Financial Data and Key Metrics Changes - FFO for Q3 2023 was $0.64 per share, exceeding the midpoint of guidance by $0.01, with run rate FFO at $0.59 per share, up 7.3% year-over-year [21] - AFFO was $0.52 per share, reflecting a 4% year-over-year increase, with excess AFFO over dividends expected to be about $80 million for the full year [21][22] - Revenue increased by 6.8% year-over-year, while expenses rose by 8%, primarily due to timing [9] Business Line Data and Key Metrics Changes - New lease rates increased by 3.6%, renewals by 6%, and blended lease rates by 4.7% in Q3 [9] - The acquisition portfolio, now 20% of the business, saw revenue growth of 10.3% and net operating income growth of 15.2% [10] - Same-store net operating income grew by 6.3%, with an operating margin of 73.4% [9] Market Data and Key Metrics Changes - Occupancy rates improved from 94.6% in July to 96% in September, with October's average daily occupancy at 96.9% [11] - The company anticipates a strong start to 2024, with bad debt showing improvement and diversified portfolio mitigating pressures from new supply [11][12] Company Strategy and Development Direction - The company emphasizes a diversified portfolio across markets and price points, focusing on operational excellence and customer selection to enhance stability [5][6] - AIR is actively pursuing profitable acquisitions, having raised over $600 million through joint ventures and property sales [8][13] - The investment philosophy remains focused on generating positive spreads to the cost of capital and improving portfolio quality [14] Management's Comments on Operating Environment and Future Outlook - Management noted that interest rates have disrupted property pricing but created acquisition opportunities [5] - The company expects continued strong same-store NOI growth and a favorable outlook for 2024, despite potential headwinds from higher interest rates [38][39] - Management remains cautious about certain markets, particularly Northern California, but sees potential for recovery [48][56] Other Important Information - The company declared a quarterly cash dividend of $0.45 per share, reflecting an annualized yield of approximately 5.8% [22] - AIR's balance sheet is robust, with no debt maturities until Q2 2025 and $2.1 billion in available liquidity [20] Q&A Session Summary Question: Breakdown of NOI growth by properties - Management confirmed that 89% of GAV will be in the same-store pool next year, with expectations for growth from reacquired properties [25][26] Question: Impact of late fees on growth - Management acknowledged potential headwinds from reduced late fees but highlighted other initiatives to offset this [27][28] Question: Future joint venture activities - Management indicated that while joint ventures add complexity, they are necessary due to changes in capital markets and will continue to be a part of the strategy [29][30] Question: Guidance on same-store revenue - Management maintained that the midpoint of guidance is achievable, with expectations for blended lease rate growth remaining consistent [34][35] Question: Bad debt recovery efforts - Management emphasized their focus on resident quality and ongoing efforts to pursue delinquent accounts, with some success in small claims court [66][68]

[EXPLANATORY NOTE](index=2&type=section&id=EXPLANATORY%20NOTE) This filing combines the quarterly reports of Apartment Income REIT Corp. (AIR) and Apartment Income REIT, L.P. (AIR Operating Partnership) and their consolidated subsidiaries. AIR is a self-administered and self-managed REIT, with AIR Operating Partnership owning all assets and managing daily operations. AIR holds approximately 91.3% legal interest and 93.1% economic interest in the AIR Operating Partnership as of June 30, 2023. The combined report aims to present the business as a whole, eliminate duplicative disclosure, and save costs [Explanatory Note Details](index=2&type=section&id=Explanatory%20Note%20Details) This filing combines the quarterly reports of Apartment Income REIT Corp. (AIR) and Apartment Income REIT, L.P. (AIR Operating Partnership) and their consolidated subsidiaries. AIR is a self-administered and self-managed REIT, with AIR Operating Partnership owning all assets and managing daily operations. AIR holds approximately 91.3% legal interest and 93.1% economic interest in the AIR Operating Partnership as of June 30, 2023. The combined report aims to present the business as a whole, eliminate duplicative disclosure, and save costs - The report combines filings for Apartment Income REIT Corp. (AIR) and Apartment Income REIT, L.P. (AIR Operating Partnership) to present the business as a single enterprise, streamline disclosures, and reduce costs[7](index=7&type=chunk)[11](index=11&type=chunk)[14](index=14&type=chunk) - AIR is a self-administered and self-managed REIT, with AIR Operating Partnership holding all assets and managing daily operations[8](index=8&type=chunk)[10](index=10&type=chunk) AIR's Ownership in AIR Operating Partnership (as of June 30, 2023) | Ownership Type | Percentage | | :------------- | :--------- | | Legal Interest | 91.3% | | Economic Interest | 93.1% | [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements for Apartment Income REIT Corp. (AIR) and Apartment Income REIT, L.P. (AIR Operating Partnership) for the quarter ended June 30, 2023, along with comparative periods. It includes balance sheets, statements of operations, comprehensive income (loss), equity/partners' capital, and cash flows, followed by detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items [ITEM 1. FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Apartment Income REIT Corp. (AIR) and Apartment Income REIT, L.P. (AIR Operating Partnership) for the quarter ended June 30, 2023, along with comparative periods. It includes balance sheets, statements of operations, comprehensive income (loss), equity/partners' capital, and cash flows, followed by detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items [Apartment Income REIT Corp.: Condensed Consolidated Balance Sheets](index=5&type=section&id=Apartment%20Income%20REIT%20Corp.%3A%20Condensed%20Consolidated%20Balance%20Sheets) This section presents the Condensed Consolidated Balance Sheets for the company AIR Corp. Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Total assets | $6,407,010 | $6,551,883 | | Total indebtedness | $3,684,577 | $3,641,629 | | Total liabilities | $4,160,977 | $4,155,434 | | Total equity | $2,168,890 | $2,319,306 | - Total assets decreased by **$144.873 million** from December 31, 2022, to June 30, 2023, while total indebtedness increased by **$42.948 million**[21](index=21&type=chunk) [Apartment Income REIT Corp.: Condensed Consolidated Statements of Operations](index=6&type=section&id=Apartment%20Income%20REIT%20Corp.%3A%20Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the Condensed Consolidated Statements of Operations for the company AIR Corp. Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric (Three Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total revenues | $214,560 | $183,500 | $31,060 | 16.9% | | Net income (loss) | $598 | $211,659 | $(211,061) | -99.7% | | Net (loss) income attributable to AIR common stockholders | $(1,439) | $196,722 | $(198,161) | -100.7% | | Net (loss) income per share – basic and diluted | $(0.01) | $1.26 | $(1.27) | -100.8% | | Metric (Six Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total revenues | $426,553 | $364,978 | $61,575 | 16.9% | | Net income (loss) | $(9,350) | $613,043 | $(622,393) | -101.5% | | Net (loss) income attributable to AIR common stockholders | $(12,718) | $573,105 | $(585,823) | -102.2% | | Net (loss) income per share – basic and diluted | $(0.09) | $3.66 | $(3.75) | -102.5% | - Net income attributable to AIR common stockholders significantly decreased, resulting in a **loss of $0.01 per share** for the three months ended June 30, 2023, compared to a net income of $1.26 per share in the prior year, primarily due to a loss on dispositions and impairments of real estate and higher interest expense[23](index=23&type=chunk) [Apartment Income REIT Corp.: Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Apartment%20Income%20REIT%20Corp.%3A%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents the Condensed Consolidated Statements of Comprehensive Income (Loss) for the company AIR Corp. Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric (Three Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :---------------------------------- | :-------- | :-------- | :---------- | :--------- | | Net income (loss) | $598 | $211,659 | $(211,061) | -99.7% | | Unrealized gain on derivative instruments, net | $16,631 | $13,715 | $2,916 | 21.3% | | Comprehensive income (loss) | $11,865 | $227,363 | $(215,498) | -94.8% | | Metric (Six Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :---------------------------------- | :-------- | :-------- | :---------- | :--------- | | Net income (loss) | $(9,350) | $613,043 | $(622,393) | -101.5% | | Unrealized gain on derivative instruments, net | $5,191 | $12,932 | $(7,741) | -59.9% | | Comprehensive income (loss) | $(13,677) | $627,964 | $(641,641) | -102.2% | [Apartment Income REIT Corp.: Condensed Consolidated Statements of Equity](index=8&type=section&id=Apartment%20Income%20REIT%20Corp.