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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2022

OR

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

For the transition period from to

Commission File Number: 1-39686 (Apartment Income REIT Corp.)

Commission File Number: 0-24497 (Apartment Income REIT, L.P.)

img186090643_0.jpg 

APARTMENT INCOME REIT CORP.

APARTMENT INCOME REIT, L.P.

 

(Exact name of registrant as specified in its charter)

 

Maryland (Apartment Income REIT Corp.)

 

84-1299717

Delaware (Apartment Income REIT, L.P.)

 

84-1275621

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

4582 South Ulster Street, Suite 1700

 

 

Denver, Colorado

 

80237

(Address of principal executive offices)

 

(Zip Code)

(303) 757-8101

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Class A Common Stock (Apartment Income REIT Corp.)

 

AIRC

 

New York Stock Exchange

 

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.

 

Apartment Income REIT Corp.: Yes  ☒ No ☐

 

Apartment Income REIT, L.P.: Yes  ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

 

Apartment Income REIT Corp.: Yes  ☒ No ☐

 

Apartment Income REIT, L.P.: Yes  ☒ No ☐

 

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

Apartment Income REIT Corp.:

 

Apartment Income REIT, L.P.:

 

Large accelerated filer

 

 

Accelerated filer

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Apartment Income REIT Corp.:

 

Apartment Income REIT, L.P.:

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Apartment Income REIT Corp.: Yes     No ☒

 

Apartment Income REIT, L.P.: Yes     No ☒

The number of shares of Apartment Income REIT Corp. Class A Common Stock outstanding as of May 2, 2022: 157,097,052

 

 

 


Table of Contents

 

EXPLANATORY NOTE

This filing combines the quarterly reports on Form 10-Q for the quarterly period ended March 31, 2022, of Apartment Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating Partnership”), and their consolidated subsidiaries. The AIR Operating Partnership’s condensed consolidated financial statements include the accounts of the AIR Operating Partnership and its consolidated subsidiaries. Except as the context otherwise requires, “we,” “our,” and “us” refer to AIR, the AIR Operating Partnership, and their consolidated subsidiaries, collectively.

AIR, a Maryland corporation, is a self-administered and self-managed real estate investment trust. AIR, through wholly-owned subsidiaries, is the general and special limited partner of the AIR Operating Partnership. As of March 31, 2022, AIR owned approximately 92.3% of the legal interest in the common partnership units of the AIR Operating Partnership (“OP Units”) and 93.9% of the economic interest in the AIR Operating Partnership. The remaining 7.7% legal interest is owned by third-party limited partners. The legal ownership percentage is based on outstanding common stock and common OP Units, including unvested restricted stock and unvested LTIP units. The economic ownership percentage includes any unvested restricted stock and unvested LTIP units to the extent they are considered participating securities, as defined by accounting principles generally accepted in the United States (“GAAP”). As the sole general partner of the AIR Operating Partnership, AIR has exclusive control of the AIR Operating Partnership’s day-to-day management.

The AIR Operating Partnership holds all of AIR’s assets and manages the daily operations of AIR’s business. Pursuant to the AIR Operating Partnership agreement, AIR is required to contribute to the AIR Operating Partnership all proceeds from the offerings of its securities. In exchange for the contribution of such proceeds, AIR receives additional interests in the AIR Operating Partnership with similar terms (e.g., if AIR contributes proceeds of a stock offering, AIR receives partnership units with terms substantially similar to the stock issued by AIR).

We believe combining the periodic reports of AIR and the AIR Operating Partnership into this single report provides the following benefits:

We present our business as a whole, in the same manner our management views and operates the business;
We eliminate duplicative disclosure and provide a more streamlined and readable presentation because a substantial portion of the disclosures apply to both AIR and the AIR Operating Partnership; and
We save time and cost through the preparation of a single combined report rather than two separate reports.

We operate AIR and the AIR Operating Partnership as one enterprise, the management of AIR directs the management and operations of the AIR Operating Partnership, and the members of the Board of Directors of AIR are identical to those of the AIR Operating Partnership’s general partner.

