Apartment Investment and Management Company Announces Third Quarter 2005 Results

DENVER, Nov. 1 /PRNewswire-FirstCall/ -- SUMMARY FINANCIAL RESULTS: Apartment Investment and Management Company (Aimco) announced third quarter 2005 results including:

* Net income was $26.4 million, compared with $163.2 million in the third quarter 2004. The $136.8 million decrease in net income was primarily a result of $161.5 million lower gains on dispositions of real estate related to both consolidated and unconsolidated property sales and $27.7 million higher depreciation expense, partially offset by $23 million of improved property net operating income. Earnings per share (EPS) was $0.05 on a diluted basis, compared with $1.48 in the third quarter 2004, based on net income attributable to common shareholders. * Funds from operations (FFO) is a non-GAAP financial measure defined in the glossary in the Supplemental Information (the Glossary). FFO (diluted) before impairment and preferred redemption charges was $61.9 million, or $0.65 per share. FFO includes a charge of $0.02 per share related to damage caused by hurricanes Katrina and Rita. Excluding this charge, FFO met the low end of Aimco's guidance range. FFO calculated in accordance with the definition prescribed by the National Association of Real Estate Investment Trusts (NAREIT) was $55.2 million, or $0.58 per share, compared with $73.8 million, or $0.78 per share, in the third quarter 2004. Under the NAREIT definition, FFO deducts charges related to impairment losses from real estate assets sold or held for sale and charges related to the redemption of preferred securities (each adjusted for minority interest in Aimco Operating Partnership) of $0.07 and $0.11 per share in the third quarter 2005 and third quarter 2004, respectively. Third quarter 2005 impairment charges relate primarily to a planned sale of nine student housing properties. Comparatively, FFO included hurricane related charges of $0.02 and $0.07 per share in the third quarter 2005 and third quarter 2004, respectively. * Adjusted funds from operations (diluted) (AFFO; a non-GAAP financial measure defined in the Glossary) was $37.5 million, or $0.40 per share, compared with $62.2 million, or $0.66 per share, in the third quarter 2004. AFFO includes deductions of $0.25 and $0.23 per share for capital replacement expenditures in the third quarter 2005 and third quarter 2004, respectively. Diluted Per Share Results THIRD QUARTER YEAR-TO-DATE 2005 2004 2005 2004 Earnings (loss) - EPS $0.05 $1.48 ($0.11) $1.34 Funds from operations - FFO $0.58 $0.78 $1.88 $2.07 FFO before impairment and preferred redemption charges $0.65 $0.89 $1.99 $2.21 Adjusted funds from operations - AFFO $0.40 $0.66 $1.33 $1.69 Management Comments

Chairman and Chief Executive Officer Terry Considine comments: "Aimco had a solid third quarter: increased occupancies position the portfolio for significant increases in fourth quarter and 2006 profitability; redevelopment is ramping up; and progress on entitlements offers the potential for substantial increases to Net Asset Value."

Business Components -- Conventional Operations and Aimco Capital

CONVENTIONAL REAL ESTATE OPERATIONS -- Conventional real estate operations include Aimco's diversified portfolio of market rate apartment communities. At the end of the third quarter 2005, this portfolio had 566 properties with 160,327 units in which Aimco had a weighted average ownership of 81%. During the third quarter 2005, conventional real estate operations generated net operating income of $161.2 million.

"Same Store" Results

The "Same Store" portfolio is a sub-set of total conventional properties. In the third quarter 2005, the "Same Store" portfolio included 481 communities with approximately 112,788 effective units based on Aimco's weighted average ownership of 82% (see Supplemental Schedules 6a through 7).

Comparing "Same Store" results in the third quarter 2005 with the third quarter 2004, total revenue increased $16.0 million, or 6.4%. The increase in revenue was generated by: higher occupancy, up 270 basis points from 90.7% to 93.4%; higher average rent, up $20 per unit, or 2.7%, from $744 per unit to $764 per unit; and lower bad debt, down $0.4 million. "Same Store" expenses of $120.4 million increased by $6.7 million, or 5.9%, compared with the third quarter 2004. Increased expenses were primarily due to: $2.7 million of increased personnel costs mostly related to leasing staff; $0.9 million increased utility costs; $0.7 million of increased unit turnover costs; and $4.4 million of higher property taxes; which were partially offset by lower repairs and maintenance and lower property insurance costs. "Same Store" portfolio net operating income was $145.8 million for the third quarter 2005, up 6.8% from the third quarter 2004. Third quarter 2004 expenses included $1.2 million related to hurricanes. Excluding the effect of hurricanes in the prior year results, "Same Store" expenses increased 7.0% and "Same Store" net operating income increased 5.9%.

