOTE 6 — Earnings (Loss) per Unit

We calculate earnings (loss) per unit based on the weighted average number of common OP Units, participating securities, common OP unit equivalents and dilutive convertible securities outstanding during the period. We consider both common OP Units and High Performance Units, which have identical rights to distributions and undistributed earnings, to be common units for purposes of the earnings (loss) per unit data presented below. The following table illustrates the calculation of basic and diluted earnings (loss) per unit for the three months ended March 31, 2010 and 2009 (in thousands, except per unit data):

		Three Months Ended
		March 31,
		2010				2009
Numerator:
Loss from continuing operations		$	(37,506	)		$	(35,235	)
(Income) loss from continuing operations attributable to noncontrolling interests			(2,231	)			10,260
Income attributable to the Partnership’s preferred unitholders			(14,615	)			(14,235	)
Loss from continuing operations attributable to the Partnership’s common unitholders		$	(54,352	)		$	(39,210	)
Income from discontinued operations		$	20,958			$	2,867
Income from discontinued operations attributable to noncontrolling interests			(9,903	)			(3,979	)
Income (loss) from discontinued operations attributable to the Partnership’s common unitholders		$	11,055			$	(1,112	)
Net loss		$	(16,548	)		$	(32,368	)
(Income) loss attributable to noncontrolling interests			(12,134	)			6,281
Income attributable to the Partnership’s preferred unitholders			(14,615	)			(14,235	)
Net loss attributable to the Partnership’s common unitholders		$	(43,297	)		$	(40,322	)
Denominator:
Denominator for basic earnings (loss) per unit — weighted average number of common units outstanding			124,400				119,661
Effect of dilutive securities:
Dilutive potential common units			—				—
Denominator for diluted earnings (loss) per unit			124,400				119,661
Earnings (loss) per common unit:
Basic and diluted earnings (loss) per common unit:
Loss from continuing operations attributable to the Partnership’s common unitholders		$	(0.44	)		$	(0.33	)
Income (loss) from discontinued operations attributable to the Partnership’s common unitholders			0.09				(0.01	)
Net loss attributable to the Partnership’s common unitholders		$	(0.35	)		$	(0.34	)

As of March 31, 2010 and 2009, the common unit equivalents that could potentially dilute basic earnings per unit in future periods totaled 7.4 million and 11.0 million, respectively. These securities, representing stock options to purchase shares of Aimco Class A Common Sock, have been excluded from the earnings (loss) per unit computations for the three months ended March 31, 2010 and 2009, because their effect would have been anti-dilutive. Participating securities, consisting of unvested restricted shares of Aimco stock and shares of Aimco stock purchased pursuant to officer loans, receive dividends similar to shares of Aimco Class A Common Stock and common OP Units and totaled 0.6 million and 1.0 million at March 31, 2010 and 2009, respectively. Participating securities had no effect on basic and diluted earnings (loss) per unit computations for the periods presented above because no distributions were declared and there were no undistributed earnings during these periods.

Various classes of redeemable preferred OP Units are outstanding. Depending on the terms of each class, these preferred OP Units are convertible into common OP Units or redeemable for cash or, at our option, shares of Aimco Class A Common Stock, and are paid distributions varying from 1.84% to 9.5% per annum per unit, or equal to the dividends paid on Aimco Class A Common Stock based on the conversion terms. As of March 31, 2010, a total of 3.1 million preferred OP Units were outstanding with redemption values of $85.5 million and were potentially redeemable for approximately 4.6 million shares of Aimco Class A Common Stock (based on the period end market price), or cash at our option. We have a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. The potential dilutive effect of these securities would have been antidilutive in the periods presented; however, based on our cash redemption policy, they may also be excluded from future earnings (loss) per unit computations in periods during which their effect is dilutive.

In December 2009, we adopted the provisions of FASB Accounting Standards Update 2010-01, Accounting for Distributions to Shareholders with Components of Stock and Cash, or ASU 2010-01, which are codified in FASB ASC Topic 505. ASU 2010-01 requires that for distributions with components of cash and stock, the portion distributed in stock should be accounted for prospectively as a stock issuance with no retroactive adjustment to basic and diluted earnings per share. In accordance with ASU 2010-01, we retrospectively revised the accounting treatment of our special distribution paid in January 2009, resulting in a 4.8 million reduction in the number of weighted average units outstanding and a $0.02 increase in the loss per unit attributed to the Partnership’s common unitholders for the three months ended March 31, 2009, as compared to the amounts previously reported.

NOTE 7 — Business Segments

Based on a planned reduction in our transactional activities, during the three months ended March 31, 2010, we reevaluated our reportable segments and determined our investment management reporting unit no longer meets the requirements for a reportable segment. Additionally, to provide more meaningful information regarding our real estate operations, we elected to disaggregate information for the prior real estate segment. Following these changes, we have two reportable segments: conventional real estate operations and affordable real estate operations. Our conventional real estate operations consist of market-rate apartments with rents paid by the resident and include 239 properties with 73,234 units. Our affordable real estate operations consist of 259 properties with 30,186 units, with rents that are generally paid, in whole or part, by a government agency.