We believe it is important to understand the few differences between AIR and the AIR Operating Partnership in the context of how AIR and the AIR Operating Partnership operate as a consolidated company. AIR has no assets or liabilities other than its investment in the AIR Operating Partnership, which is held directly and indirectly through certain intermediate holding companies (in which all of the common stock is owned by AIR). Also, AIR is a corporation that issues publicly traded equity from time to time, whereas the AIR Operating Partnership is a partnership that has no publicly traded equity. Except for the net proceeds from stock offerings by AIR, which are contributed to the AIR Operating Partnership in exchange for additional limited partnership interests (of a similar type and in an amount equal to the shares of stock sold in the offering), the AIR Operating Partnership generates all remaining capital required by its business. These sources include the AIR Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of debt and equity securities, including additional partnership units, and proceeds received from the sale of apartment communities.

Equity, partners’ capital, and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of AIR and those of the AIR Operating Partnership. Interests in the AIR Operating Partnership held by entities other than AIR, which we refer to as OP Units, are classified within partners’ capital in the AIR Operating Partnership’s financial statements and as noncontrolling interests in AIR’s financial statements.

To help investors understand the differences between AIR and the AIR Operating Partnership, this report provides separate condensed consolidated financial statements for AIR and the AIR Operating Partnership; a single set of condensed consolidated notes to such financial statements that includes separate discussions of each entity’s stockholders’ equity or partners’ capital, and earnings per share or earnings per unit, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity, where appropriate.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for AIR and the AIR Operating Partnership in order to establish that the requisite certifications have been made and that AIR and the AIR Operating Partnership are both compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

1


Table of Contents

 

APARTMENT INCOME REIT CORP.

APARTMENT INCOME REIT, L.P.

 

TABLE OF CONTENTS

 

FORM 10-Q

 

 

Page

 

PART I. FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS (Unaudited)

 

 

Apartment Income REIT Corp.:

 

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations

4

 

Condensed Consolidated Statements of Comprehensive Income

5

 

Condensed Consolidated Statements of Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Apartment Income REIT, L.P.:

 

 

Condensed Consolidated Balance Sheets

8

 

Condensed Consolidated Statements of Operations

9

 

Condensed Consolidated Statements of Comprehensive Income

10

 

Condensed Consolidated Statements of Partners’ Capital

11

 

Condensed Consolidated Statements of Cash Flows

12

 

Notes to the Condensed Consolidated Financial Statements of Apartment Income REIT Corp. and Apartment Income REIT, L.P.

13

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

21

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

34

ITEM 4.

CONTROLS AND PROCEDURES

35

 

PART II. OTHER INFORMATION

 

ITEM 1A.

RISK FACTORS

36

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

36

ITEM 6.

EXHIBITS

38

Signatures

 

39

 

 

2


Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Buildings and improvements

 

$

5,729,946

 

 

$

5,720,267

 

Land

 

 

1,162,311

 

 

 

1,164,814

 

Total real estate

 

 

6,892,257

 

 

 

6,885,081

 

Accumulated depreciation

 

 

(2,341,446

)

 

 

(2,284,793

)

Net real estate

 

 

4,550,811

 

 

 

4,600,288

 

Cash and cash equivalents

 

 

77,867

 

 

 

67,320

 

Restricted cash

 

 

26,044

 

 

 

25,441

 

Note receivable from Aimco

 

 

534,127

 

 

 

534,127

 

Leased real estate assets

 

 

466,203

 

 

 

466,355

 

Goodwill

 

 

32,286

 

 

 

32,286

 

Other assets, net

 

 

601,198

 

 

 

568,051

 

Assets held for sale

 

 

14,320

 

 

 

146,492

 

Total assets

 

$

6,302,856

 

 

$

6,440,360

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Non-recourse property debt, net

 

$

2,033,705

 

 

$

2,294,739

 

Term loans, net

 

 

1,145,226

 

 

 

1,144,547

 

Revolving credit facility borrowings

 

 

177,000

 

 

 

304,000

 

Total indebtedness

 

 

3,355,931

 

 

 

3,743,286

 

Accrued liabilities and other

 

 

603,308

 

 

 

592,774

 

Liabilities related to assets held for sale

 

 

425

 

 

 

85,775

 

Total liabilities

 

 

3,959,664

 

 

 

4,421,835

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred noncontrolling interests in AIR Operating Partnership

 