%3A%20Condensed%20Consolidated%20Statements%20of%20Equity) This section presents the Condensed Consolidated Statements of Equity for the company AIR Corp. Total Equity (in thousands) | Date | Total Equity | | :--------------- | :----------- | | June 30, 2023 | $2,168,890 | | December 31, 2022 | $2,319,306 | | June 30, 2022 | $2,288,825 | | December 31, 2021 | $1,939,155 | - Total AIR equity decreased from **$2,156,417 thousand** at December 31, 2022, to **$1,999,465 thousand** at June 30, 2023, primarily due to distributions in excess of earnings and net loss[21](index=21&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) [Apartment Income REIT Corp.: Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Apartment%20Income%20REIT%20Corp.%3A%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the Condensed Consolidated Statements of Cash Flows for the company AIR Corp. Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2023 | 2022 | Change ($) | Change (%) | | :----------------- | :---------- | :---------- | :---------- | :--------- | | Operating Activities | $182,662 | $201,496 | $(18,834) | -9.3% | | Investing Activities | $(228,410) | $574,667 | $(803,077) | -139.8% | | Financing Activities | $(125,744) | $(768,033) | $642,289 | 83.6% | | Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(171,492) | $8,130 | $(179,622) | -2209.4% | - Net cash used in investing activities significantly increased in 2023, shifting from a net cash provided of **$574.7 million** in 2022 to a net cash used of **$228.4 million**, primarily due to lower proceeds from dispositions and note repayments[31](index=31&type=chunk) [Apartment Income REIT, L.P.: Condensed Consolidated Balance Sheets](index=11&type=section&id=Apartment%20Income%20REIT%2C%20L.P.%3A%20Condensed%20Consolidated%20Balance%20Sheets) This section presents the Condensed Consolidated Balance Sheets for the company AIR Operating Partnership Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Total assets | $6,407,010 | $6,551,883 | | Total indebtedness | $3,684,577 | $3,641,629 | | Total liabilities | $4,160,977 | $4,155,434 | | Total partners' capital | $2,168,890 | $2,319,306 | - The balance sheet for AIR Operating Partnership mirrors that of AIR Corp. in total assets, liabilities, and equity/partners' capital, reflecting its role as the primary asset holder and operator[34](index=34&type=chunk) [Apartment Income REIT, L.P.: Condensed Consolidated Statements of Operations](index=12&type=section&id=Apartment%20Income%20REIT%2C%20L.P.%3A%20Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the Condensed Consolidated Statements of Operations for the company AIR Operating Partnership Condensed Consolidated Statements of Operations Highlights (in thousands, except per unit data) | Metric (Three Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :--------- | | Total revenues | $214,560 | $183,500 | $31,060 | 16.9% | | Net income (loss) | $598 | $211,659 | $(211,061) | -99.7% | | Net (loss) income attributable to the AIR Operating Partnership's common unitholders | $(1,754) | $209,471 | $(211,225) | -100.8% | | Net (loss) income per unit – basic and diluted | $(0.01) | $1.26 | $(1.27) | -100.8% | | Metric (Six Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :---------------------------------- | :---------- | :---------- | :---------- | :---------- | | Total revenues | $426,553 | $364,978 | $61,575 | 16.9% | | Net income (loss) | $(9,350) | $613,043 | $(622,393) | -101.5% | | Net (loss) income attributable to the AIR Operating Partnership's common unitholders | $(14,037) | $609,519 | $(623,556) | -102.3% | | Net (loss) income per unit – basic and diluted | $(0.09) | $3.66 | $(3.75) | -102.5% | - Similar to AIR Corp., the AIR Operating Partnership experienced a significant decline in net income attributable to common unitholders, resulting in a **loss of $0.01 per unit** for the three months ended June 30, 2023, compared to a net income of $1.26 per unit in the prior year[37](index=37&type=chunk) [Apartment Income REIT, L.P.: Condensed Consolidated Statements of Comprehensive Income (Loss)](index=13&type=section&id=Apartment%20Income%20REIT%2C%20L.P.%3A%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents the Condensed Consolidated Statements of Comprehensive Income (Loss) for the company AIR Operating Partnership Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric (Three Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :---------------------------------- | :-------- | :-------- | :---------- | :--------- | | Net income (loss) | $598 | $211,659 | $(211,061) | -99.7% | | Unrealized gain on derivative instruments, net | $16,631 | $13,715 | $2,916 | 21.3% | | Comprehensive income (loss) | $11,865 | $227,363 | $(215,498) | -94.8% | | Metric (Six Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :---------------------------------- | :-------- | :-------- | :---------- | :--------- | | Net income (loss) | $(9,350) | $613,043 | $(622,393) | -101.5% | | Unrealized gain on derivative instruments, net | $5,191 | $12,932 | $(7,741) | -59.9% | | Comprehensive income (loss) | $(13,677) | $627,964 | $(641,641) | -102.2% | [Apartment Income REIT, L.P.: Condensed Consolidated Statements of Partners' Capital](index=14&type=section&id=Apartment%20Income%20REIT%2C%20L.P.%3A%20Condensed%20Consolidated%20Statements%20of%20Partners%27%20Capital) This section presents the Condensed Consolidated Statements of Partners' Capital for the company AIR Operating Partnership Total Partners' Capital (in thousands) | Date | Total Partners' Capital | | :--------------- | :---------------------- | | June 30, 2023 | $2,168,890 | | December 31, 2022 | $2,319,306 | | June 30, 2022 | $2,288,825 | | December 31, 2021 | $1,939,155 | - Total partners' capital for AIR Operating Partnership decreased from **$2,398,091 thousand** at December 31, 2022, to **$2,248,977 thousand** at June 30, 2023, primarily due to net loss and distributions to common unitholders[34](index=34&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) [Apartment Income REIT, L.P.: Condensed Consolidated Statements of Cash Flows](index=17&type=section&id=Apartment%20Income%20REIT%2C%20L.P.%3A%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the Condensed Consolidated Statements of Cash Flows for the company AIR Operating Partnership Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2023 | 2022 | Change ($) | Change (%) | | :----------------- | :---------- | :---------- | :---------- | :--------- | | Operating Activities | $182,662 | $201,496 | $(18,834) | -9.3% | | Investing Activities | $(228,410) | $574,667 | $(803,077) | -139.8% | | Financing Activities | $(125,744) | $(768,033) | $642,289 | 83.6% | | Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(171,492) | $8,130 | $(179,622) | -2209.4% | - Net cash used in investing activities for the AIR Operating Partnership shifted from a net cash provided of **$574.7 million** in 2022 to a net cash used of **$228.4 million** in 2023, primarily due to reduced proceeds from dispositions and note repayments[45](index=45&type=chunk) [Notes to the Condensed Consolidated Financial Statements of Apartment Income REIT Corp. and Apartment Income REIT, L.P.:](index=18&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20of%20Apartment%20Income%20REIT%20Corp.%20and%20Apartment%20Income%20REIT%2C%20L.P.%3A) This section provides detailed notes to the condensed consolidated financial statements, covering basis of presentation, accounting policies, and specific financial items [Note 1 — Basis of Presentation and Organization](index=18&type=section&id=Note%201%20%E2%80%94%20Basis%20of%20Presentation%20and%20Organization) This note clarifies the consolidated financial statements include Apartment Income REIT Corp. (AIR), Apartment Income REIT, L.P. (AIR Operating Partnership), and their subsidiaries. It details AIR's structure as a self-administered REIT, its general and special limited partner interests in the Operating Partnership, and the portfolio of 73 stabilized multi-family properties across 10 states and D.C. as of June 30, 2023 - The financial statements consolidate AIR, AIR Operating Partnership, and their subsidiaries, with AIR Operating Partnership conducting all business operations[47](index=47&type=chunk)[53](index=53&type=chunk) - As of June 30, 2023, the portfolio included **73 apartment communities** with **25,739 apartment homes**, with an average ownership of approximately **87%**[54](index=54&type=chunk)[55](index=55&type=chunk) AIR's Ownership in AIR Operating Partnership (as of June 30, 2023) | Ownership Type | Percentage | | :------------- | :--------- | | Legal Interest | 91.3% | | Economic Interest | 93.1% | [Note 2 — Summary of Significant Accounting Policies](index=19&type=section&id=Note%202%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies, including the consolidation of Variable Interest Entities (VIEs) where the company is the primary beneficiary. It also details the presentation of redeemable preferred OP Units as temporary equity/partners' capital due to their redeemable nature and provides a rollforward of their redemption value - The company consolidates VIEs where it is deemed the primary beneficiary, having power to direct activities and absorb significant losses or receive significant benefits[57](index=57&type=chunk) - Redeemable preferred OP Units are presented as temporary equity/partners' capital because