Our chief operating decision maker uses various generally accepted industry financial measures to assess the performance of the business, including: net operating income; Net Asset Value, which is the estimated fair value of our assets, net of debt; Pro forma Funds From Operations, which is Funds From Operations excluding operating real estate impairment losses and preferred unit redemption related gains or losses; Adjusted Funds From Operations, which is Pro forma Funds From Operations less spending for Capital Replacements; same store property operating results; Free Cash Flow, which is net operating income less spending for Capital Replacements; financial coverage ratios; and leverage as shown on our balance sheet. The chief operating decision maker emphasizes net operating income as a key measurement of segment profit or loss. Segment net operating income is generally defined as segment revenues less direct segment operating expenses.

The following tables present the revenues, net operating income (loss) and income (loss) from continuing operations of our conventional and affordable real estate operations segments for the three months ended March 31, 2010 and 2009 (in thousands):

										Corporate
		Conventional				Affordable				and Amounts
		Real Estate				Real Estate				Not Allocated
		Operations				Operations				to Segments				Total
Three Months Ended March 31, 2010:
Rental and other property revenues (1)		$	232,370			$	55,168			$	1,181			$	288,719
Asset management and tax credit revenues			—				—				4,257				4,257
Total revenues			232,370				55,168				5,438				292,976
Property operating expenses (1)			96,983				28,924				14,508				140,415
Investment management expenses			—				—				3,229				3,229
Depreciation and amortization (1)			—				—				109,019				109,019
General and administrative expenses			—				—				11,735				11,735
Other expenses, net			—				—				3,144				3,144
Total operating expenses			96,983				28,924				141,635				267,542
Net operating income (loss)			135,387				26,244				(136,197	)			25,434
Other items included in continuing operations			—				—				(62,940	)			(62,940	)
Income (loss) from continuing operations		$	135,387			$	26,244			$	(199,137	)		$	(37,506	)
Three Months Ended March 31, 2009:
Rental and other property revenues (1)		$	233,536			$	48,732			$	1,644			$	283,912
Asset management and tax credit revenues			—				—				9,539				9,539
Total revenues			233,536				48,732				11,183				293,451
Property operating expenses (1)			93,711				25,103				16,816				135,630
Investment management expenses			—				—				3,789				3,789
Depreciation and amortization (1)			—				—				104,860				104,860
Provision for operating real estate impairment losses (1)			—				—				510				510
General and administrative expenses			—				—				16,260				16,260
Other expenses, net			—				—				1,583				1,583
Total operating expenses			93,711				25,103				143,818				262,632
Net operating income (loss)			139,825				23,629				(132,635	)			30,819
Other items included in continuing operations			—				—				(66,054	)			(66,054	)
Income (loss) from continuing operations		$	139,825			$	23,629			$	(198,689	)		$	(35,235	)

The assets of our reportable segments are as follows (in thousands):

		March 31,				December 31,
		2010				2009
Conventional		$	6,056,731			$	6,119,670
Affordable			1,251,308				1,151,670
Corporate and other assets			592,924				650,799
Total consolidated assets		$	7,900,963			$	7,922,139

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding the effect of acquisitions and redevelopments, our future financial performance, including our ability to maintain current or meet projected occupancy, rent levels and same store results, and the effect of government regulations. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond our control, including, without limitation: financing risks, including the availability and cost of financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; earnings may not be sufficient to maintain compliance with debt covenants; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions; the terms of governmental regulations that affect us and interpretations of those regulations; the competitive environment in which we operate; the timing of acquisitions and dispositions; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us. In addition, Aimco’s current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on its ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership. Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009, and the other documents we file from time to time with the Securities and Exchange Commission. As used herein and except as the context otherwise requires, “we,” “our,” “us” and the “Company” refer to AIMCO Properties, L.P. (which we refer to as the Partnership) and the Partnership’s consolidated corporate subsidiaries and consolidated real estate partnerships, collectively.

Executive Overview

We are a limited partnership focused on the ownership and management of market-rate apartment communities located in the 20 largest markets in the United States (as measured by total market capitalization, which is the total market value of institutional-grade apartment properties in a particular market) with average rents that are 100% – 125% of local market average rents. We upgrade the quality of our portfolio through the sale of communities with rents below average market rents and the reinvestment of capital within these 20 target markets through redevelopment and acquisitions. Our apartment properties are generally financed with property-level, non-recourse, long-dated, fixed-rate, amortizing debt. We are the operating partnership for Aimco, which is a self-administered and self-managed real estate investment trust, or REIT.

As of March 31, 2010, we owned or managed 836 apartment properties containing 132,075 units located in 43 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: net operating income; Net Asset Value, which is the estimated fair value of our assets, net of debt; Pro forma Funds From Operations, which is Funds From Operations excluding operating real estate impairment losses and preferred unit redemption related gains or losses; Adjusted Funds From Operations, which is Pro forma Funds From Operations less spending for Capital Replacements; same store property operating results; Free Cash Flow, which is net operating income less spending for Capital Replacements; financial coverage ratios; and leverage as shown on our balance sheet. Funds From Operations and Capital Replacements are defined and further described in the sections captioned “Funds From Operations” and “Capital Additions” below. The key macro-economic factors and non-financial indicators that affect our financial condition and operating performance are: household formations; rates of job growth; single-family and multifamily housing starts; interest rates; and availability and cost of financing.

