Edgar Filing: APARTMENT INVESTMENT & MANAGEMENT CO

10-K





UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
Form 10-K
(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2015
OR
o	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 1-13232 (Apartment Investment and Management Company)
Commission File Number 0-24497 (AIMCO Properties, L.P.)

Apartment Investment and Management Company
AIMCO Properties, L.P.
(Exact name of registrant as specified in its charter)



Maryland (Apartment Investment and Management Company)		84-1259577
Delaware (AIMCO Properties, L.P.)		84-1275621
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4582 South Ulster Street, Suite 1100
Denver, Colorado		80237
(Address of principal executive offices)		(Zip Code)
(303) 757-8101
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Class A Common Stock (Apartment Investment and Management Company)		New York Stock Exchange
Class A Cumulative Preferred Stock (Apartment Investment and Management Company)		New York Stock Exchange
Class Z Cumulative Preferred Stock (Apartment Investment and Management Company)		New York Stock Exchange
Securities registered pursuant to Section 12(b) of the Act:

None (Apartment Investment and Management Company)
Partnership Common Units (AIMCO Properties, L.P.)



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.
	Apartment Investment and Management Company: Yes x No o	AIMCO Properties, L.P.: Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
	Apartment Investment and Management Company: Yes o No x	AIMCO Properties, L.P.: Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
	Apartment Investment and Management Company: Yes x No o	AIMCO Properties, L.P.: Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
	Apartment Investment and Management Company: Yes x No o	AIMCO Properties, L.P.: Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
	Apartment Investment and Management Company: Yes x No o	AIMCO Properties, L.P.: Yes x No o

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
	Apartment Investment and Management Company:
	Large accelerated filer	x		Accelerated filer	o
	Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o
	AIMCO Properties, L.P.:
	Large accelerated filer	o		Accelerated filer	x
	Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
	Apartment Investment and Management Company: Yes o No x	AIMCO Properties, L.P.: Yes o No x
The aggregate market value of the voting and non-voting common stock of Apartment Investment and Management Company held by non-affiliates of Apartment Investment and Management Company was approximately $5.7 billion as of June 30, 2015. As of February 25, 2016, there were 156,599,775 shares of Class A Common Stock outstanding.
As of February 25, 2016, there were 164,453,698 shares of Partnership Common Units outstanding.

_______________________________________________________

Documents Incorporated by Reference

Portions of Apartment Investment and Management Company’s definitive proxy statement to be issued in conjunction with Apartment Investment and Management Company’s annual meeting of stockholders to be held April 26, 2016, are incorporated by reference into Part III of this Annual Report.

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EXPLANATORY NOTE

This filing combines the Annual Reports on Form 10-K for the fiscal year ended December 31, 2015, of Apartment Investment and Management Company, or Aimco, and AIMCO Properties, L.P., or the Aimco Operating Partnership. Where it is important to distinguish between the two entities, we refer to them specifically. Otherwise, references to “we,” “us” or “our” mean collectively Aimco, the Aimco Operating Partnership and their consolidated entities.

Aimco, a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. Aimco, through wholly-owned subsidiaries, is the general and special limited partner of and, as of December 31, 2015, owned a 95.2% ownership interest in the common partnership units of, the Aimco Operating Partnership. The remaining 4.8% interest is owned by limited partners. As the sole general partner of the Aimco Operating Partnership, Aimco has exclusive control of the Aimco Operating Partnership’s day-to-day management.

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

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


•	We present our business as a whole, in the same manner our management views and operates the business;


•	We eliminate duplicative disclosure and provide a more streamlined and readable presentation since a substantial portion of the disclosures apply to both Aimco and the Aimco Operating Partnership; and


•	We save time and cost through the preparation of a single combined report rather than two separate reports.

We operate Aimco and the Aimco Operating Partnership as one enterprise, the management of Aimco directs the management and operations of the Aimco Operating Partnership, and the members of the Board of Directors of Aimco are identical to those of the Aimco Operating Partnership.

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

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

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

This report also includes separate Part II, Item 9A. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for Aimco and the Aimco Operating Partnership in order to establish that the requisite certifications have been made and that Aimco and the Aimco Operating Partnership are both compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

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APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO PROPERTIES, L.P.