they are redeemable at the holders' option for cash or AIR Common Stock[58](index=58&type=chunk) Redeemable Preferred OP Units Redemption Value Rollforward (in thousands) | Metric | Amount | | :----------------------- | :--------- | | Balance at January 1, 2023 | $77,143 | | Preferred distributions | $(3,140) | | Net income allocated to preferred units | $3,140 | | Balance at June 30, 2023 | $77,143 | [Note 3 — Significant Transactions](index=20&type=section&id=Note%203%20%E2%80%94%20Significant%20Transactions) This note details significant transactions, including the acquisition of one apartment community for $298 million in South Florida during H1 2023. It also covers dispositions of two apartment communities in Q2 2023, impairment losses totaling $23.6 million on three real estate assets, and the formation of two joint ventures: the Value-Add JV (70% interest sold) and the Core JV (47% interest sold in 10 properties) Apartment Community Acquisition (H1 2023, in thousands) | Item | Amount | | :-------------------- | :--------- | | Purchase price | $298,000 | | Capitalized transaction costs | $5,469 | | Total consideration | $303,469 | - During Q2 2023, the company sold two apartment communities and recognized non-cash impairment losses of **$8.2 million** and **$15.4 million** on three real estate assets, totaling **$23.6 million**[63](index=63&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - Formed two joint ventures: the Value-Add JV (sold **70% interest** in Huntington Gateway, recognized **$6.4 million** gain) and the Core JV (sold **47% interest** in 10 properties, expected to generate **$813.3 million** cash proceeds)[70](index=70&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) [Note 4 — Leases](index=21&type=section&id=Note%204%20%E2%80%94%20Leases) This note provides details on lease income from tenant arrangements, distinguishing between fixed and variable payments. It also outlines the average remaining term for residential leases (17.1 months) and the future minimum annual rental payments contractually obligated to be received Total Lease Income (in thousands) | Lease Income Type (Three Months Ended June 30) | 2023 | 2022 | | :--------------------------------------------- | :-------- | :-------- | | Fixed lease income | $196,718 | $169,337 | | Variable lease income | $15,253 | $11,216 | | Total lease income | $211,971 | $180,553 | | Lease Income Type (Six Months Ended June 30) | 2023 | 2022 | | :--------------------------------------------- | :-------- | :-------- | | Fixed lease income | $393,054 | $337,567 | | Variable lease income | $28,541 | $22,021 | | Total lease income | $421,595 | $359,588 | - As of June 30, 2023, residential leases have an average remaining term of **17.1 months**[74](index=74&type=chunk) Future Minimum Annual Rental Payments (in thousands) | Year | Amount | | :--------------- | :--------- | | 2023 (remaining) | $262,306 | | 2024 | $258,690 | | 2025 | $41,745 | | 2026 | $11,214 | | 2027 | $9,701 | | Thereafter | $34,712 | | Total | $618,368 | [Note 5 — Debt](index=22&type=section&id=Note%205%20%E2%80%94%20Debt) This note summarizes the company's total indebtedness, comprising secured and unsecured debt, and details changes in debt structure, including new fixed-rate financing and a secured credit facility. It also lists financial covenants that the company must maintain, such as leverage and fixed charge coverage ratios Total Indebtedness (in thousands) | Debt Type | June 30, 2023 | December 31, 2022 | | :------------------------ | :------------ | :---------------- | | Total non-recourse property debt, net | $2,197,437 | $1,985,430 | | Total unsecured debt, net | $1,487,140 | $1,656,199 | | Total indebtedness | $3,684,577 | $3,641,629 | - In Q1 2023, AIR borrowed **$320 million** in 10-year fixed-rate financing at **4.9% interest**, used to refinance a floating rate loan and reduce revolving credit facility borrowings[75](index=75&type=chunk) - Established a secured credit facility for up to **$1 billion** in committed property-level financing with a 15-year term, increasing total liquidity to approximately **$1.8 billion**[76](index=76&type=chunk) - Key financial covenants include a maximum leverage ratio of **0.60 to 1.00** and a fixed charge coverage ratio of no less than **1.50 to 1.00**[77](index=77&type=chunk) [Note 6 — Commitments and Contingencies](index=22&type=section&id=Note%206%20%E2%80%94%20Commitments%20and%20Contingencies) This note addresses legal matters and environmental liabilities. It states that the company is party to various legal actions not expected to have a material adverse effect. Environmental obligations, such as asset retirement obligations (AROs) for hazardous materials, are generally not reasonably estimable due to timing uncertainties, with estimable AROs being immaterial - The company is involved in various legal actions, but none are expected to have a material adverse effect on financial condition, results of operations, or cash flows[78](index=78&type=chunk) - Legal obligations for environmental remediation (AROs) are generally not reasonably estimable due to significant uncertainties in timing and manner of settlement, and estimable AROs are immaterial[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 7 — Earnings and Dividends per Share and per Unit](index=23&type=section&id=Note%207%20%E2%80%94%20Earnings%20and%20Dividends%20per%20Share%20and%20per%20Unit) This note provides reconciliations for basic and diluted earnings per share (EPS) and earnings per unit (EPU) for both AIR and AIR Operating Partnership. It also states the dividends and distributions paid per share/unit for the periods Earnings per Share/Unit (Basic and Diluted) | Metric (Three Months Ended June 30) | 2023 | 2022 | | :---------------------------------- | :-------- | :-------- | | Earnings per share – basic and diluted | $(0.01) | $1.26 | | Earnings per unit – basic and diluted | $(0.01) | $1.26 | | Metric (Six Months Ended June 30) | 2023 | 2022 | | :---------------------------------- | :-------- | :-------- | | Earnings per share – basic and diluted | $(0.09) | $3.66 | | Earnings per unit – basic and diluted | $(0.09) | $3.66 | - Dividends and distributions paid per share of Common Stock and per common unit were **$0.45** for the three months and **$0.90** for the six months ended June 30, 2023 and 2022, respectively[81](index=81&type=chunk) - Approximately **2.2 million** common share equivalent securities were excluded from diluted EPS calculation for Q2 2023 as they were anti-dilutive[82](index=82&type=chunk) [Note 8 — Fair Value Measurements](index=24&type=section&id=Note%208%20%E2%80%94%20Fair%20Value%20Measurements) This note describes the three-level GAAP fair value hierarchy used for measuring assets and liabilities. It summarizes recurring fair value measurements for derivative instruments and treasury rate locks, and notes that carrying values for cash, receivables, and short-term debt approximate fair value. Non-recurring fair value measurements include a real estate asset written down for impairment - The company uses a three-level valuation hierarchy (Level 1, 2, 3) for fair value measurements, prioritizing observable inputs[83](index=83&type=chunk) Recurring Fair Value Measurements (as of June 30, 2023, in thousands) | Instrument | Total Fair Value | | :------------------------------ | :--------------- | | Interest rate swaps - pay-fixed, receive floating | $35,395 | | Interest rate swaps - pay-floating, receive fixed | $(1,959) | | Treasury rate lock | $2,236 | - As of June 30, 2023, one real estate asset was measured at fair value on a nonrecurring basis at **$19.9 million** due to impairment, classified as Level 2[86](index=86&type=chunk) [Note 9 — Derivative Financial Instruments and Hedging Activities](index=25&type=section&id=Note%209%20%E2%80%94%20Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) This note details the company's use of interest rate derivatives, primarily swaps and treasury locks, to manage interest rate risk and add predictability to interest expense. It explains the accounting treatment for cash flow hedges (recognized in OCI) and economic hedges (recognized in earnings), noting a de-designation of $830 million in swaps and new pay-floating, receive-fixed swaps in Q2 2023 - The company uses interest rate swaps and treasury locks to manage interest rate risk, with changes in fair value of cash flow hedges recognized in OCI and economic hedges in earnings[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) - In Q2 2023, **$830 million** of pay-fixed, receive-floating interest rate swaps were de-designated, with **$29.5 million** of unrealized gains to be reclassified to earnings over the remaining debt term[90](index=90&type=chunk) - New **$480 million** pay-floating, receive-fixed interest rate swaps were entered into in Q2 2023, not designated as accounting hedges, with changes in fair value recognized in earnings[92](index=92&type=chunk) [Note 10 — Variable Interest Entities](index=27&type=section&id=Note%2010%20%E2%80%94%20Variable%20Interest%20Entities) This note clarifies the company's involvement with Variable Interest Entities (VIEs), consolidating the AIR Operating Partnership and four other VIEs that own apartment communities. It also details interests in unconsolidated joint ventures, including the Value-Add JV (30% interest) and