Because our operating results depend primarily on income from our properties, the supply and demand for apartments influences our operating 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 affect our operating results. Our cost of capital is affected by the conditions in the capital and credit markets and the terms that we negotiate for our equity and debt financings.

The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements in Item 1.

Results of Operations

Overview

Three months ended March 31, 2010 compared to March 31, 2009

We reported net loss attributable to the Partnership of $28.7 million and net loss attributable to the Partnership’s common unitholders of $43.3 million for the three months ended March 31, 2010, compared to net loss attributable to the Partnership of $26.1 million and net loss attributable to the Partnership’s common unitholders of $40.3 million for the three months ended March 31, 2009, increases in losses of $2.6 million and $3.0 million, respectively.

These increases were principally due to the following items, all of which are discussed in further detail below:

	•		a decrease in gain on dispositions of unconsolidated real estate and other, primarily related to additional proceeds received in 2009 related to our disposition during 2008 of an interest in an unconsolidated real estate partnership, for which there was no comparable activity in 2010;
	•		a decrease in asset management and tax credit revenues; and
	•		an increase in the noncontrolling interests in consolidated real estate partnerships’ share of earnings, primarily due to their share of increases in gains on disposition of consolidated real estate properties during 2010.

The effects of these items on our operating results were partially offset by an increase in income from discontinued operations, primarily related to recognition of higher gains on sales as compared to 2009.

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

Real Estate Operations

Our real estate portfolio is comprised of two business components: conventional real estate operations and affordable real estate operations, which also represent our two reportable segments. Our conventional real estate portfolio consists of market-rate apartments with rents paid by the resident and includes 239 properties with 73,234 units. Our affordable real estate portfolio consists of 259 properties with 30,186 units, with rents that are generally paid, in whole or part, by a government agency. Our conventional and affordable properties contributed 88% and 12%, respectively, of our property net operating income attributed to the Partnership’s common unitholders during the three months ended March 31, 2010.

Our chief operating decision maker uses various generally accepted industry financial measures to assess the performance and financial condition of the business, including: net operating income; Net Asset Value; Pro forma Funds From Operations; Adjusted Funds From Operations; same store property operating results; Free Cash Flow; financial coverage ratios; and leverage as shown on our balance sheet. Our chief operating decision maker emphasizes net operating income as a key measurement of segment profit or loss. Segment net operating income is generally defined as segment revenues less direct segment operating expenses.

The following table summarizes the net operating income of our real estate operations, including our conventional and affordable segments, for the three months ended March 31, 2010 and 2009 (in thousands):

		Three Months Ended
		March 31,
		2010				2009
Rental and other property revenues:
Conventional real estate operations		$	232,370			$	233,536
Affordable real estate operations			55,168				48,732
Corporate and amounts not allocated			1,181				1,644
Total			288,719				283,912
Property operating expenses:
Conventional real estate operations			96,983				93,711
Affordable real estate operations			28,924				25,103
Corporate and amounts not allocated			14,508				16,816
Total			140,415				135,630
Real estate operations net operating income		$	148,304			$	148,282

For the three months ended March 31, 2010, compared to the months ended March 31, 2009, our real estate operations net operating income was comparable and consisted of an increase in rental and other property revenues of $4.8 million, or 1.7%, and an offsetting increase in property operating expenses of $4.8 million, or 3.5%.

Our conventional real estate operations net operating income decreased $4.4 million, or 3.1%, from $139.8 million during the three months ended March 31, 2009 to $135.4 million during the three months ended March 31, 2010. This decrease was primarily attributable to our conventional same store properties, including a $3.6 million, or 1.9%, decrease in revenues due to lower average rent (approximately $59 per unit) partially offset by an increase of 270 basis points in average physical occupancy, and $2.6 million increase in expenses due to an increase in snow removal, repairs and maintenance and marketing costs, partially offset by lower turn and administrative costs. The decrease in conventional net operating income associated with our same store properties was partially offset by a $1.8 million increase in net operating income associated with our conventional non-same store properties. Revenues of our conventional non-same store properties increased $2.5 million, primarily due to a $2.4 million increase in redevelopment revenues relating to a 12% increase in the number of units in service at these properties relative to 2009, partially offset by a $0.8 million increase in expenses of our conventional non-same store properties due to increases in payroll, utilities, contract services and marketing expenses.

Our affordable real estate operations net operating income increased $2.6 million, or 11.0%, from $23.6 million during the three months ended March 31, 2009, to $26.2 million during the three months ended March 31, 2010. Revenues of our affordable properties increased by $6.4 million, including a net increase of $5.5 million in revenues associated with our adoption of revised accounting guidance regarding consolidation of variable interest entities (see Note 2 to our condensed consolidated financial statements in Item 1) and a $1.2 million increase in rental revenues associated with our other affordable properties, primarily due to higher average rents partially offset by lower physical occupancy in 2010 relative to 2009. Expenses of our affordable properties increased by $3.8 million, primarily due to our adoption of revised accounting guidance regarding consolidation of variable interest entities discussed above.