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ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended December 31, 2015




Item		Page
	PART I
1.	Business	2
1A.	Risk Factors	7
1B.	Unresolved Staff Comments	14
2.	Properties	14
3.	Legal Proceedings	15
4.	Mine Safety Disclosures	15

	PART II
5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
6.	Selected Financial Data	19
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
7A.	Quantitative and Qualitative Disclosures About Market Risk	42
8.	Financial Statements and Supplementary Data	42
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	42
9A.	Controls and Procedures	43
9B.	Other Information	47

	PART III
10.	Directors, Executive Officers and Corporate Governance	47
11.	Executive Compensation	47
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
13.	Certain Relationships and Related Transactions, and Director Independence	47
14.	Principal Accounting Fees and Services	47

	PART IV
15.	Exhibits and Financial Statement Schedules	47

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FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Annual Report contains or may contain information that is forward-looking, within the meaning of the Federal securities laws, including, without limitation, statements regarding: our ability to maintain current or meet projected occupancy; rental rates and property operating results; the effect of acquisitions, dispositions, developments and redevelopments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our development and redevelopment investments; expectations regarding sales of our apartment communities and the use of proceeds thereof; and our ability to comply with debt covenants, including financial coverage ratios.

Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond our control, including, without limitation: real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new supply; financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that our earnings may not be sufficient to maintain compliance with debt covenants; the terms of governmental regulations that affect us and interpretations of those regulations; the competitive environment in which we operate; the timing of acquisitions, dispositions, redevelopments and developments; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by us. In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership.

Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” described in Item 1A of this Annual Report and the other documents we file from time to time with the Securities and Exchange Commission.

PART I

Item 1. Business

The Company

Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT. AIMCO Properties, L.P., or the Aimco Operating Partnership, is a Delaware limited partnership formed on May 16, 1994, to conduct our business, which is focused on the ownership, management, redevelopment and limited development of quality apartment communities located in the largest coastal and job growth markets of the United States.

Aimco, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, owns a majority of the ownership interests in the Aimco Operating Partnership. Aimco conducts all of its business and owns all of its assets through the Aimco Operating Partnership. Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as “OP Units.” OP Units include common partnership units, high performance partnership units and partnership preferred units, which we refer to as common OP Units, HPUs and preferred OP Units, respectively. We also refer to HPUs as common partnership unit equivalents. At December 31, 2015, after eliminations for units held by consolidated entities, the Aimco Operating Partnership had 164,179,533 common partnership units and equivalents outstanding. At December 31, 2015, Aimco owned 156,326,416 of the common partnership units (95.2% of the outstanding common partnership units and equivalents of the Aimco Operating Partnership) and Aimco had outstanding an equal number of shares of its Class A Common Stock, which we refer to as Common Stock.

As of December 31, 2015, our real estate portfolio consisted of 196 apartment communities with 49,149 apartment homes.

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Business Overview

Our business activities are defined by a commitment to our core values of integrity, respect, collaboration, performance and a focus on our customers. These values and our corporate mission, “to consistently provide quality apartment homes in a respectful environment delivered by a team of people who care,” shape our culture. In all of our interactions with residents, team members, business partners, lenders and equity holders, we aim to be the best owner and operator of apartment communities and an outstanding corporate citizen.

Our principal financial objective is to provide predictable and attractive returns to our equity holders, as measured by growth in Economic Income and Adjusted Funds From Operations (each defined under the Non-GAAP Performance and Liquidity Measures heading in Item 7). Our business plan to achieve this objective is to:


•	operate our portfolio of desirable apartment homes with valued amenities, with a high level of focus on customer selection and customer satisfaction, and in an efficient manner that realizes the benefits of our corporate systems and local management expertise;


•	improve our geographically diversified portfolio of apartment communities, which average “B/B+” in quality (defined under the Portfolio Management heading below) by selling lower rated apartment communities and investing the proceeds from such sales through property upgrades, redevelopment, development and acquisition of higher-quality apartment communities;


•	provide financial leverage primarily by the use of non-recourse, long-dated, fixed-rate property debt and perpetual preferred equity, a combination which reduces our refunding and re-pricing risk and which provides a hedge against increases in interest rates; and


•	emphasize a collaborative, respectful, and performance-oriented culture while maintaining high morale and team engagement.