a joint venture with Blackstone (20% interest), where the company is not the primary beneficiary - AIR consolidates the AIR Operating Partnership and four other VIEs that own **15 apartment communities** with **5,041 homes** as of June 30, 2023[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - The company holds interests in unconsolidated joint ventures, including a **30% interest** in the Value-Add JV and a **20% interest** in a joint venture with Blackstone, where it is not the primary beneficiary[100](index=100&type=chunk)[101](index=101&type=chunk) Assets and Liabilities of Consolidated VIEs (excluding AIR Operating Partnership, in thousands) | Category | June 30, 2023 | December 31, 2022 | | :---------- | :------------ | :---------------- | | Net real estate | $1,040,597 | $1,066,482 | | Total Assets | $1,135,333 | $1,143,723 | | Non-recourse property debt, net | $1,204,242 | $1,212,065 | | Total Liabilities | $1,240,488 | $1,247,430 | [Note 11 — Business Segments](index=28&type=section&id=Note%2011%20%E2%80%94%20Business%20Segments) This note defines the company's two business segments: Same Store (stabilized communities) and Other Real Estate (recently acquired, leased, or to-be-sold properties). Performance is assessed using proportionate property Net Operating Income (NOI), which excludes utility reimbursements and certain offsite costs. As of June 30, 2023, the Same Store segment included 63 communities (22,794 homes) and Other Real Estate included 10 communities (2,945 homes) - The company operates in two segments: Same Store (**63 communities, 22,794 homes**) and Other Real Estate (**10 communities, 2,945 homes**) as of June 30, 2023[103](index=103&type=chunk)[105](index=105&type=chunk) - Proportionate property NOI, which excludes utility reimbursements and certain offsite costs, is used to assess segment operating performance[104](index=104&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) Proportionate Property Net Operating Income (in thousands) | Segment (Three Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :----------------------------------- | :---------- | :---------- | :---------- | :--------- | | Same Store | $118,850 | $107,408 | $11,442 | 10.7% | | Other Real Estate | $19,044 | $1,729 | $17,315 | nm | | Total | $137,894 | $109,137 | $28,757 | 26.3% | | Segment (Six Months Ended June 30) | 2023 | 2022 | Change ($) | Change (%) | | :----------------------------------- | :---------- | :---------- | :---------- | :--------- | | Same Store | $235,505 | $210,852 | $24,653 | 11.7% | | Other Real Estate | $37,590 | $2,024 | $35,566 | nm | | Total | $273,095 | $212,876 | $60,219 | 28.3% | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=32&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance and condition for the quarter ended June 30, 2023. It covers strategic objectives, operational excellence, significant transactions, balance sheet and liquidity management, dividend policy, and team culture. The discussion also includes a detailed analysis of operating results, non-GAAP financial measures like FFO and leverage ratios, and an outlook on future capital needs [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements, which are based on management's current expectations and are subject to various risks and uncertainties. These risks include fluctuations in real estate values, economic conditions, operating costs, financing risks, and legal/regulatory changes, which could cause actual results to differ materially - Forward-looking statements are subject to risks including real estate and operating risks, national and local economic conditions (inflation, recession), competitive housing supply, changes in operating costs, and financing risks (interest rate changes)[113](index=113&type=chunk) - The company assumes no obligation to revise or update forward-looking statements to reflect future events or circumstances[115](index=115&type=chunk) [Executive Overview](index=32&type=section&id=Executive%20Overview) The executive overview emphasizes AIR's strategic objectives: a simple, efficient business model, a diversified portfolio of stabilized multi-family properties, and a low-leveraged balance sheet. Key goals include improving property operations, maintaining an efficient cost structure, disciplined capital allocation, forming private capital partnerships, and commitment to corporate responsibility - Strategic objectives include pursuing a simple, efficient business model, maintaining a high-quality diversified portfolio, continuously improving property operations, and maintaining a flexible, low-levered balance sheet[117](index=117&type=chunk) - As of June 30, 2023, the portfolio comprised **73 apartment communities** with **25,739 apartment homes** across 10 states and D.C., with an average ownership of approximately **87%**[118](index=118&type=chunk) [Operational Excellence](index=33&type=section&id=Operational%20Excellence) Operational excellence is demonstrated by a record 74.2% Same Store NOI margin in Q2 2023, driven by 8.8% residential rent growth and controlled expenses. Average Daily Occupancy (ADO) declined 190 basis points sequentially due to seasonality and increased move-outs from expiring COVID-related protections, with anticipation of recovery in Q3 and Q4 - Second quarter 2023 Same Store NOI margin was **74.2%**, up **120 basis points** year-over-year, an AIR record for the second quarter[120](index=120&type=chunk) - Residential Rents grew by **8.8%** and controllable expenses increased by only **100 basis points**[125](index=125&type=chunk) - Average Daily Occupancy (ADO) declined **190 basis points** sequentially due to normal seasonality (110 bps) and increased move-outs of non-paying residents (60 bps), expected to rebound in Q3 and Q4[121](index=121&type=chunk) Acquisition Portfolio Performance (Three Months Ended June 30, 2023) | Year Class | Apartment Communities | % of Gross Asset Value | Year-over-Year Rev Change | Year-over-Year Exp Change | Year-over-Year NOI Change | Sequential NOI Change | | :--------- | :-------------------- | :--------------------- | :------------------------ | :------------------------ | :------------------------ | :-------------------- | | 2021 | 5 | 8.0% | 19.0% | (2.2%) | 30.5% | 4.9% | | 2022 & 2023 | 5 | 9.0% | N/A | N/A | N/A | 3.4% | | Total Acquisition Portfolio | 10 | 17.0% | N/A | N/A | N/A | 4.1% | [Transactions](index=33&type=section&id=Transactions) The company employs a 'paired trades' strategy to acquire properties, enhance their value through 'AIR Edge' operations, and then sell them to reinvest capital for accelerated growth. Two joint ventures were formed: the Value-Add JV (70% interest sold in Huntington Gateway) and the Core JV (47% interest sold in 10 properties). The company is also completing its strategic exit from New York City through property sales, recognizing $1.5 billion in non-cash GAAP gains from dispositions since the Separation - AIR's strategy involves 'paired trades' to acquire properties, deploy 'AIR Edge' operational expertise to improve profitability, and then sell them to reinvest capital for higher returns[126](index=126&type=chunk)[127](index=127&type=chunk) - Formed two joint ventures in Q2/Q3 2023: the Value-Add JV (sold **70% interest** in Huntington Gateway) and the Core JV (sold **47% interest** in 10 properties, expected to generate **$813.3 million** cash)[128](index=128&type=chunk)[73](index=73&type=chunk) - Nearing completion of strategic exit from New York City, with **$1.5 billion** in non-cash GAAP gains recognized from **$2.2 billion** of dispositions since the Separation[130](index=130&type=chunk) Joint Venture Partnerships Overview | JV Name | Formation Date | Gross Asset Value @ 100% | AIR / JV Partner Ownership | Number of Properties | Units | Average Revenue per Unit | | :---------------- | :------------- | :----------------------- | :------------------------- | :------------------- | :---- | :----------------------- | | California JV | September 2020 | $2.4B | 61% / 39% | 12 | 4,051 | $3,389 | | Washington, D.C. JV | October 2021 | $0.5B | 20% / 80% | 3 | 1,748 | $2,070 | | Core JV | July 2023 | $1.1B | 53% / 47% | 10 | 3,093 | $2,534 | | Value-Add JV | June 2023 | $0.1B | 30% / 70% | 1 | 443 | $2,307 | [Balance Sheet and Liquidity](index=34&type=section&id=Balance%20Sheet%20and%20Liquidity) AIR targets a Net Leverage to EBITDAre ratio between 5.0x and 6.0x, focusing on fixed-rate, long-term debt with laddered maturities. Pro forma for announced joint ventures, Net Leverage to EBITDAre is reduced to 5.9x, with 96% fixed-rate leverage and $2.3 billion in available liquidity, supported by $5.8 billion in unencumbered property value - AIR targets Net Leverage to EBITDAre between **5.0x to 6.0x**, with a focus on fixed-rate, long-term debt and laddered maturities[131](index=131&type=chunk) - Pro forma for announced joint ventures, Net Leverage to EBITDAre is reduced to **5.9x**, with **96% fixed-rate leverage** and limited repricing risk before Q2 2025[133](index=133&type=chunk) - Available liquidity is **$2.3 billion**, with access to more potentially secured by **$5.8 billion** in unencumbered property value[133](index=133&type=chunk) [Dividend and Equity Capital Markets](index=35&type=section&id=Dividend%20and%20Equity%20Capital%20Markets) On July 25, 2023, AIR's Board of Directors declared a quarterly