Real estate operations net operating income amounts not attributed to our conventional or affordable properties include property management revenues and expenses and casualty losses, which we do not allocate to our conventional or affordable segments for purposes of evaluating segment performance. Property management revenues decreased by $0.5 million, primarily attributable to the elimination of revenues related to properties consolidated during 2010 in connection with our adoption of revised accounting guidance regarding consolidation of variable interest entities discussed above. Expenses not allocated to our conventional or affordable segments decreased by $2.3 million, primarily due to a $2.4 million decrease in property management expenses, resulting primarily from reductions in personnel and related costs attributed to our restructuring activities (see Note 4 to the condensed consolidated financial statements in Item 1).

Other Operating Expenses (Income)

Asset Management and Tax Credit Revenues

We perform activities and services for consolidated and unconsolidated real estate partnerships, including portfolio strategy, capital allocation, joint ventures, tax credit syndication, acquisitions, dispositions and other transaction activities. Within our owned portfolio, we refer to these activities as “Portfolio Management,” and their benefit is seen in property operating results and in investment gains. For affiliated partnerships, we refer to these activities as asset management, for which we are separately compensated through fees paid by third party investors. These activities are conducted in part by our taxable subsidiaries, and the related net operating income may be subject to income taxes.

Asset management revenue may include certain fees that were earned in a prior period, but not recognized at that time because collectibility was not reasonably assured. Those fees may be recognized in a subsequent period upon occurrence of a transaction or a high level of the probability of occurrence of a transaction, or improvement in operations that generates sufficient cash to pay the fees.

For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, asset management and tax credit revenues decreased $5.3 million. This decrease is primarily attributable to a $1.4 million decrease in promote income, which is income earned in connection with the disposition of properties owned by our consolidated joint ventures, and a decrease of $3.7 million in income related to our affordable housing tax credit syndication business, which consists of a $2.4 million write off of syndication fees receivable we determined were uncollectible during 2010 and a $1.3 million reduction in amortization of related tax credit income.

Investment Management Expenses

Investment management expenses consist primarily of the costs of departments that perform asset management and tax credit activities. For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, investment management expenses decreased $0.6 million. This decrease is primarily due to a $1.4 million reduction in personnel and related costs from our organizational restructurings, partially offset by a $0.6 million increase in transaction costs, primarily related to abandoned projects.

Depreciation and Amortization

For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, depreciation and amortization increased $4.2 million, or 4.0%. This increase primarily consists of depreciation for properties newly consolidated during 2010 and completed redevelopments and other capital projects recently placed in service.

General and Administrative Expenses

For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, general and administrative expenses decreased $4.5 million, or 27.8%. This decrease is primarily attributable to reductions in personnel and related expenses associated with our organizational restructuring activity (see Note 4 to the condensed consolidated financial statements in Item 1 for additional information).

Other Expenses, Net

Other expenses, net includes franchise taxes, risk management activities, partnership administration expenses and certain non-recurring items.

For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, other expenses, net increased by $1.6 million. The increase is primarily attributable to an increase of $3.6 million in expenses related to our self-insurance retention activities, including an increase of $2.3 million related to property casualty claims, partially offset by a $2.0 million reimbursement during 2010 of costs associated with certain litigation matters.

Interest Expense

For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, interest expense, which includes the amortization of deferred financing costs, decreased by $0.4 million, or 0.5%. Interest expense decreased primarily due to a $2.7 million decrease in corporate interest expense and a $0.5 million increase in capitalized interest due to higher interest rates, partially offset by a $2.8 million increase related to non-recourse property loans, primarily due to $2.1 million of interest expense related to newly consolidated properties in 2010.

Equity in Earnings (Losses) of Unconsolidated Real Estate Partnerships

Equity in earnings (losses) of unconsolidated real estate partnerships includes our share of net earnings (losses) of our unconsolidated real estate partnerships and is primarily driven by depreciation expense in excess of the net operating income recognized by such partnerships.

For the three months ended March 31, 2010, we recognized equity in earnings of unconsolidated real estate partnerships of $8.0 million as compared to equity in losses of unconsolidated real estate partnerships of $2.0 million for the three months ended March 31, 2009. The increase of $10.0 million in equity in earnings from 2009 to 2010 was primarily due to our reversal during 2010 of approximately $11.2 million of excess equity in losses recognized during 2008 and 2009. These excess losses were attributed to noncontrolling interests in our consolidated real estate partnerships that hold such investments and, accordingly, this reversal had no significant effect on net income or loss attributable to the Partnership during the affected periods.

Gain on Dispositions of Unconsolidated Real Estate and Other

Gain on dispositions of unconsolidated real estate and other includes our share of gains related to dispositions of real estate by unconsolidated real estate partnerships, gains on disposition of interests in unconsolidated real estate partnerships, gains on dispositions of land and other non-depreciable assets and certain costs related to asset disposal activities. Changes in the level of gains recognized from period to period reflect the changing level of disposition activity from period to period. Additionally, gains on properties sold are determined on an individual property basis or in the aggregate for a group of properties that are sold in a single transaction, and are not comparable period to period.

For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, gain on dispositions of unconsolidated real estate and other decreased $8.2 million. This decrease is primarily attributable to $8.6 million of additional proceeds received in 2009 related to our disposition during 2008 of an interest in an unconsolidated real estate partnership, for which there were no comparable gains during 2010.