Same Store Operating Results THIRD QUARTER Year-over-year Sequential 2005 2004 Variance 2nd Qtr 2005 Variance Same Store Operating Measures Average Physical Occupancy(1) 93.4% 90.7% +270 bp 91.0% +240 bp Average Rent Per Unit $764 $744 +2.7% $756 +1.1% Total Same Store ($mm) Revenue $266.2 $250.2 +6.4% $256.5 +3.8% Expenses (120.4) (113.7) +5.9% (113.4) +6.2% NOI $145.8 $136.5 +6.8% $143.1 +1.9% (1) As of the first quarter 2005, Aimco's reported occupancy represents the daily weighted average for the quarter. Comparable prior periods have been calculated accordingly. Previously, reported occupancy was as of the end of the month and average occupancy for a quarter was the arithmetic average of the three, month-end occupancies.

Comparing "Same Store" results on a sequential basis, total revenue increased $9.7 million in the third quarter 2005 compared with the second quarter 2005, driven primarily by a 240 basis point increase in occupancy and a 1.1% increase in rental rate. Expenses increased $7.0 million, primarily due to higher unit turnover costs related to increased occupancy, higher utilities and higher workers' compensation costs. Net operating income increased $2.7 million, or 1.9%, on a sequential basis.

Going forward into the heating season, the higher cost of electricity and natural gas is expected to increase utility expenses compared with the 2004/2005 heating season. Aimco's primary exposure to these rising costs comes from the cost to heat apartment property common areas and to heat individual apartments where the cost is not borne by the resident. At the end of the third quarter 2005, Aimco had approximately 18,000 conventional apartments, 11% of the conventional portfolio, where the heating cost is Aimco's responsibility and is not reimbursed by the resident. Aimco expects its fourth quarter 2005 total utilities expense, including expenses for affordable properties, to be higher than previously expected by approximately $0.015 to $0.02 per share. Based on expected consumption, Aimco has fixed rates for nearly 80% of its natural gas exposure through March 2006 and has fixed rates for nearly 50% of its natural gas exposure through March 2007.

CORE PROPERTIES -- Core properties (defined in the glossary) offer the potential for long-term growth at higher rates of return. These properties are predominantly located in coastal and sun-belt states as well as the Rocky Mountain region and Chicago. In the third quarter 2005, core properties accounted for 80% of conventional operations net operating income. Core properties within the "Same Store" portfolio had better operating characteristics than non-core properties (defined in the glossary). Core property average rent was $872 per month, average occupancy was 94.8% and the operating margin was 58.4% compared with non-core, which had average monthly rent of $587, average occupancy of 91.0% and an operating margin of 43.9%

UNIVERSITY COMMUNITIES -- Aimco's University Communities portfolio includes 20 properties with 5,596 units. Aimco seeks to own properties in close proximity to major universities. The company is currently in negotiations to sell nine properties having 2,167 units. In September 2005, University operations had "Same Store" occupancy of 96.6% and average rent of $597, up from 95.4% and $568, respectively, in September 2004.

AIMCO CAPITAL -- Aimco is among the largest owners and operators of affordable properties in the United States. Aimco Capital has been organized to oversee Aimco's affordable property operations, asset management and transactional activities, and is led by a management team dedicated to this sector.

Affordable Property Operations

At the end of the third quarter 2005, Aimco's owned affordable portfolio included 371 properties with 44,351 units in which Aimco had a weighted average ownership of 41%. During the third quarter 2005, affordable property operations generated net operating income of $19.9 million and property management net operating income of $3.6 million. On a year-over-year basis, third quarter average month-end occupancy increased 80 basis points from 95.2% to 96.0%, and average rent per unit increased 2.3% from $654 to $669 per unit.

Affordable Asset Management and Transactional Activity

Aimco Capital generates activity fees from transactional activities (including tax credit redevelopments, syndications, dispositions and refinancings), and asset management income from the financial management of affordable real estate partnerships. Aimco Capital activity fee and asset management net operating income was $4.9 million in the third quarter 2005 compared with $3.6 million in the third quarter 2004, and $14.4 million year-to-date 2005 compared with $14.6 million year-to-date 2004.