cash dividend of $0.45 per share of Common Stock, targeting a 75% payout ratio on Pro forma FFO for 2023, which is expected to have favorable tax characteristics - A quarterly cash dividend of **$0.45 per share** of Common Stock was declared on July 25, 2023, payable on August 29, 2023[134](index=134&type=chunk) - The Board targeted a **75% payout ratio** on Pro forma FFO for 2023, expecting favorable tax characteristics[134](index=134&type=chunk) [Team and Culture](index=35&type=section&id=Team%20and%20Culture) The company emphasizes a culture of productivity, innovation, and cost reduction through automation and technology. It fosters a collaborative, respectful, and responsible team environment, prioritizing internal promotions and talent development. This focus has led to significant industry recognition for customer service and being a top workplace - The company focuses on productivity, innovation, and cost reduction through automation, technology, and resident retention[135](index=135&type=chunk) - A collaborative and productive culture, based on respect and personal responsibility, is reinforced by a preference for internal promotion and talent development[137](index=137&type=chunk) - Recognized as a Kingsley Excellence Elite Five multifamily company, a winner of the 2023 Kingsley Excellence Awards for customer service (ranking second overall, first among publicly traded REITs), and multiple 'Top Workplaces' awards[138](index=138&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) The company reported a net loss attributable to common stockholders of $0.01 per share for Q2 2023 and $0.09 per share for H1 2023, a significant decline from prior year's net income. Pro forma FFO per share also decreased to $0.58 for Q2 2023 and $1.12 for H1 2023, primarily due to impairment losses, lower interest income from the Aimco note repayment, and higher interest expense, partially offset by increased property operations contribution Net (Loss) Income Attributable to AIR Common Stockholders per Share (Diluted) | Period (Ended June 30) | 2023 | 2022 | | :--------------------- | :-------- | :-------- | | Three Months | $(0.01) | $1.26 | | Six Months | $(0.09) | $3.66 | Pro forma FFO per Share | Period (Ended June 30) | 2023 | 2022 | | :--------------------- | :-------- | :-------- | | Three Months | $0.58 | $0.66 | | Six Months | $1.12 | $1.23 | - The decline in net income and Pro forma FFO was primarily driven by impairment losses, lower interest income from the Aimco note repayment, and higher interest expense, partially offset by increased contribution from property operations[141](index=141&type=chunk)[148](index=148&type=chunk) [Property Operations](index=36&type=section&id=Property%20Operations) The Same Store segment's proportionate property NOI increased by 10.6% for Q2 2023 and 11.6% for H1 2023, driven by an 8.8% and 9.4% increase in residential rental rates, respectively, partially offset by a decrease in Average Daily Occupancy (ADO). The Other Real Estate segment's NOI significantly increased due to contributions from recently acquired properties - Same Store proportionate property NOI increased by **10.6%** for Q2 2023 and **11.6%** for H1 2023, excluding ownership changes[150](index=150&type=chunk)[152](index=152&type=chunk) - This increase was primarily due to an **8.8% (Q2)** and **9.4% (H1)** increase in residential rental rates, partially offset by a **1.1% (Q2)** and **0.7% (H1)** decrease in ADO[150](index=150&type=chunk)[152](index=152&type=chunk) - Other Real Estate proportionate property NOI increased by **$17.3 million (Q2)** and **$35.6 million (H1)** due to contributions from properties acquired in 2022 and 2023[151](index=151&type=chunk)[153](index=153&type=chunk) [Non-Segment Real Estate Operations](index=38&type=section&id=Non-Segment%20Real%20Estate%20Operations) Non-segment real estate operations, which include offsite property management costs, casualty losses, and results from sold/held-for-sale properties, decreased by $6.6 million for Q2 2023 and $20.6 million for H1 2023. This decline was primarily due to lower NOI from sold properties and increased casualty losses - Non-segment real estate operations decreased by **$6.6 million** for Q2 2023 and **$20.6 million** for H1 2023 compared to the prior year[155](index=155&type=chunk) - The decrease was primarily attributable to **$6.7 million (Q2)** and **$16.4 million (H1)** lower NOI from sold properties, a **$2.6 million** increase in casualty losses (H1), and a **$1.6 million** increase in property management expenses (H1)[155](index=155&type=chunk) [Depreciation and Amortization](index=38&type=section&id=Depreciation%20and%20Amortization) Depreciation and amortization expense increased by $10.6 million (13.5%) for Q2 2023 and $21.7 million (13.3%) for H1 2023 compared to the prior year. This increase is mainly due to properties acquired after June 30, 2022, partially offset by reduced depreciation from sold properties - Depreciation and amortization expense increased by **$10.6 million (13.5%)** for Q2 2023 and **$21.7 million (13.3%)** for H1 2023[156](index=156&type=chunk) - The increase is primarily due to properties acquired subsequent to June 30, 2022, partially offset by reduced depreciation from sold properties[156](index=156&type=chunk) [Other expenses (income), net](index=38&type=section&id=Other%20expenses%20(income)%2C%20net) Other expenses (income), net, decreased by $5.6 million for Q2 2023, shifting from income to expense, primarily due to fees earned from the Value-Add JV and services under a transition agreement, partially offset by a prior year gain on a cost basis investment. For H1 2023, other expense, net, increased by $5.2 million - Other expenses (income), net, decreased by **$5.6 million** for Q2 2023 (from income of **$3.1 million** to expense of **$2.5 million**)[158](index=158&type=chunk) - This change was primarily due to fees earned from the Value-Add JV and services provided under a transition services agreement, partially offset by a 2022 gain on a cost basis investment[158](index=158&type=chunk)[159](index=159&type=chunk) - For H1 2023, other expense, net, increased by **$5.2 million** compared to 2022[159](index=159&type=chunk) [Interest Income](index=38&type=section&id=Interest%20Income) Interest income significantly decreased by $24.1 million (94.1%) for Q2 2023 and $36.1 million (92.3%) for H1 2023 compared to the prior year. This substantial decline is primarily attributed to the repayment of the note receivable from Aimco in 2022, including a $12.9 million prepayment penalty received in Q2 2022, and lower interest income from properties previously leased to Aimco - Interest income decreased by **$24.1 million (94.1%)** for Q2 2023 and **$36.1 million (92.3%)** for H1 2023[160](index=160&type=chunk) - The decrease was primarily due to lower interest income from the Aimco note receivable (repaid in 2022), including a **$12.9 million** prepayment penalty received in Q2 2022[160](index=160&type=chunk) [Interest Expense](index=38&type=section&id=Interest%20Expense) Interest expense increased by $11.5 million (44.3%) for Q2 2023 and $25.6 million (53.2%) for H1 2023 compared to the prior year. This rise is mainly due to higher interest rates on term loans and the revolving credit facility, interest expense from senior unsecured notes issued in Q2 2022, and higher outstanding property debt balances - Interest expense increased by **$11.5 million (44.3%)** for Q2 2023 and **$25.6 million (53.2%)** for H1 2023[161](index=161&type=chunk) - The increase was primarily due to higher rates on term loans and the revolving credit facility, interest expense from senior unsecured notes issued in Q2 2022, and higher outstanding property debt balances[161](index=161&type=chunk) [Loss on Extinguishment of Debt](index=38&type=section&id=Loss%20on%20Extinguishment%20of%20Debt) The company did not incur any loss on extinguishment of debt during Q2 2023 or Q2 2022. For H1 2023, the loss on extinguishment of debt decreased by $21.6 million compared to H1 2022, due to fewer prepayment penalties incurred from early debt payments in 2022 - No loss on extinguishment of debt was incurred during Q2 2023 or Q2 2022[162](index=162&type=chunk) - For H1 2023, loss on extinguishment of debt decreased by **$21.6 million** compared to H1 2022, due to lower prepayment penalties from early debt payments in 2022[162](index=162&type=chunk) [(Loss) Gain on Dispositions and Impairments of Real Estate](index=39&type=section&id=(Loss)%20Gain%20on%20Dispositions%20and%20Impairments%20of%20Real%20Estate) For Q2 and H1 2023, the company recognized a $17.5 million loss on dispositions and impairments of real estate. This was primarily due to non-cash impairment losses totaling $23.6 million on three real estate assets, partially offset by a $6.4 million gain from the formation of the Value-Add JV. This contrasts sharply with Q2 and H1 2022, which saw significant gains of $175.6 million and $587.6 million, respectively, from apartment community sales - A **$17.5 million** loss on dispositions and impairments of real estate was recognized for Q2 and H1 2023[163](index=163&type=chunk) - This loss was primarily due to non-cash impairment losses of **$8.2 million** and **$15.4 million** on three real estate assets, partially offset by a **$6.4 million** gain from the Value-Add JV