 

79,354

 

 

 

79,370

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Perpetual preferred stock

 

 

2,000

 

 

 

2,129

 

Common Stock, $0.01 par value, 1,021,175,000 shares authorized at March 31, 2022 and December 31, 2021, and 157,082,823 and 156,998,367 shares issued/outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

1,571

 

 

 

1,570

 

Additional paid-in capital

 

 

3,762,457

 

 

 

3,763,105

 

Accumulated other comprehensive loss

 

 

(783

)

 

 

 

Distributions in excess of earnings

 

 

(1,648,077

)

 

 

(1,953,779

)

Total AIR equity

 

 

2,117,168

 

 

 

1,813,025

 

Noncontrolling interests in consolidated real estate partnerships

 

 

(70,157

)

 

 

(70,883

)

Common noncontrolling interests in AIR Operating Partnership

 

 

216,827

 

 

 

197,013

 

Total equity

 

 

2,263,838

 

 

 

1,939,155

 

Total liabilities, preferred noncontrolling interests in AIR Operating Partnership, and equity

 

$

6,302,856

 

 

$

6,440,360

 

 

 

See notes to condensed consolidated financial statements.

3

 


Table of Contents

 

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

REVENUES

 

 

 

 

 

 

Rental and other property revenues

 

$

179,261

 

 

$

174,730

 

Other revenues

 

 

2,217

 

 

 

1,683

 

Total revenues

 

 

181,478

 

 

 

176,413

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

Property operating expenses

 

 

63,236

 

 

 

64,617

 

Depreciation and amortization

 

 

84,549

 

 

 

75,280

 

General and administrative expenses

 

 

6,597

 

 

 

4,414

 

Other expenses, net

 

 

4,018

 

 

 

2,876

 

 

 

 

158,400

 

 

 

147,187

 

 

 

 

 

 

 

 

Interest income

 

 

13,481

 

 

 

15,972

 

Interest expense

 

 

(22,107

)

 

 

(36,025

)

Loss on extinguishment of debt

 

 

(23,636

)

 

 

(1,010

)

Gain on derecognition of leased properties and dispositions of real estate

 

 

412,003

 

 

 

84,032

 

Loss from unconsolidated real estate partnerships

 

 

(2,014

)

 

 

 

Income before income tax benefit (expense)

 

 

400,805

 

 

 

92,195

 

Income tax benefit (expense)

 

 

579

 

 

 

(3,080

)

Net income

 

 

401,384

 

 

 

89,115

 

 

 

 

 

 

 

 

Noncontrolling interests:

 

 

 

 

 

 

Net loss attributable to noncontrolling interests in consolidated real estate partnerships

 

 

564

 

 

 

235

 

Net income attributable to preferred noncontrolling interests in AIR Operating Partnership

 

 

(1,603

)

 

 

(1,604

)

Net income attributable to common noncontrolling interests in AIR Operating Partnership

 

 

(24,167

)

 

 

(4,436

)

Net income attributable to noncontrolling interests

 

 

(25,206

)

 

 

(5,805

)

Net income attributable to AIR

 

 

376,178

 

 

 

83,310

 

Net income attributable to AIR preferred stockholders

 

 

(42

)

 

 

(50

)

Net income attributable to participating securities

 

 

(255

)

 

 

(64

)

Net income attributable to AIR common stockholders

 

$

375,881

 

 

$

83,196

 

 

 

 

 

 

 

 

Net income attributable to AIR common stockholders per share – basic

 

$

2.40

 

 

$

0.56

 

 

 

 

 

 

 

 

Net income attributable to AIR common stockholders per share – diluted

 

$

2.39

 

 

$

0.56

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding – basic

 

 

156,736

 

 

 

148,611

 

Weighted-average common shares outstanding – diluted

 

 

157,088

 

 

 

148,830

 

 

See notes to condensed consolidated financial statements.

4

 


Table of Contents

 

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net income

 

$

401,384

 

 

$

89,115

 

Unrealized loss on derivative instruments

 

 

(783

)

 

 

 

Reclassification of unrealized losses on available for sale debt securities

 

 

 

 

 

(2,071

)

Comprehensive income

 

 

400,601

 

 

 

87,044

 

Comprehensive income attributable to noncontrolling interests

 

 

(25,206

)

 

 

(5,673

)

Comprehensive income attributable to AIR

 

$

375,395

 

 

$

81,371

 

 

See notes to condensed consolidated financial statements.