Portfolio Management and Redevelopment Activity

Acquisitions -- In the third quarter 2005 Aimco acquired the Mustang Village apartments located in San Luis Obispo, California. Mustang Village is a 514-unit community located adjacent to California Polytechnic State University. The $70.8 million acquisition was made through Aimco's joint venture with the California State Teachers' Retirement System.

The Palazzo East property located in the Mid-Wilshire area of Los Angeles continues to lease-up, reaching 73.5% occupancy at the end of October.

Year-to-date Aimco has purchased seven properties including 1,526 units for a total purchase price of $352 million, plus Chestnut Hall for which the purchase price was not disclosed. During the third quarter 2005, Aimco also purchased for an aggregate of $4.4 million additional limited partnership interests in 58 partnerships that own 122 properties. See Supplemental Schedule 8 for additional information on acquisition activity.

Dispositions -- Non-core sales: Aimco regularly reviews its portfolio to identify properties that do not meet its long-term investment criteria and are typically located in markets that Aimco seeks to exit. These properties are considered non-core and Aimco seeks to hold them over the intermediate term.

In the third quarter 2005, Aimco sold 24 non-core conventional properties and 12 affordable properties with 4,867 and 1,511 units, respectively, for $334 million in gross proceeds (Aimco share $276 million). Aimco's share of net proceeds after repayment of existing property debt and transaction costs was $130 million. Year-to-date Aimco sold 32 conventional properties and 33 affordable properties for gross proceeds of $523 million (Aimco share $403 million) and exited five markets. See Supplemental Schedule 8 for additional information on disposition activity.

Gain on Dispositions -- Aimco's property dispositions resulted in total gains on dispositions of real estate (including gains related to sales of unconsolidated entities and other and net gains within discontinued operations), net of related taxes, of $50.5 million for the third quarter 2005, compared with gains of $201.2 million for the third quarter 2004.

REDEVELOPMENT ACTIVITY -- Aimco continues to expand its redevelopment activity. At quarter-end, Aimco's Redevelopment and Construction Services groups had 50 projects at various stages of redevelopment, including 33 conventional projects and 17 affordable projects. During the third quarter 2005, redevelopment expenditures totaled $57.0 million (Aimco share $46.1 million) and Aimco initiated four new moderate conventional projects. The Flamingo South Beach project reached stabilization during the third quarter 2005 with occupied and pre-leased units at 93% at quarter-end. Belmont Place in Marietta, Georgia reached stabilization five quarters ahead of schedule with occupied and pre-leased units at 96% at quarter-end. At quarter-end, Aimco's pipeline of identified redevelopment opportunities included 120 properties for an estimated redevelopment cost of approximately $1 billion, which the company plans to complete over the next five years. Further information on redevelopment projects is provided in Supplemental Schedule 10.

ENTITLEMENT ACTIVITY -- Aimco has additional development opportunity tied to successful entitlement activity. During the third quarter, Aimco continued its progress on improving the permitted density and zoning use for several properties. For example, at Spring Hill Lake located in Greenbelt, Maryland, Aimco received City of Greenbelt and Prince Georges County Planning Board approvals for its conceptual site plan that entails increasing the density from 2,900 to 5,800 units.

Additional Financial Information

PROPERTY MANAGEMENT INCOME -- Income from property management is generated from management of properties in which Aimco has unconsolidated interests. Property management net operating income was $4.2 million in the third quarter 2005 compared with $6.0 million in the third quarter 2004. Property management net operating income declined due to sales of unconsolidated properties and increased ownership resulting in consolidation.

ACTIVITY FEE AND ASSET MANAGEMENT INCOME -- Activity fees are generated from transactional activities (including tax credit redevelopments, syndications, dispositions and refinancings) and are earned primarily by Aimco Capital. Asset management income is earned by Aimco Capital from the financial management of partnerships, rather than property management of day- to-day operations. Activity fee and asset management net operating income from both conventional and Aimco Capital operations was $5.3 million in the third quarter 2005 compared with $3.7 million in the third quarter 2004. Year-to-date activity fee and asset management income was $15.0 million compared with $15.1 million in the first nine months of 2004. The amount of this net operating income may vary each quarter depending upon the nature and timing of transactional activity.

INTEREST INCOME -- Interest income was $7.4 million for the third quarter 2005, a decrease of $2.8 million compared with the third quarter 2004. Interest income in the third quarter 2004 benefited from transaction related accretion income of $2.5 million. Interest income was generated primarily from notes receivable totaling $205.8 million at September 30, 2005 and from interest-bearing accounts.