formation[163](index=163&type=chunk) - In contrast, Q2 and H1 2022 recognized significant gains of **$175.6 million** and **$587.6 million**, respectively, from real estate dispositions[163](index=163&type=chunk) [Gain on Derivative Instruments](index=39&type=section&id=Gain%20on%20Derivative%20Instruments) For Q2 and H1 2023, the company recognized gains of $11.4 million and $9.3 million, respectively, on derivative instruments not designated as cash flow hedges. These gains include both cash and non-cash components - Gains on derivative instruments not designated as cash flow hedges were **$11.4 million** for Q2 2023 and **$9.3 million** for H1 2023[164](index=164&type=chunk) - For Q2 2023, these gains comprised **$5.3 million** in cash gains and **$6.1 million** in non-cash gains. For H1 2023, they included **$5.3 million** in cash gains and **$4.0 million** in non-cash gains[164](index=164&type=chunk) [Critical Accounting Estimates](index=39&type=section&id=Critical%20Accounting%20Estimates) The company identifies the impairment of long-lived assets as a critical accounting policy that involves significant judgments and estimates in preparing its condensed consolidated financial statements. No other significant changes in critical accounting estimates were reported from the prior Annual Report on Form 10-K - The impairment of long-lived assets is considered a critical accounting policy due to the significant judgments and estimates involved[165](index=165&type=chunk) - No other significant changes in critical accounting estimates have occurred since the December 31, 2022, Annual Report on Form 10-K[166](index=166&type=chunk) [Non-GAAP Measures](index=39&type=section&id=Non-GAAP%20Measures) This section defines and reconciles key non-GAAP financial measures used by management and investors, including NAREIT Funds From Operations (FFO) and Pro forma Funds From Operations (Pro forma FFO). These metrics adjust GAAP net income for real estate-specific items and non-recurring events to provide a clearer view of operational performance, although they are not substitutes for GAAP measures - NAREIT FFO and Pro forma FFO are non-GAAP measures used to assess operational performance, adjusting GAAP net income for real estate-specific items and non-recurring events[168](index=168&type=chunk)[169](index=169&type=chunk)[171](index=171&type=chunk) NAREIT FFO and Pro forma FFO Attributable to AIR Common Stockholders (in thousands, except per share data) | Metric (Three Months Ended June 30) | 2023 | 2022 | | :---------------------------------- | :-------- | :-------- | | NAREIT FFO attributable to AIR common stockholders | $92,893 | $100,422 | | Pro forma FFO attributable to AIR common stockholders | $85,717 | $102,819 | | NAREIT FFO per share – diluted | $0.62 | $0.64 | | Pro forma FFO per share – diluted | $0.58 | $0.66 | | Metric (Six Months Ended June 30) | 2023 | 2022 | | :---------------------------------- | :-------- | :-------- | | NAREIT FFO attributable to AIR common stockholders | $165,526 | $166,006 | | Pro forma FFO attributable to AIR common stockholders | $167,025 | $192,328 | | NAREIT FFO per share – diluted | $1.11 | $1.06 | | Pro forma FFO per share – diluted | $1.12 | $1.23 | [Leverage Ratios](index=41&type=section&id=Leverage%20Ratios) The company targets Net Leverage to Adjusted EBITDAre between 5.0x and 6.0x, and also focuses on Proportionate Debt to Adjusted EBITDAre. These non-GAAP ratios are used to assess financial risk and credit quality. As of June 30, 2023, Proportionate Debt to Adjusted EBITDAre was 6.3x (5.7x pro forma for Core JV) and Net Leverage to Adjusted EBITDAre was 6.5x (5.9x pro forma for Core JV) - The company targets Net Leverage to Adjusted EBITDAre between **5.0x and 6.0x**[177](index=177&type=chunk) Leverage Ratios (as of June 30, 2023) | Ratio | Annualized Current Quarter | Annualized Current Quarter Pro forma for the Core Joint Venture Transaction | | :---------------------------------- | :------------------------- | :-------------------------------------------------------------------------- | | Proportionate Debt to Adjusted EBITDAre | 6.3x | 5.7x | | Net Leverage to Adjusted EBITDAre | 6.5x | 5.9x | Net Leverage Reconciliation (as of June 30, 2023, in thousands) | Item | Amount | | :---------------------------------------- | :--------- | | Total indebtedness | $3,684,577 | | Proportionate Debt | $3,233,108 | | Net Leverage | $3,312,251 | | Net Leverage, Pro forma for Core Joint Venture transaction | $2,860,347 | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash flows from operations, dispositions, debt refinancing, and credit facilities. As of June 30, 2023, available liquidity was $1.8 billion, increasing to approximately $2.3 billion after the Core JV completion. Liquidity is used for operations, debt payments, capital expenditures, dividends, and acquisitions, with long-term needs met through borrowings, equity offerings, and property sales - Primary liquidity sources include cash flows from operations, dispositions, debt refinancing, new property debt, credit facilities, and equity offerings[183](index=183&type=chunk) - As of June 30, 2023, available liquidity was **$1.8 billion**, increasing to approximately **$2.3 billion** after the Core JV completion[183](index=183&type=chunk)[184](index=184&type=chunk) - Long-term liquidity requirements are expected to be met through secured/unsecured borrowings, equity issuances, property sales, and operating cash flows[186](index=186&type=chunk) [Leverage and Capital Resources](index=44&type=section&id=Leverage%20and%20Capital%20Resources) The company's total leverage, including secured/unsecured debt, preferred OP Units, and redeemable noncontrolling interests, had a weighted-average remaining term of 6.6 years and an interest rate of 4.3% as of June 30, 2023. Post-Core JV, the average term extends to 7.2 years with a 4.0% interest rate. The company is in compliance with financial covenants and has sufficient committed credit to repay all debt maturing through 2027 - Total leverage had a weighted-average remaining term of **6.6 years** and an interest rate of **4.3%** as of June 30, 2023[190](index=190&type=chunk) - Subsequent to the Core JV transaction, the weighted-average interest rate for total leverage is **4.0%** and the average remaining term to maturity is **7.2 years**[190](index=190&type=chunk) - The company believes it was in compliance with all financial covenants as of June 30, 2023, and expects to remain so for the next 12 months, with sufficient committed credit to repay all debt due through 2027[191](index=191&type=chunk) [Changes in Cash, Cash Equivalents, and Restricted Cash](index=44&type=section&id=Changes%20in%20Cash%2C%20Cash%20Equivalents%2C%20and%20Restricted%20Cash) This section provides an overview of the changes in consolidated cash, cash equivalents, and restricted cash, broken down by operating, investing, and financing activities, as detailed in the condensed consolidated statements of cash flows - Changes in cash, cash equivalents, and restricted cash are discussed in relation to operating, investing, and financing activities[192](index=192&type=chunk) [Operating Activities](index=44&type=section&id=Operating%20Activities) Net cash provided by operating activities for H1 2023 was $182.7 million, a decrease of $18.8 million compared to H1 2022. This decline was primarily due to lower net operating income from sold apartment communities, partially offset by increased contributions from recently acquired properties - Net cash provided by operating activities was **$182.7 million** for H1 2023[193](index=193&type=chunk) - This represents an **$18.8 million** decrease compared to H1 2022, primarily due to lower NOI from sold properties, partially offset by increased contributions from recently acquired properties[193](index=193&type=chunk) [Investing Activities](index=44&type=section&id=Investing%20Activities) Net cash used in investing activities for H1 2023 was $228.4 million, primarily for real estate purchases and capital expenditures. This contrasts with H1 2022, which saw $574.7 million in net cash provided by investing activities, mainly from dispositions and the repayment of the Aimco note receivable. Total capital additions for H1 2023 were $88.0 million - Net cash used in investing activities was **$228.4 million** for H1 2023, primarily for real estate purchases and capital expenditures[194](index=194&type=chunk) - In contrast, H1 2022 provided **$574.7 million** in cash from investing activities, mainly from dispositions and Aimco note repayment[194](index=194&type=chunk) Total Capital Additions (Six Months Ended June 30, in thousands) | Category | 2023 | 2022 | | :---------------------- | :-------- | :-------- | | Capital replacements | $17,372 | $12,916 | | Capital improvements | $5,880 | $6,855 | | Capital enhancements | $44,756 | $41,920 | | Initial capital expenditures | $15,250 | $12,807 | | Casualty | $4,646 | $10,828 | | Entitlement and planning | $133 | $1,027 | | Total capital additions | $88,037 | $86,353 | [Financing Activities](index=45&type=section&id=Financing%20Activities) Net cash used in financing activities for H1 2023 was $125.7 million, primarily driven by net repayments on the revolving credit facility and dividend payments, partially offset by proceeds from non-recourse property debt. This is a significant