Our long-standing business is organized around our strategic areas of focus: excellence in property operations; adding value through redevelopment and limited development; upgrading our portfolio through disciplined portfolio management; maintaining a safe and liquid balance sheet; and fostering a performance culture. Our strategic areas of focus are described in more detail below. Recent accomplishments in the execution of such strategies are discussed in the Executive Overview in Item 7.

Property Operations

We own and operate a diversified portfolio of conventional apartment communities. We also operate a portfolio of affordable apartment communities, which consists of apartments with rents that are generally paid, in whole or part, by a government agency. As the tax credit delivery or compliance periods for our affordable apartment communities expire, between 2016 and 2023, we expect to sell these apartment communities and reinvest the proceeds in our conventional portfolio. Our conventional and affordable portfolios comprise our reportable segments.

Our property operations are organized into two geographic areas, the East and West. To manage our portfolio more efficiently and to increase the benefits from our local management expertise, we give direct responsibility for operations within each area to area operations leaders with regular senior management reviews. To enable the area operations leaders to focus on sales and service, as well as to improve financial control and budgeting, we have dedicated area financial officers who support the operations leaders. Additionally, with the exception of routine maintenance and purchases and installation of equipment and other capital assets, we have specialized teams that manage capital spending related to larger capital and construction projects, thus reducing the need for the area operations leaders to spend time on oversight of such projects.

We seek to improve our property operations by: employing service-oriented, well-trained employees; upgrading systems; standardizing business processes, operational measurements and internal reporting; and enhancing financial controls over field operations. We focus on the following areas:

•

Customer Satisfaction. Our operating culture is focused on our residents and we regularly monitor and evaluate our performance through a customer satisfaction tracking system. Our goal is to provide our residents with a high level of service in clean, safe and attractive communities. We have automated certain aspects of our on-site operations to enable our current and future residents to interact with us using methods that are efficient and effective for them, such as making on-line requests for service work, taking self-guided apartment community tours and executing leases and lease renewals on-line. In addition, we emphasize the quality of our on-site employees through recruiting, training and retention programs, which we believe contributes to improved customer service and leads to increased occupancy rates and enhanced operational performance.

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•

Resident Selection and Retention. In apartment communities, neighbors are a meaningful part of the value provided, together with the location of the community and the physical quality of the apartment homes. Part of our property operations strategy is to focus on attracting and retaining credit-worthy residents who are also good neighbors. We have structured goals and coaching for all of our sales personnel, a tracking system for inquiries and a standardized renewal communication program. We have standardized residential financial stability requirements and have policies and monitoring practices to maintain our resident quality.

•

Revenue Management and Ancillary Services. For our conventional apartment communities, we have a centralized revenue management system that leverages people, processes and technology to work in partnership with our area operational management teams to develop rental rate pricing. We seek to increase revenue, net operating income and free cash flow by optimizing the balance between rental and occupancy rates, as well as taking into consideration the cost of preparing an apartment home for a new resident. We are also focused on careful measurements of on-site operations, as we believe that timely and accurate collection of apartment community performance and resident profile data will enable us to maximize revenue through better property management and leasing decisions. We maximize rental revenue with timely data and analysis of new and renewal pricing for each apartment home, thereby enabling us to respond quickly to changes in supply and demand. We also generate incremental revenue by providing services to our residents, including, at certain apartment communities, telecommunications services, appliance rental, carport, premier parking, garage and storage space rental.


•	Controlling Expenses. Cost controls are accomplished by local focus at the area level; taking advantage of economies of scale at the corporate level; and through electronic procurement. Refer to the Results of Operations discussion within Item 7 for further information regarding our cost controls.

•

Maintaining and Improving Apartment Community Quality. We believe that the physical condition and amenities of our apartment communities are important factors in our ability to maintain and increase rental rates. We invest in the maintenance and improvement of our apartment communities primarily through: Capital Improvements, which are non-redevelopment capital additions that are made to enhance the value, profitability or useful life of an asset from its condition at the date of our purchase; Capital Replacements, which are capital additions made to replace capital assets consumed during our ownership; and Property Upgrades, which may include kitchen and bath remodeling, energy conservation projects, and investments in longer-lived materials designed to reduce turnover costs, such as simulated wood flooring and granite countertops.