DEBT ACTIVITY -- During the third quarter 2005, Aimco closed 24 mortgage loans, including 23 refinancings of existing mortgage debt and one new mortgage loan on an acquired property. Total proceeds were $298.5 million at a weighted average interest rate of 5.21%. After repayment of existing property debt, transaction costs and distributions to limited partners totaling $199.3 million, Aimco's share of net proceeds was $99.2 million.

At the end of the third quarter 2005, Aimco's corporate debt balance was $632.0 million at an average interest rate of 5.68%. The balance on Aimco's revolving credit facility totaled $232 million, leaving $194.5 million (after $23.5 million in outstanding letters of credit) in available capacity. Please refer to Schedule 5 of the Supplemental Information for more detail on debt activity.

As of September 30, 2005, Aimco had $6.3 billion total debt outstanding of which $2.0 billion was floating rate. The floating rate debt included $632 million corporate debt, $638 million floating rate secured notes and $730 million of tax-exempt bonds.

INTEREST EXPENSE -- Consolidated interest expense was $96.1 million for the third quarter 2005, an increase of $4.1 million from $92.0 million in the third quarter 2004. The increase in interest expense was primarily the result of: (i) $6.6 million due to increased debt balances primarily associated with acquisitions, refinancings and increased ownership; (ii) $1.5 million due to increased interest rates on corporate and variable rate property debt and other items; partially offset by (iii) $1.0 million related to lower interest rates on refinanced property debt; and (iv) $3.0 million higher capitalized interest due to increased redevelopment activity.

G&A -- General and administrative expenses for the third quarter 2005 of $23.1 million were up $4.7 million compared with $18.4 million in the third quarter 2004. The year-over-year increase is primarily due to increased compensation related to increased staffing levels, recruiting fees and higher health care costs.

Outlook

For the fourth quarter 2005, FFO is forecast in a range from $0.69 to $0.71 per share, before impairment and preferred redemption charges, and AFFO is forecast in a range from $0.45 to $0.47 per share.

For the full year 2005, FFO is forecast in a range from $2.68 to $2.70 per share, before impairment and preferred redemption charges, and AFFO is forecast in a range from $1.78 to $1.80 per share. Please refer to the Outlook Schedule for more detail on the fourth quarter and full year 2005, which follows the Consolidated Financial Statements in this release.

Dividends on Common Stock

As announced on October 27, 2005, the Aimco Board of Directors declared a quarterly cash dividend of $0.60 per share of Class A Common Stock for the quarter ended September 30, 2005, payable on November 30, 2005 to stockholders of record on November 18, 2005. The dividend represents 150% of AFFO (diluted) and 103% of FFO (diluted), on a per share basis, and a 6.5% annualized yield based on the $36.93 closing price of Aimco's Class A Common Stock on October 26, 2005.

Earnings Conference Call

Please join Aimco management for the Third Quarter 2005 earnings conference call to be held Tuesday, November 1, 2005 at 1:00 p.m. Eastern Time. You may join the conference call through an Internet audiocast via Aimco's Website at http://www.aimco.com/about/3Q2005, then click on the Webcast link. Alternatively, you may join the conference call via telephone by dialing 877-845-9665, or 706-634-2273 for international callers. Please call approximately five minutes before the conference call is scheduled to begin and indicate that you wish to join the Apartment Investment and Management Company Third Quarter 2005 earnings conference call or refer to conference ID 9849263. If you are unable to join the live conference call, you may access the replay for 30 days on Aimco's Website or by dialing 800-642-1687 (706-645-9291 for international callers) and using conference ID 9849263.

Supplemental Information

The Supplemental Information referenced in this release is available at Aimco's Website at the link http://www.aimco.com/about/3Q2005 or by calling Investor Relations at 303-691-4350.

Forward-looking Statements

This earnings release and Supplemental Information contain forward-looking statements, including statements regarding projected results and specifically forecasts of fourth quarter and full year results. These forward-looking statements are based on management's judgment as of this date and include certain risks and uncertainties. Risks and uncertainties include, but are not limited to, Aimco's ability to maintain current occupancy, rent levels and "Same Store" results and Aimco's ability to close transactions necessary to generate fee income as anticipated. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors that are beyond the control of Aimco including, without limitation: natural disasters such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; financing risks, including the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risk; acquisition and development risks, including failure of such acquisitions to perform in accordance with projections; the timing of acquisitions and dispositions; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by Aimco. Readers should carefully review Aimco's financial statements and notes thereto, as well as the risk factors described in Aimco's Annual Report on Form 10-K for the year ended December 31, 2004 and the other documents Aimco files from time to time with the Securities and Exchange Commission. These forward-looking statements reflect management's judgment as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances.