Income Tax Benefit

In conjunction with Aimco’s UPREIT structure certain of our operations or a portion thereof, such as property management, asset management and risk management, are conducted through, and certain of our properties are owned by, taxable subsidiaries. Income taxes related to the results of continuing operations of our taxable subsidiaries are included in income tax benefit in our consolidated statements of operations.

For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, income tax benefit increased by $1.3 million. This increase was primarily attributable to an increase in losses of our TRS entities.

Income from Discontinued Operations, Net

The results of operations for properties sold during the period or designated as held for sale at the end of the period are generally required to be classified as discontinued operations for all periods presented. The 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 and debt extinguishment gains and losses to the extent there is secured debt on the property. In addition, any impairment losses on assets held for sale and the net gain or loss on the eventual disposal of properties held for sale are reported in discontinued operations.

For the three months ended March 31, 2010 and 2009, income from discontinued operations totaled $21.0 million and $2.9 million, respectively. The $18.1 million increase in income from discontinued operations was principally due to a $23.1 million increase in gain on dispositions of real estate, net of income taxes, and an $11.5 million decrease in interest expense, partially offset by a decrease of $16.3 million in operating income (inclusive of a $10.6 million increase in real estate impairment losses).

During the three months ended March 31, 2010, we sold 12 consolidated properties for gross proceeds of $82.6 million and net proceeds of $21.1 million, resulting in a net gain on sale of approximately $27.4 million (which includes $1.1 million of related income taxes). During the three months ended March 31, 2009, we sold ten consolidated properties for gross proceeds of $83.1 million and net proceeds of $14.6 million, resulting in a gain on sale of approximately $4.3 million (which is net of $0.2 million of related income taxes).

For the three months ended March 31, 2010 and 2009, income from discontinued operations includes the operating results of the properties sold or classified as held for sale as of March 31, 2010.

Changes in the level of gains recognized from period to period reflect the changing level of our disposition activity from period to period. Additionally, gains on properties sold are determined on an individual property basis or in the aggregate for a group of properties that are sold in a single transaction, and are not comparable period to period (see Note 3 to the condensed consolidated financial statements in Item 1 for additional information on discontinued operations).

Noncontrolling Interests in Consolidated Real Estate Partnerships

Noncontrolling interests in consolidated real estate partnerships reflects the non-Aimco partners’, or noncontrolling partners’, share of operating results of consolidated real estate partnerships. This generally includes the noncontrolling partners’ share of property management fees, interest on notes and other amounts that we charge to such partnerships.

For the three months ended March 31, 2010, compared to the three months ended March 31, 2009, net earnings attributed to noncontrolling interests in consolidated real estate partnerships increased by $18.4 million. This increase was primarily due to the noncontrolling interests share of a reversal during 2010 of approximately $11.2 million of excess equity in losses recognized during 2009 and 2008, an increase of $5.7 million in the gain on disposition of real estate allocated to noncontrolling interests, and an increase in income allocated to noncontrolling interests related to operations of our consolidated real estate partnerships. These increases were partially offset by an increase in losses allocated to noncontrolling interests related to certain partnerships that were consolidated during 2010 (see Note 2 to our condensed consolidated financial statements in Item 1 for further discussion of our adoption of ASU 2009-17).

Critical Accounting Policies and Estimates

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

Impairment of Long-Lived Assets

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

From time to time, we have non-revenue producing properties that we hold for future redevelopment. We assess the recoverability of the carrying amount of these redevelopment properties by comparing our estimate of undiscounted future cash flows based on the expected service potential of the redevelopment property upon completion to the carrying amount. In certain instances, we use a probability-weighted approach to determine our estimate of undiscounted future cash flows when alternative courses of action are under consideration.

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

	•		the general economic climate;
	•		competition from other apartment communities and other housing options;
	•		local conditions, such as loss of jobs or an increase in the supply of apartments, that might adversely affect apartment occupancy or rental rates;
	•		changes in governmental regulations and the related cost of compliance;
	•		increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents;
	•		changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multifamily housing; and
	•		changes in interest rates and the availability of financing.

Any adverse changes in these and other factors could cause an impairment of our long-lived assets, including real estate and investments in unconsolidated real estate partnerships. Based on periodic tests of recoverability of long-lived assets, for the three months ended March 31, 2010, we recorded no impairment losses related to properties to be held and used. We recognized impairment losses of $0.5 million during the three months ended March 31, 2009.

Other assets in our consolidated balance sheet in Item 1 includes $70.5 million of goodwill related to our conventional and affordable reportable segments as of March 31, 2010. We annually evaluate impairment of intangible assets using an impairment test that compares the fair value of the reporting units with the carrying amounts, including goodwill. We performed our last impairment analysis during 2009 and concluded no impairment was necessary. We will perform our next impairment analysis during the fourth quarter of 2010 and do not anticipate recognizing an impairment of goodwill in connection with this analysis. As further discussed in Note 3 to the condensed consolidated financial statements in Item 1, we allocate goodwill to real estate properties when they are sold or classified as held for sale, based on the relative fair values of these properties and the retained properties in each reportable segment.