Redevelopment and Development

We invest in the redevelopment of certain apartment communities in superior locations, when we believe the investment will yield risk-adjusted returns in excess of those from apartment communities sold in paired trades or in excess of the cost of equity issued to fund the equity component of the redevelopments. We have historically undertaken a range of redevelopment projects: from those in which buildings or exteriors are renovated without the need to vacate apartment homes; to those in which significant renovation of apartment homes may be accomplished upon lease expiration; and to those in which an entire building or community is wholly vacated. We primarily execute our redevelopment projects using a phased approach, where we renovate portions of an apartment community in stages, which allows additional flexibility in project costs and the ability to tailor our product offerings to customer response and rent achievement. Redevelopment and development work may include seeking entitlements from local governments, which, for redevelopments, enhance the value of our existing portfolio by increasing density, that is, the right to add apartment homes to a site. We have a specialized Redevelopment and Construction Services team which oversees these projects and uses third party contractors with expertise in the local markets.

On a more limited basis, we may undertake ground-up development, either directly in connection with the redevelopment of an existing apartment community or at a new location. In the very limited instances where we elect to complete ground-up development in a new location (such as our One Canal development in Boston, Massachusetts), we have done so with a third party development partner with expertise in the local market and where such partner has accepted or substantially mitigated entitlement and construction risks.

Portfolio Management

Portfolio management involves the ongoing allocation of investment capital to meet our geographic and product type goals. We target geographic diversification in our portfolio in order to optimize risk-adjusted returns and to avoid the risk of undue concentration in any particular market. We seek to balance the portfolio by owning communities that offer apartment homes with a range of prices so as to diversify our exposure to economic downturns and to competitive new building supply. We also seek to own properties with the potential for profitable redevelopment.

Our portfolio strategy seeks predictable rent growth from a portfolio of “A,” “B” and “C+” quality conventional apartment communities, averaging “B/B+” in quality, and diversified among the largest coastal and job growth markets in the United States,

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as measured by total apartment value. We measure conventional apartment community quality by comparing the average rents of our apartment homes to local market average rents as reported by a third-party provider of commercial real estate performance and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of the local market average, as “B” quality apartment communities those earning rents between 90% and 125% of the local market average; “C+” quality assets are those with rents greater than $1,100 per month, but lower than 90% of local market average; and “C” quality assets are those with rents less than $1,100 per month and lower than 90% of local market average. We classify as “B/B+” quality a portfolio that on average earns rents between 100% and 125% of the local market average rents where the portfolio is located. Although some companies and analysts within the multifamily real estate industry use apartment community class ratings of “A,” “B” and “C,” some of which are tied to local market rent averages, the metrics used to classify apartment community quality as well as the timing for which local markets rents are calculated may vary from company to company. Accordingly, our rating system for measuring apartment community quality is neither broadly nor consistently used in the multifamily real estate industry.

Our portfolio strategy is to sell each year the 5% to 10% of our portfolio with lower projected returns, lower operating margins, and lower expected future rent growth, and reinvest the sale proceeds in apartment communities already in our portfolio, through property upgrades and redevelopment, or through the purchase of other apartment communities and, in limited situations, the development of apartment communities. We execute our strategy through paired trades when the investment will yield risk-adjusted returns in excess of those of the apartment community sold and when portfolio quality is enhanced. Whenever possible, we structure transactions in a tax-efficient manner to preserve our invested capital.

Balance Sheet and Liquidity

The majority of our leverage, approximately 93% at December 31, 2015, consists of property-level, non-recourse, long-dated debt, and 6% at December 31, 2015, consists of perpetual preferred equity, a combination which reduces our refunding and re-pricing risk. The majority of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates and inflation. Although our primary sources of leverage are property-level, non-recourse, long-dated, fixed-rate, amortizing debt and perpetual preferred equity, we also have a revolving credit arrangement which we use for working capital and other short-term purposes.

Culture

Our culture is the key to our success. Our emphasis on a collaborative, respectful, and performance-oriented culture is what enables the continuing transformation of the Aimco business. In 2015, Aimco was recognized by the Denver Post as a Top Work Place for the third consecutive year.