5

 


Table of Contents

 

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended March 31, 2022 and 2021

(In thousands, except share data)

(Unaudited)

 

 

 

Perpetual Preferred Stock

 

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Noncontrolling
Interests in

 

 

Common
Noncontrolling
Interests in

 

 

 

 

 

 

Shares
Issued

 

 

Amount

 

 

Shares
Issued

 

 

Amount

 

 

Additional
Paid-
in Capital

 

 

Other
Comprehensive
Income (Loss)

 

 

Distributions in Excess
of Earnings

 

 

Total AIR
Equity

 

 

Consolidated
Real Estate
Partnerships

 

 

AIR
Operating
Partnership

 

 

Total
Equity

 

Balances at December 31, 2020

 

 

20

 

 

$

2,000

 

 

 

148,861,036

 

 

$

1,489

 

 

$

3,432,121

 

 

$

3,039

 

 

$

(2,131,798

)

 

$

1,306,851

 

 

$

(61,943

)

 

$

63,185

 

 

$

1,308,093

 

Redemption of AIR Operating Partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,223

)

 

 

(3,223

)

Amortization of share-based compensation cost

 

 

 

 

 

 

 

 

33,000

 

 

 

 

 

 

1,915

 

 

 

 

 

 

 

 

 

1,915

 

 

 

 

 

 

723

 

 

 

2,638

 

Effect of changes in ownership of consolidated entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,590

)

 

 

 

 

 

 

 

 

(2,590

)

 

 

 

 

 

2,590

 

 

 

 

Change in accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,939

)

 

 

 

 

 

(1,939

)

 

 

 

 

 

(132

)

 

 

(2,071

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

83,310

 

 

 

83,310

 

 

 

(235

)

 

 

4,436

 

 

 

87,511

 

Common Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(63,858

)

 

 

(63,858

)

 

 

 

 

 

 

 

 

(63,858

)

Preferred Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

(50

)

 

 

 

 

 

 

 

 

(50

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,402

)

 

 

(3,767

)

 

 

(5,169

)

Other, net

 

 

 

 

 

 

 

 

80,803

 

 

 

1

 

 

 

(752

)

 

 

 

 

 

15

 

 

 

(736

)

 

 

(1,039

)

 

 

 

 

 

(1,775

)

Balances at March 31, 2021

 

 

20

 

 

$

2,000

 

 

 

148,974,839

 

 

$

1,490

 

 

$

3,430,694

 

 

$

1,100

 

 

$

(2,112,381

)

 

$

1,322,903

 

 

$

(64,619

)

 

$

63,812

 

 

$

1,322,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

 

145

 

 

$

2,129

 

 

 

156,998,367

 

 

$

1,570

 

 

$

3,763,105

 

 

$

 

 

$

(1,953,779

)

 

$

1,813,025

 

 

$

(70,883

)

 

$

197,013

 

 

$

1,939,155

 

Redemption of AIR Operating Partnership units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,452

)

 

 

(3,452

)

Amortization of share-based compensation cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,890

 

 

 

 

 

 

 

 

 

1,890

 

 

 

 

 

 

860

 

 

 

2,750

 

Effect of changes in ownership of consolidated entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,686

)

 

 

 

 

 

 

 

 

(2,686

)

 

 

 

 

 

2,686

 

 

 

 

Contributions from noncontrolling interests in consolidated real estate partnerships

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,325

 

 

 

 

 

 

4,325

 

Change in accumulated other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(783

)

 

 

 

 

 

(783

)

 

 

 

 

 

 

 

 

(783

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

376,178

 

 

 

376,178

 

 

 

(564

)

 

 

24,167

 

 

 

399,781

 

Common Stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70,428

)

 

 

(70,428

)

 

 

 

 

 

 

 

 

(70,428

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,147

)

 

 

(4,447

)

 

 

(7,594

)

Other, net

 

 

(125

)

 

 

(129

)

 

 

84,456

 

 

 

1

 

 

 

148

 

 

 

 

 

 

(48

)