reduction from the $768.0 million used in H1 2022, which included substantial repayments of non-recourse debt and term loans, and common stock repurchases - Net cash used in financing activities was **$125.7 million** for H1 2023[197](index=197&type=chunk) - This was primarily due to net repayments on the revolving credit facility and dividend payments, partially offset by net proceeds from non-recourse property debt[197](index=197&type=chunk) - H1 2022 saw **$768.0 million** in net cash used, mainly for repayments on non-recourse debt and term loans, dividends, and common stock repurchases, partially offset by unsecured notes payable proceeds[197](index=197&type=chunk) [Future Capital Needs](index=46&type=section&id=Future%20Capital%20Needs) The company expects to fund future acquisitions, debt maturities, and capital spending primarily through proceeds from apartment community sales (including joint ventures), secured and unsecured borrowings, equity issuances, and operating cash flows. Management believes it has sufficient cash and access to additional liquidity to meet operational needs for 2023 and beyond - Future capital needs will be funded principally by proceeds from apartment community sales (including joint ventures), secured/unsecured borrowings, equity issuances, and operating cash flows[198](index=198&type=chunk) - Management believes the company has sufficient cash and access to additional liquidity to meet operational needs for 2023 and beyond[198](index=198&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=46&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's primary market risks: refunding risk (availability of funds for maturing debt) and repricing risk (interest rate changes). The company uses derivative financial instruments like interest rate swaps and treasury rate locks to mitigate interest rate risk. As of June 30, 2023, a 100-basis point change in floating rates would impact annual interest expense by $7.4 million, reducing to $1.3 million post-Core JV transaction - Primary market risks are refunding risk (availability of funds for maturing debt) and repricing risk (increases in base interest rates and credit risk spreads)[199](index=199&type=chunk) - Derivative financial instruments, such as interest rate swaps and treasury rate locks, are used to reduce exposure to interest rate risk[199](index=199&type=chunk) - As of June 30, 2023, a **100-basis point** change in floating rates would increase/decrease annual interest expense by **$7.4 million**; post-Core JV, this sensitivity reduces to **$1.3 million**[200](index=200&type=chunk) - The estimated fair value of total indebtedness was approximately **$3.4 billion** as of June 30, 2023[202](index=202&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=46&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms that the disclosure controls and procedures for both Apartment Income REIT Corp. (AIR) and Apartment Income REIT, L.P. (AIR Operating Partnership) were evaluated and deemed effective as of June 30, 2023. Furthermore, there were no material changes in internal control over financial reporting for either entity during the second quarter of 2023 [AIR: Disclosure Controls and Procedures](index=46&type=section&id=AIR%3A%20Disclosure%20Controls%20and%20Procedures) AIR's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023 - AIR's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[203](index=203&type=chunk) [AIR: Changes in Internal Control Over Financial Reporting](index=46&type=section&id=AIR%3A%20Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) There were no material changes in AIR's internal control over financial reporting during the second quarter of 2023 - No material changes in AIR's internal control over financial reporting occurred during Q2 2023[204](index=204&type=chunk) [The AIR Operating Partnership: Disclosure Controls and Procedures](index=46&type=section&id=The%20AIR%20Operating%20Partnership%3A%20Disclosure%20Controls%20and%20Procedures) The management of AIR Operating Partnership, with the participation of AIR's CEO and CFO, concluded that its disclosure controls and procedures were effective as of June 30, 2023 - The AIR Operating Partnership's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[206](index=206&type=chunk) [The AIR Operating Partnership: Changes in Internal Control Over Financial Reporting](index=47&type=section&id=The%20AIR%20Operating%20Partnership%3A%20Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) There were no material changes in the AIR Operating Partnership's internal control over financial reporting during the second quarter of 2023 - No material changes in the AIR Operating Partnership's internal control over financial reporting occurred during Q2 2023[207](index=207&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section states that there have been no material changes to the risk factors previously disclosed in Apartment Income REIT Corp.'s and AIR Operating Partnership's combined Annual Report on Form 10-K for the year ended December 31, 2022 [ITEM 1A. RISK FACTORS](index=48&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section states that there have been no material changes to the risk factors previously disclosed in Apartment Income REIT Corp.'s and AIR Operating Partnership's combined Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to the risk factors from the combined Annual Report on Form 10-K for the year ended December 31, 2022, have occurred[210](index=210&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=48&type=section&id=ITEM%202.%20UNREGISTERED%20SALES

Financial Data and Key Metrics Changes - The second quarter FFO was $0.58 per share, up 13.7% year-over-year, adjusted for a non-recurring benefit from the Aimco note prepayment [24] - Revenue increased by 8.8% year-over-year, while expenses rose by 4.1%, leading to a net operating income (NOI) increase of 10.6% [13][24] - AIR's operating margin reached 74.2%, up 120 basis points from 2022, marking the highest second quarter margin in the company's history [13] Business Line Data and Key Metrics Changes - Same-store and acquisition portfolios contributed to property NOI growth at low double digits [6] - The AIR Edge model resulted in revenue growth of 19% and NOI growth of 30.5% for acquisitions from 2021, outperforming the same-store portfolio [14] - Customer retention rates reached a record 62%, with only 38% turnover in the past 12 months [12] Market Data and Key Metrics Changes - New lease rates increased by 6% and renewals by 7%, leading to a blended average increase of 6.5% [12] - The company noted that rental rates and inflation are dropping rapidly, with some new lease rents being negative [9] - The occupancy rate was reported at 94.6%, with expectations of a 2% increase by the end of the third quarter [15] Company Strategy and Development Direction - AIR aims to acquire properties at distressed prices due to a slowdown in transaction markets, leveraging abundant equity capital [10] - The company is focused on disciplined capital allocation, targeting high-quality properties that can benefit from the AIR Edge [21] - The Board is recommending amendments to strengthen shareholder rights, reflecting a shareholder-centric approach [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenges and capitalize on opportunities in the current market [21] - The normalization of the operating environment post-COVID is expected to enhance the effectiveness of AIR's operational strategies [16] - Management anticipates continued growth in property NOI and a strong leasing season in the second half of the year [27] Other Important Information - AIR has approximately $2.3 billion in available liquidity, significantly above the peer average [24] - The company declared a quarterly cash dividend of $0.45 per share, reflecting a yield of over 5% based on the current share price [29] Q&A Session Summary Question: Sequential increase in FFO growth - Management clarified that the sequential growth is primarily driven by incremental property NOI contributions from both same-store and acquisition portfolios [32] Question: Bad debt levels in California - Management noted that bad debt is being managed effectively, with many delinquent residents having left the portfolio, contributing to improved occupancy levels [37] Question: Contribution of fees to FFO - Management confirmed that the anticipated contribution of fees from services provided to third parties was included in the annual plan, with a breakdown of sustainable versus episodic contributions [44][46] Question: Lease rate assumptions for the second half of the year - Management indicated that blended lease rate assumptions for the second half are expected to be in the mid-four to five range to achieve revenue guidance [48]

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Apartment Income REIT Corp. (NYSE:AIRC) Q1 2023 Earnings Conference Call May 2, 2023 1:00 PM ET Company Participants Lisa Cohn - President and General Counsel, AIR Communities Terry Considine - CEO Keith Kimmel - President of Property Operations John McGrath - Co-CIO and Chairman of Investment Committee Paul Beldin - CFO Conference Call Participants Eric Wolfe - Citi Haendel St. Juste - Mizuho John Kim - BMO Capital Markets Chandni Luthra - Goldman Sachs John Pawlowski - Green Street Operator Welcome, and t ...