About Aimco

Aimco is a real estate investment trust headquartered in Denver, Colorado that owns and operates a geographically diversified portfolio of apartment communities through 25 regional operating centers. Aimco, through its subsidiaries, operates approximately 1,425 properties, including approximately 250,000 apartment units, and serves approximately one million residents each year. Aimco's properties are located in 47 states, the District of Columbia and Puerto Rico. Aimco common shares are included in the S&P 500.

GAAP Income Statements Consolidated Statements of Income (in thousands, except per share data) (unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2005 2004 2005 2004 REVENUES: Rental and other property revenues $379,550 $341,116 $1,099,783 $985,148 Property management revenues, primarily from affiliates 6,094 8,713 18,684 26,032 Activity fees and asset management revenues, primarily from affiliates 8,018 5,985 22,715 24,381 Total revenues 393,662 355,814 1,141,182 1,035,561 EXPENSES: Property operating expenses 185,078 169,900 528,756 474,443 Property management expenses 1,918 2,737 5,663 7,327 Activity and asset management expenses 2,760 2,272 7,673 9,299 Depreciation and amortization 112,594 84,907 312,945 251,085 General and administrative expenses 23,123 18,434 65,697 54,020 Other expenses (income), net (3,402) (1,865) (5,261) (2,520) Total expenses 322,071 276,385 915,473 793,654 Operating income 71,591 79,429 225,709 241,907 Interest income 7,371 10,166 22,237 25,067 Recovery of (provision for) losses on notes receivable (206) (672) 1,352 (1,773) Interest expense (96,107) (92,043) (277,101) (261,826) Deficit distributions to minority partners (2,977) (7,105) (6,147) (14,286) Equity in losses of unconsolidated real estate partnerships (552) (1,197) (1,871) (3,669) Impairment losses related to real estate partnerships (1,178) (583) (1,709) (2,316) Gain on dispositions of real estate related to unconsolidated entities and other 8,097 39,138 12,870 41,235 Income (loss) before minority interests, discontinued operations and cumulative effect of change in accounting principle (13,961) 27,133 (24,660) 24,339 Minority interests: Minority interest in consolidated real estate partnerships 3,920 1,370 8,639 7,173 Minority interest in Aimco Operating Partnership, preferred [a] (1,806) (1,968) (5,424) (5,908) Minority interest in Aimco Operating Partnership, common [a] 3,405 (557) 8,973 4,443 Total minority interests 5,519 (1,155) 12,188 5,708 Income (loss) from continuing operations (8,442) 25,978 (12,472) 30,047 Income from discontinued operations, net [b] 34,794 137,230 68,422 165,132 Income before cumulative effect of change in accounting principle 26,352 163,208 55,950 195,179 Cumulative effect of change in accounting principle -- -- -- (3,957) Net income 26,352 163,208 55,950 191,222 Net income attributable to preferred stockholders 21,693 24,667 66,255 66,307 Net income (loss) attributable to common stockholders $4,659 $138,541 $(10,305) $124,915 Weighted average number of common shares outstanding 94,041 93,247 93,765 93,041 Weighted average number of common shares and common share equivalents outstanding 94,041 93,394 93,765 93,041 Earnings (loss) per common share - basic: Income (loss) from continuing operations (net of income attributable to preferred stockholders) $(0.32) $0.01 $(0.84) $(0.39) Income from discontinued operations 0.37 1.48 0.73 1.77 Cumulative effect of change in accounting principle -- -- -- (0.04) Net income (loss) attributable to common stockholders $0.05 $1.49 $(0.11) $1.34 Earnings (loss) per common share - diluted: Income (loss) from continuing operations (net of income attributable to preferred stockholders) $(0.32) $0.01 $(0.84) $(0.39) Income from discontinued operations 0.37 1.47 0.73 1.77 Cumulative effect of change in accounting principle -- -- -- (0.04) Net income (loss) attributable to common stockholders $0.05 $1.48 $(0.11) $1.34 GAAP Income Statements Notes to Consolidated Statements of Income [a] The Aimco Operating Partnership is AIMCO Properties, L.P., the operating partnership in Aimco's UPREIT structure [b] Income from discontinued operations of consolidated properties is broken down as follows (in thousands): Nine Nine Quarter Quarter Months Months Ended Ended Ended Ended 30-Sep-05 30-Sep-04 30-Sep-05 30-Sep-04 Rental and other property revenue 17,332 44,634 67,396 