Notes Receivable and Interest Income Recognition

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

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

We recognize interest income on discounted notes receivable based upon whether the amount and timing of collections are both probable and reasonably estimable. We consider collections to be probable and reasonably estimable when the borrower has closed transactions or has entered into certain pending transactions (which include real estate sales, refinancings, foreclosures and rights offerings) that provide a reliable source of repayment. In such instances, we recognize accretion income, on a prospective basis using the effective interest method over the estimated remaining term of the loans, equal to the difference between the carrying amount of the discounted notes and the estimated collectible value. We record income on all other discounted notes using the cost recovery method. 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 amount of the notes; therefore, accretion income varies on a period by period basis and could be lower or higher than in prior periods.

Provision for Losses on Notes Receivable

We assess the collectibility of notes receivable on a periodic basis, which assessment consists primarily of an evaluation of cash flow projections of the borrower to determine whether estimated cash flows are sufficient to repay principal and interest in accordance with the contractual terms of the note. We recognize impairments on notes receivable when it is probable that principal and interest will not be received in accordance with the contractual terms of the loan. The amount of the impairment to be recognized generally is based on the fair value of the partnership’s real estate that represents the primary source of loan repayment. In certain instances where other sources of cash flow are available to repay the loan, the impairment is measured by discounting the estimated cash flows at the loan’s original effective interest rate.

During the three months ended March 31, 2010 and 2009, we recorded provisions for losses on notes receivable of $0.4 million and $0.2 million, respectively. We will continue to evaluate the collectibility of these notes, and we will adjust related allowances in the future due to changes in market conditions and other factors.

Capitalized Costs

We capitalize costs, including certain indirect costs, incurred in connection with our capital additions activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital additions activities at the property level. We characterize as “indirect costs” an allocation of certain department costs, including payroll, at the area operations and corporate levels that clearly relate to capital additions activities. We capitalize interest, property taxes and insurance during periods in which redevelopment and construction projects are in progress. We charge to expense as incurred costs that do not relate to capital additions activities, including ordinary repairs, maintenance, resident turnover costs and general and administrative expenses.

For the three months ended March 31, 2010 and 2009, for continuing and discontinued operations, we capitalized $2.9 million and $2.4 million of interest costs, respectively, and $6.7 million and $13.8 million of site payroll and indirect costs, respectively. The decrease is primarily due to a reduced level of redevelopment activities.

Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flow from our operations. Additional sources are proceeds from property sales and proceeds from refinancings of existing property loans and borrowings under new property loans.

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

The state of credit markets and related effect on the overall economy may have an adverse affect on our liquidity, both through increases in interest rates and credit risk spreads, and access to financing. As further discussed in Item 3, Quantitative and Qualitative Disclosures About Market Risk, we are subject to interest rate risk associated with certain variable rate liabilities, preferred units and assets. Based on our net variable rate liabilities, preferred units and assets outstanding at March 31, 2010, we estimate that a 1.0 % increase in 30-day LIBOR with constant credit risk spreads would reduce our income (or increase our loss) attributable to the Partnership’s common unitholders by approximately $1.5 million on an annual basis. Although base interest rates have generally decreased relative to their levels prior to the disruptions in the financial markets, the tightening of credit markets has affected the credit risk spreads charged over base interest rates on, and the availability of, property loan financing. For future refinancing activities, our liquidity and cost of funds may be affected by increases in base interest rates or higher credit risk spreads. If timely property financing options are not available for maturing debt, we may consider alternative sources of liquidity, such as reductions in certain capital spending or proceeds from asset dispositions.

As further discussed in Note 2 to our condensed consolidated financial statements in Item 1, we use total rate of return swaps as a financing product to lower our cost of borrowing through conversion of fixed-rate tax-exempt bonds payable and fixed-rate notes payable to variable interest rates indexed to the SIFMA rate for tax-exempt bonds payable and the 30-day LIBOR rate for notes payable, plus a credit risk spread. The cost of financing through these arrangements is generally lower than the fixed rate on the debt. As of March 31, 2010, we had total rate of return swap positions with two financial institutions with notional amounts totaling $353.0 million. Swaps with notional amounts totaling $307.8 million and $45.2 million have maturity dates in May 2012 and October 2012, respectively.

During the three months ended March 31, 2010, we received net cash receipts of $3.7 million under the total return swaps, which positively affected our liquidity. To the extent interest rates increase above the fixed rates on the underlying borrowings, our obligations under the total return swaps will negatively affect our liquidity.

We periodically evaluate counterparty credit risk associated with these arrangements. At the current time, we have concluded we do not have material exposure. In the event a counterparty were to default under these arrangements, loss of the net interest benefit we generally receive under these arrangements, which is equal to the difference between the fixed rate we receive and the variable rate we pay, may adversely affect our liquidity.

The total rate of return swaps require specified loan-to-value ratios. In the event the values of the real estate properties serving as collateral under these agreements decline or if we sell properties in the collateral pool with low loan-to-value ratios, certain of our consolidated subsidiaries have an obligation to pay down the debt or provide additional collateral pursuant to the swap agreements, which may adversely affect our cash flows. The obligation to provide collateral is limited to these subsidiaries and is non-recourse to the Partnership. At March 31, 2010, these subsidiaries were not required to provide cash collateral based on the loan-to-value ratios of the real estate properties serving as collateral under these agreements.