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 APARTMENT INCOME REIT CORP. APARTMENT INCOME REIT, L.P. For the quarterly period ended March 31, 2023 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 Num ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 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.) APARTMENT INCOME REI ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) Presents unaudited condensed consolidated financial statements for AIR and its operating partnership, including balance sheets, income, and cash flows, with notes on policies and transactions [Apartment Income REIT Corp. Financial Statements](index=5&type=section&id=Apartment%20Income%20REIT%20Corp.%20Financial%20Statements) Provides core financial statements for AIR, highlighting increased net income from real estate dispositions and reduced total indebtedness in Q2 2022 Apartment Income REIT Corp. Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $6,433,285 | $6,440,360 | | Total Liabilities | $4,065,130 | $4,421,835 | | Total Indebtedness | $3,368,457 | $3,743,286 | | Total AIR Equity | $2,132,449 | $1,813,025 | Apartment Income REIT Corp. Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $183,500 | $178,333 | $364,978 | $354,746 | | Gain on dispositions of real estate | $175,606 | $3,353 | $587,609 | $87,385 | | Net income (loss) attributable to AIR common stockholders | $196,722 | $(18,030) | $572,603 | $65,166 | | Net income (loss) per common share – diluted | $1.26 | $(0.12) | $3.66 | $0.43 | Apartment Income REIT Corp. Cash Flow Highlights (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $201,496 | $93,797 | | Net cash provided by (used in) investing activities | $574,667 | $(199,483) | | Net cash (used in) provided by financing activities | $(768,033) | $112,907 | [Apartment Income REIT, L.P. Financial Statements](index=11&type=section&id=Apartment%20Income%20REIT,%20L.P.%20Financial%20Statements) Presents financial statements for AIR Operating Partnership, largely identical to AIR Corp. except for the equity section, reflecting the partnership structure - The assets and liabilities of the AIR Operating Partnership are identical to those of AIR Corp. The main difference lies in the equity section, where the AIR Operating Partnership's balance sheet shows **'Partners' capital' of $2.29 billion**, while AIR Corp.'s shows 'Total equity'[30](index=30&type=chunk) AIR Operating Partnership Statement of Operations Highlights (in thousands, except per unit data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total Revenues | $183,500 | $178,333 | | Net income (loss) attributable to common unitholders | $209,471 | $(18,975) | | Net income (loss) per common unit – diluted | $1.26 | $(0.12) | [Notes to the Condensed Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and supplementary information for financial statements, covering accounting policies, major transactions, debt, leases, and segment reporting - During the three months ended June 30, 2022, the company acquired **three apartment communities with 1,001 homes** for a total consideration of **$472.3 million**[55](index=55&type=chunk)[56](index=56&type=chunk) - During the six months ended June 30, 2022, the company sold **twelve apartment communities with 2,050 homes** for gross proceeds of **$781.1 million**[59](index=59&type=chunk) - In Q2 2022, the company reached an agreement with Aimco to cancel existing master leases at four properties for a payment of **$200 million**[60](index=60&type=chunk) - In Q2 2022, the company issued **three tranches of guaranteed, senior unsecured notes totaling $400 million** at a weighted-average effective interest rate of **4.3%**. Total indebtedness as of June 30, 2022, was **$3.37 billion**[69](index=69&type=chunk)[72](index=72&type=chunk) - The company operates **two reportable segments**: Same Store, which includes **64 stabilized apartment communities**, and Other Real Estate, which includes **11 recently acquired or non-stabilized communities**[95](index=95&type=chunk)[96](index=96&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=26&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, strategic initiatives, and outlook, highlighting strong operational results, capital allocation, balance sheet improvements, liquidity, and non-GAAP measures [Executive Overview](index=27&type=section&id=Executive%20Overview) Outlines AIR's strategic objectives, highlighting strong Q2 operational performance, portfolio management activities, and significant balance sheet improvements - Strategic objectives include pursuing a simple business model, maintaining a high-quality diversified portfolio, improving property operations, maintaining an efficient cost structure, and sustaining a **low-leverage balance sheet**[110](index=110&type=chunk)[111](index=111&type=chunk) Q2 2022 Same Store Operational Highlights (YoY) | Metric | Change | | :--- | :--- | | Revenue | +11.6% | | NOI | +16.4% | | NOI Margins | 73.6% (+304 bps) | | New Lease Rents | +18.9% | | Renewal Rents | +11.1% | - The company uses a "paired trade" strategy to fund acquisitions, requiring the unlevered IRR on purchased communities to be at least **200 basis points higher** than on the communities sold[119](index=119&type=chunk) - During Q2 2022, AIR repurchased **2.9 million shares for $125 million** at an average price of **$42.93 per share**[125](index=125&type=chunk) - The company is transitioning from a secured to a primarily unsecured borrower, issuing **$400 million in senior unsecured notes** in Q2 2022 to repay borrowings on its revolving credit facility[127](index=127&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Provides detailed comparative analysis of operating results, highlighting increased net income from dispositions, strong Same Store NOI growth, and boosted interest income Same Store Proportionate Property NOI Change (YoY) | Period | Revenue Change (excl. ownership changes) | NOI Change (excl. ownership changes) | Key Drivers | | :--- | :--- | :--- | :--- | | **Q2 2022** | +11.6% | +16.4% | 750 bps increase in rental rates, 160 bps increase in ADO, 200 bps decrease in bad debt | | **6-Months 2022** | +10.4% | +14.1% | 620 bps increase in rental rates, 210 bps increase in ADO, 130 bps decrease in bad debt | - Interest income for the three and six months ended June 30, 2022, increased by **$10.0 million** and **$7.5 million**, respectively, primarily due to a **$12.9 million prepayment penalty** received from Aimco's partial note repayment[153](index=153&type=chunk) - The company recognized a **$175.6 million gain on dispositions** for the three months and **$587.6 million** for the six months ended June 30, 2022, which was the main driver for the increase in net income[156](index=156&type=chunk) [Non-GAAP Measures](index=34&type=section&id=Non-GAAP%20Measures) Defines and reconciles key non-GAAP financial measures like FFO and leverage ratios, showing a notable increase in Pro forma FFO per share in Q2 2022 Pro forma FFO per Share (Diluted) | Period | 2022 | 2021 | | :--- | :--- | :--- | | **Three Months Ended June 30** | $0.66 | $0.52 | | **Six Months Ended June 30** | $1.23 | $1.02 | - The company provides detailed reconciliations from GAAP Net Income to NAREIT FFO and Pro forma FFO, adjusting for items like real estate depreciation, gains on property sales, and other non-recurring costs[168](index=168&type=chunk) - The company targets a Net Leverage to Adjusted EBITDAre ratio **below 6.0x**. As of June 30, 2022, Proportionate Debt was calculated at **$2.76 billion** and Annualized Adjusted EBITDAre was **$464.1 million**[170](index=170&type=chunk)[174](index=174&type=chunk)[178](index=178&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Details the company's liquidity, capital management, and cash flow, highlighting $924.5 million in liquidity, debt maturity extensions, and increased operating cash flow - As of June 30, 2022, total available liquidity was **$924.5 million**, which included **$840.9 million** of available capacity under the revolving credit facility[179](index=179&type=chunk) - The weighted-average remaining term to maturity for total leverage was **6.9 years** with a weighted-average interest rate of **3.8%**. Only **7% of debt** will reprice before 2025, after considering interest rate swaps[185](index=185&type=chunk) - For the six months ended June 30, 2022, net cash provided by operating activities increased by **$107.7 million** year-over-year to **$201.5 million**, due to favorable working capital timing and stronger property performance[188](index=188&type=chunk) Capital Additions (in thousands) | Category | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Capital enhancements | $44,002 | $32,778 | | Capital replacements | $13,335 | $13,916 | | Initial capital expenditures | $12,806 | $1,763 | | **Total Capital Additions** | **$89,659** | **$54,230** | [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Outlines the company's primary market risk as interest rate risk from $1.04 billion in variable-rate debt, mitigated by swaps, with a 100 bps change impacting annual interest by $2.1 million - The company's primary market risk is interest rate risk from its variable-rate debt, which totaled approximately **$1.04 billion** as of June 30, 2022 (**$800.0M term loans**, **$88.5M property debt**, and **$148.0M on the revolving credit facility**)[195](index=195&type=chunk) - After considering the effect of interest rate swaps, a **100 basis point change** in the floating interest rate is estimated to increase or decrease annual interest expense by **$2.1 million**[195](index=195&type=chunk) [Controls and Procedures](index=39&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management confirms the effectiveness of disclosure controls and procedures for AIR and its operating partnership as of June 30, 2022, with no material changes in internal controls - Management, including the CEO and CFO, evaluated and concluded that the disclosure controls and procedures for both AIR and the AIR Operating Partnership were **effective** as of June 30, 2022[198](index=198&type=chunk)[199](index=199&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2022[199](index=199&type=chunk)[200](index=200&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Risk Factors](index=41&type=section&id=ITEM%201A.%20RISK%20FACTORS) States no material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 - There have been **no material changes** from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[202](index=202&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) Details AIR's Q2 2022 equity activities, including repurchasing 2.9 million shares for $125 million and no unregistered sales AIR Share Repurchases (Q2 2022) | Total Shares Repurchased | Average Price Paid per Share | Total Cost | | :--- | :--- | :--- | | 2,911,761 | $42.93 | ~$125 million | - The AIR Operating Partnership redeemed **15,680 common OP units** for cash during the three months ended June 30, 2022[206](index=206&type=chunk)[207](index=207&type=chunk) [Exhibits](index=43&type=section&id=ITEM%206.%20EXHIBITS) Provides a list of exhibits filed with Form 10-Q, including legal and financial documents, certifications, and iXBRL data files - The report includes a list of filed exhibits, such as the Note and Guarantee Agreement, amendments to the Master Leasing Agreement with Aimco, CEO/CFO certifications, and iXBRL data files[213](index=213&type=chunk)[214](index=214&type=chunk) [Signatures](index=45&type=section&id=Signatures) Contains formal signatures of authorized officers for Apartment Income REIT Corp. and AIR Operating Partnership, dated July 29, 2022 - The report was signed on **July 29, 2022**, by Paul Beldin, Executive Vice President and Chief Financial Officer, on behalf of both Apartment Income REIT Corp. and Apartment Income REIT, L.P.[217](index=217&type=chunk)[218](index=218&type=chunk)