141,127 Property operating expense (11,204) (22,279) (37,205) (66,773) Other (expenses) income, net (316) (434) (961) (1,063) Depreciation and amortization (408) (9,137) (12,638) (28,304) Interest expense (3,513) (11,098) (15,229) (34,865) Interest income 35 82 178 213 Minority interest in consolidated real estate partnerships (63) (13) 490 (1,022) Income from operations 1,863 1,755 2,031 9,313 Gain on dispositions of real estate, net of minority partners' interest 44,050 174,497 81,101 196,049 Impairment losses on real estate assets sold or held for sale (6,208) (9,451) (8,395) (9,942) Recovery of deficit distributions (deficit distributions) to minority partners 671 (723) 4,333 2,688 Income tax arising from disposals (1,630) (12,446) (2,849) (13,235) Minority interest in Aimco Operating Partnership (3,952) (16,402) (7,799) (19,741) Income from discontinued operations $34,794 $137,230 $68,422 $165,132 GAAP Balance Sheets Consolidated Balance Sheets (in thousands) (unaudited) As of As of September 30, 2005 December 31, 2004 ASSETS Buildings and improvements $8,692,623 $8,133,833 Land 2,293,876 2,113,839 Accumulated depreciation (2,199,796) (1,899,493) TOTAL REAL ESTATE 8,786,703 8,348,179 Cash and cash equivalents 139,636 105,343 Restricted cash 314,585 289,689 Accounts receivable 78,343 75,044 Accounts receivable from affiliates 40,495 39,216 Deferred financing costs 66,619 69,228 Notes receivable from unconsolidated real estate partnerships 178,407 165,289 Notes receivable from non-affiliates 27,373 31,716 Investment in unconsolidated real estate partnerships 177,518 207,839 Other assets 239,245 243,317 Assets held for sale 214,132 497,381 TOTAL ASSETS $10,263,056 $10,072,241 LIABILITIES AND STOCKHOLDERS' EQUITY Secured tax-exempt bond financing $1,060,872 $1,101,225 Secured notes payable 4,598,410 4,212,040 Mandatorily redeemable preferred securities -- 15,019 Term loans 400,000 300,000 Credit facility 232,000 68,700 TOTAL INDEBTEDNESS 6,291,282 5,696,984 Accounts payable 44,731 34,663 Accrued liabilities and other 401,817 400,972 Deferred income 46,104 43,924 Security deposits 39,107 35,740 Deferred income taxes payable, net 8,257 20,139 Liabilities related to assets held for sale 156,703 347,818 TOTAL LIABILITIES 6,988,001 6,580,240 Minority interest in consolidated real estate partnerships 208,991 211,804 Minority interest in Aimco Operating Partnership 232,018 272,037 STOCKHOLDERS' EQUITY Class A Common Stock 957 949 Additional paid-in capital 3,104,279 3,070,073 Perpetual preferred stock 860,250 891,500 Convertible preferred stock 150,000 150,000 Distributions in excess of earnings (1,227,925) (1,047,897) Unearned restricted stock (27,024) (19,740) Notes due on common stock purchases (26,491) (36,725) TOTAL STOCKHOLDERS' EQUITY 2,834,046 3,008,160 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,263,056 $10,072,241 GAAP Statements of Cash Flows Consolidated Statements of Cash Flows (in thousands) (unaudited) Nine Months Ended Nine Months Ended September 30, 2005 September 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $55,950 $191,222 Depreciation and amortization 312,945 251,085 Adjustments to net income from discontinued operations (57,091) (139,728) Other adjustments to reconcile net income (29,337) (7,552) Changes in operating assets and liabilities (4,789) 7,611 Net cash provided by operating activities 277,678 302,638 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of real estate (243,996) (275,924) Capital expenditures (324,046) (191,379) Proceeds from dispositions of real estate 390,808 679,793 Change in funds held in escrow from tax-free exchanges (13,063) 709 Cash from newly consolidated properties 2,211 14,827 Purchases of non-real estate related corporate assets (11,090) (23,967) Purchases of general and limited partnership interests and other assets (85,267) (67,437) Originations of notes receivable from unconsolidated real estate partnerships (28,042) (64,491) Proceeds from repayment of notes receivable 16,402 34,145 Distributions received from investments in unconsolidated real estate partnerships 40,131 44,973 Other investing activities (379) (2,378) Net cash (used in) provided by investing activities (256,331) 148,871 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from secured notes payable borrowings 550,243 407,620 Principal repayments on secured notes payable (452,310) (465,555) Proceeds