As of March 31, 2010, the amount available under our revolving credit facility was $121.4 million (after giving effect to $14.8 million of outstanding borrowings and $43.8 million outstanding for undrawn letters of credit issued under the revolving credit facility). Our total outstanding term loan of $45.0 million at March 31, 2010, matures in the first quarter 2011. We repaid an additional $10.0 million on the term loan through April 30, 2010, leaving a remaining outstanding balance of $35.0 million. Additionally, we have limited obligations to fund redevelopment commitments during the remainder of the year and have no development commitments.

At March 31, 2010, we had $77.9 million in cash and cash equivalents, a decrease of $3.4 million from December 31, 2009. At March 31, 2010, we had $221.1 million of restricted cash, primarily consisting of reserves and escrows held by lenders for bond sinking funds, capital additions, 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 condensed consolidated statements of cash flows in Item 1.

Operating Activities

For the three months ended March 31, 2010, our net cash provided by operating activities of $26.8 million was primarily related to operating income from our consolidated properties, which is affected primarily by rental rates, occupancy levels and operating expenses related to our portfolio of properties, in excess of payments of operating accounts payable and accrued liabilities, including amounts related to our organizational restructuring (see Note 4 to the condensed consolidated financial statements in Item 1). Cash provided by operating activities increased $44.6 million compared with the three months ended March 31, 2009, driven primarily by a decrease in payments on operating accounts payable and accrued expenses, including payments related to our restructuring accruals, in 2010 as compared to 2009.

Investing Activities

For the three months ended March 31, 2010, our net cash provided by investing activities of $8.9 million consisted primarily of proceeds from disposition of real estate and a net increase in cash from partnerships consolidated and deconsolidated in connection with our adoption of ASU 2009-17 (see Note 2 to our condensed consolidated financial statements in Item 1), partially offset by 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 when compared to alternative uses for our capital. During the three months ended March 31, 2010, we sold 12 consolidated properties. These properties were sold for an aggregate sales price of $82.9 million and generated proceeds totaling $80.4 million, after the payment of transaction costs and debt prepayment penalties. The $80.4 million in proceeds is inclusive of debt assumed by buyers. Net cash proceeds from property sales were used primarily to repay property debt and for other corporate purposes.

Financing Activities

For the three months ended March 31, 2010, net cash used in financing activities of $39.0 million was primarily attributed to debt principal payments, distributions paid to common and preferred unitholders and distributions to noncontrolling interests. Proceeds from property loans partially offset the cash outflows.

Property Debt

At March 31, 2010 and December 31, 2009, we had $5.6 billion in consolidated property debt outstanding, which included $23.9 million and $74.8 million, respectively, of property debt classified within liabilities related to assets held for sale. During the three months ended March 31, 2010, we refinanced or closed property loans on four properties generating $49.9 million of proceeds from borrowings with a weighted average interest rate of 6.09%. Our share of the net proceeds after repayment of existing debt, payment of transaction costs and distributions to limited partners, was $37.3 million. We used these total net proceeds for capital additions and other corporate purposes. We intend to continue to refinance property debt primarily as a means of extending current and near term maturities and to finance certain capital projects.

Term Loan and Credit Facility

We have an Amended and Restated Senior Secured Credit Agreement, as amended, which we refer to as the Credit Agreement. As of March 31, 2010, the Credit Agreement consisted of aggregate commitments of $225.0 million, comprised of a $45.0 million term loan and $180.0 million of revolving loan commitments. The term loan bears interest at LIBOR plus 1.5% or, at our option, a base rate equal to the prime rate, and matures in March 2011. Borrowings under the revolving credit facility bear interest based on a pricing grid determined by leverage (either at LIBOR plus 4.25% with a LIBOR floor of 2.00% or, at our option, a base rate equal to the Prime rate plus a spread of 3.00%). The revolving credit facility matures May 1, 2011, and may be extended for an additional year, subject to certain conditions, including payment of a 45.0 basis point fee on the total revolving commitments and repayment of the remaining term loan balance by February 1, 2011.

At March 31, 2010, the term loan had an outstanding principal balance of $45.0 million and a weighted average interest rate of 1.74%. We repaid an additional $10.0 million on the term loan through April 30, 2010, leaving a remaining outstanding balance of $35.0 million. At March 31, 2010, we had outstanding borrowings under the revolving credit facility of $14.8 million with a weighted average interest rate of 6.25% (based on the Prime rate). The amount available under the revolving credit facility at March 31, 2010, was $121.4 million (after giving effect to $14.8 million of outstanding borrowings and $43.8 million outstanding for undrawn letters of credit issued under the revolving credit facility). The proceeds of revolving loans are generally permitted to be used to fund working capital and for other corporate purposes.

Our Credit Agreement requires us to satisfy covenant ratios of earnings before interest, taxes and depreciation and amortization to debt service and earnings to fixed charges of 1.40:1 and 1.20:1, respectively. For the twelve months ended March 31, 2010, as calculated based on the provisions in our Credit Agreement, we had a ratio of earnings before interest, taxes and depreciation and amortization to debt service of 1.59:1 and a ratio of earnings to fixed charges of 1.35:1.

Partners’ Capital Transactions

During the three months ended March 31, 2010, we paid cash distributions totaling $14.6 million, $12.5 million and $9.5 million to preferred unitholders, common unitholders and noncontrolling interests in consolidated real estate partnerships, respectively.