from tax-exempt bond financing -- 69,471 Principal repayments on tax-exempt bond financing (40,431) (169,945) Net borrowings on term loans and revolving credit facility 263,300 (16,987) Redemption of mandatorily redeemable preferred securities (15,019) (98,875) Proceeds from issuance of preferred stock -- 276,750 Redemption of preferred stock (31,250) (149,926) Repurchase of Class A Common Stock, redemption of OP Units and warrant purchase (3,791) (13,469) Payment of Class A Common Stock dividends (169,967) (169,179) Payment of preferred stock dividends (64,889) (64,978) Contributions from minority interest 25,453 27,697 Payment of distributions to minority interest (52,516) (71,315) Other financing activities 4,123 (4,680) Net cash provided by (used in) financing activities 12,946 (443,371) NET INCREASE IN CASH AND CASH EQUIVALENTS 34,293 8,138 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 105,343 114,432 CASH AND CASH EQUIVALENTS AT END OF PERIOD $139,636 $122,570 Outlook and Forward Looking Statement Fourth Quarter and Full Year 2005 (unaudited) The Outlook information provided on this Schedule contains information that is forward-looking, including statements concerning projected fourth quarter and full year 2005 results. These forward-looking statements are based on current expectations, estimates, and projections about the markets and the industry in which Aimco operates as well as management's beliefs and assumptions. These forward-looking statements are also based on certain risks and uncertainties, including but not limited to Aimco's ability to improve upon current occupancy, rent levels and "same store" results and the economic environment in which Aimco operates. Actual results may differ materially from those described in these forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the general level of interest rates; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; financing risks, including the risk that Aimco's cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; acquisition and development risks, including failure of such acquisitions to perform in accordance with projections; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by Aimco. Readers should carefully review Aimco's financial statements and notes thereto, as well as the risk factors described in Aimco's Annual Report on Form 10-K for the year ended December 31, 2004 and the other documents Aimco files from time to time with the Securities and Exchange Commission. Fourth Quarter 2005 Full Year 2005 GAAP Earnings per share(1) -$0.31 to -$0.29 -$0.42 to -$0.40 Add: Depreciation and other $1.00 $2.99 FFO per share (NAREIT) $0.69 to $0.71 $2.57 to $2.59 FFO per share before adjustments (2) $0.69 to $0.71 $2.68 to $2.70 AFFO per share $0.45 to $0.47 $1.78 to $1.80 2005 Same Store Operating Assumptions Expected physical occupancy (weighted average)(3) 93.5% to 94.5% 92% to 92.3% NOI change - sequential 3.5% to 4.9% NOI change - 2005 vs. 2004 7.9% to 9.3% 6.0% to 6.3% Gross dispositions (4) $870M to $1000M (Aimco Share $620M - $710M) Gross acquisitions (5) $425M to $450M (Aimco Share $375M - $400M) (1) Aimco's earnings per share guidance does not include estimates for (i) gain on dispositions or impairment losses due to the unpredictable timing of transactions or (ii) deferred costs recognized on early repayment of debt or redemption related preferred stock issuance charges. (2) FFO per share before adjustments represents FFO before impairments and redemption related preferred stock issuance charges. (3) The expected occupancy above is based on a daily weighted average calculation. (4) Aimco anticipates gross sales proceeds of $870 to $1000 million for 2005 ($600 to $690 million related to conventional properties and $270 to $310 million related to affordable properties). Aimco share of proceeds is expected to be $620 to $710 million ($500 to $570 million related to conventional properties and $120 to $140 million related to affordable properties). Aimco estimates that its share of cash from these dispositions, net of mortgage debt and third- party equity interests, will be $300 to $340 million ($230 to $260 million related to conventional properties and $70 to $80 million related to affordable properties). (5) Gross acquisitions include property acquisitions, limited partnership acquisitions, preferred stock redemptions and common stock repurchases.