We and Aimco have a shelf registration statement that provides for the issuance of debt securities by us and debt and equity securities by Aimco.

Future Capital Needs

We expect to fund any future acquisitions, redevelopment projects, capital improvements and capital replacements principally with proceeds from property sales (including tax-free exchange proceeds), short-term borrowings, debt and equity financing (including tax credit equity) and operating cash flows.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk exposure relates to changes in base interest rates, credit risk spreads and availability of credit. We are not subject to any other material market rate or price risks. We use predominantly long-term, fixed-rate non-recourse property debt in order to avoid the refunding and repricing risks of short-term borrowings. We use short-term debt financing and working capital primarily to fund short-term uses and acquisitions and generally expect to refinance such borrowings with cash from operating activities, property sales proceeds, long-term debt or equity financings. We use total rate-of-return swaps to obtain the benefit of variable rates on certain of our fixed-rate debt instruments. We make limited use of other derivative financial instruments and we do not use them for trading or other speculative purposes.

We had $626.1 million of floating rate debt and $67.0 million of floating rate preferred units outstanding at March 31, 2010. Of the total floating rate debt, the major components were floating rate tax-exempt bond financing ($434.7 million), floating rate secured notes ($116.1 million), revolving loans ($14.8 million) and a term loan ($45.0 million). At March 31, 2010, we had approximately $440.3 million in cash and cash equivalents, restricted cash and notes receivable, the majority of which bear interest. The effect of our interest bearing assets would partially reduce the effect of an increase in variable interest rates. Historically, changes in tax-exempt interest rates have been at a ratio of less than 1:1 with changes in taxable interest rates. Floating rate tax-exempt bond financing is benchmarked against the SIFMA rate, which since 1990 has averaged 74% of the 30-day LIBOR rate. If the historical relationship continues, we estimate that an increase in 30-day LIBOR of 100 basis points (74 basis points for tax-exempt interest rates) with constant credit risk spreads would result in net income and net income attributable to the Partnership’s common unitholders being reduced (or the amounts of net loss and net loss attributable to the Partnership being increased) by $0.9 million and $1.5 million, respectively, on an annual basis.

The estimated aggregate fair value and carrying amount of our consolidated debt (including amounts reported in liabilities related to assets held for sale) was approximately $5.8 billion at March 31, 2010. If market rates for our fixed-rate debt were higher by 1.0% with constant credit risk spreads, the estimated fair value of our debt discussed above would decrease from $5.8 billion to $5.4 billion. If market rates for our debt discussed above were lower by 1.0% with constant credit risk spreads, the estimated fair value of our fixed-rate debt would increase from $5.8 billion to $6.1 billion.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. Risk Factors

As of the date of this report, there have been no material changes from the risk factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Unregistered Sales of Equity Securities. We did not issue any common OP Units in exchange for shares of Aimco Class A Common stock during the three months ended March 31, 2010.

(c) Repurchases of Equity Securities. Our Partnership Agreement generally provides that after holding the common OP Units for one year, our Limited Partners have the right to redeem their common OP Units for cash, subject to our prior right to cause Aimco to acquire some or all of the common OP Units tendered for redemption in exchange for shares of Aimco Class A Common Stock. Common OP Units redeemed for Aimco Class A Common Stock are generally on a one-for-one basis (subject to antidilution adjustments). During the three months ended March 31, 2010, no common OP Units were redeemed in exchange for Aimco Class A Common Stock. The following table summarizes repurchases of our equity securities for the three months ended March 31, 2010.

Maximum

Number

of Units that

Total Number of

May Yet Be

Total

Average

Units Purchased as

Purchased

Number

Price

Part of Publicly

Under the

of Units

Paid

Announced Plans or

Plans or

Period

Purchased

per Unit

Programs (1)

Programs (2)

January 1 – January 31, 2010

1,901

$

15.56

N/A

N/A

February 1 – February 28, 2010

2,553

$

15.62

N/A

N/A

March 1 – March 31, 2010

18,319

$

16.86

N/A

N/A

Total

22,773

$

16.61

Distribution Payments. Our Credit Agreement includes customary covenants, including a restriction on distributions and other restricted payments, but permits distributions during any 12-month period in an aggregate amount of up to 95% of our Funds From Operations, subject to certain non-cash adjustments, for such period or such amount as may be necessary for Aimco to maintain its REIT status.

ITEM 6. Exhibits

The following exhibits are filed with this report:

EXHIBIT NO. (1)
	10.1			Eighth Amendment to Senior Secured Credit Agreement, dated as of February 3, 2010, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the Borrowers, the pledgors and guarantors named therein and the lenders party thereto (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated February 3, 2010, is incorporated herein by this reference)
	31.1			Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2			Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	99.1			Agreement Regarding Disclosure of Long-Term Debt Instruments

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: April 30, 2010

EXHIBIT INDEX

EXHIBIT NO. (1)
	10.1			Eighth Amendment to Senior Secured Credit Agreement, dated as of February 3, 2010, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the Borrowers, the pledgors and guarantors named therein and the lenders party thereto (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated February 3, 2010, is incorporated herein by this reference)
	31.1			Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2			Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2			Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	99.1			Agreement Regarding Disclosure of Long-Term Debt Instruments