Competition

In attracting and retaining residents to occupy our apartment communities we compete with numerous other housing alternatives. Our apartment communities compete directly with other rental apartments as well as condominiums and single-family homes that are available for rent or purchase in the markets in which our apartment communities are located. Principal factors of competition include rent or price charged, attractiveness of the location and apartment community and quality and breadth of services. The number of competitive apartment communities relative to demand in a particular area has a material effect on our ability to lease apartment homes at our communities and on the rents we charge. In certain markets there exists an oversupply of single-family homes and condominiums relative to consumer demand, which affect the pricing and occupancy of our rental apartments.

We also compete with other real estate investors, including other apartment REITs, pension and investment funds, partnerships and investment companies in acquiring, redeveloping, managing, obtaining financing for and disposing of apartment communities. This competition affects our ability to acquire apartment communities we want to add to our portfolio and the price that we pay in such acquisitions; our ability to finance or refinance communities in our portfolio and the cost of such financing; and our ability to dispose of communities we no longer desire to retain in our portfolio and the timing and price for which we dispose of such communities.

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Taxation

Aimco

Aimco has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, which we refer to as the Code, commencing with our taxable year ended December 31, 1994, and intends to continue to operate in such a manner. Aimco’s current and continuing qualification as a REIT depends on its ability to meet the various requirements imposed by the Code, which relate to organizational structure, distribution levels, diversity of stock ownership and certain restrictions with regard to owned assets and categories of income. If Aimco continues to qualify for taxation as a REIT, Aimco will generally not be subject to United States Federal corporate income tax on its taxable income that is currently distributed to stockholders. This treatment substantially eliminates the “double taxation” (at the corporate and stockholder levels) that generally results from an investment in a corporation.

Even if Aimco continues to qualify as a REIT, Aimco may be subject to United States Federal income and excise taxes in various situations, such as on its undistributed income. Aimco also will be required to pay a 100% tax on any net income on non-arm’s length transactions between Aimco and a taxable REIT subsidiary (described below) and on any net income from sales of apartment communities that were held for sale to customers in the ordinary course. In addition, Aimco could also be subject to the alternative minimum tax, or AMT, on items of tax preference. State and local tax laws may not conform to the United States Federal income tax treatment, and Aimco may be subject to state or local taxation in various state or local jurisdictions, including those in which Aimco transacts business. Any taxes imposed on Aimco reduce our operating cash flow and net income.

Certain of Aimco’s operations or a portion thereof, including property management, asset management and risk management are conducted through taxable REIT subsidiaries, each of which we refer to as a TRS. A TRS is a subsidiary C-corporation that has not elected REIT status and, as such, is subject to United States Federal corporate income tax. We use TRS entities to facilitate our ability to offer certain services and activities to our residents and investment partners that cannot be offered directly by a REIT. We also use TRS entities to hold investments in certain apartment communities.

The Aimco Operating Partnership

The Aimco Operating Partnership is treated as a “pass-through” entity for United States Federal income tax purposes and is not subject to United States Federal income taxation. Each of its partners, however, is subject to tax on his or her allocable share of partnership tax items, including partnership income, gains, losses, deductions and credits, or Partnership Tax Items, for each taxable year during which he or she is a partner, regardless of whether he or she receives any actual distributions of cash or other property from the Aimco Operating Partnership during the taxable year. Generally, the characterization of any particular partnership tax item is determined by us, rather than at the partner level, and the amount of a partner’s allocable share of such item is governed by the terms of the Aimco Operating Partnership’s Partnership Agreement. AIMCO-GP, Inc., the general partner, is our “tax matters partner” for United States Federal income tax purposes. The tax matters partner is authorized, but not required, to take certain actions on behalf of the Aimco Operating Partnership with respect to tax matters. The Aimco Operating Partnership is subject to tax in certain states.

Regulation

General

Apartment communities and their owners are subject to various laws, ordinances and regulations, including those related to real estate broker licensing and regulations relating to recreational facilities such as swimming pools, activity centers and other common areas. Changes in laws increasing the potential liability for environmental conditions existing on apartment communities or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, which would adversely affect our net income and cash flows from operating activities. In addition, future enactment of rent control or rent stabilization laws, such as legislation that has been considered in New York and certain cities in California, or other laws regulating multifamily housing may reduce rental revenue or increase operating costs in particular markets.

Environmental

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the future, or communities we previously owned or operated in the past. These and other risks related to environmental matters are described in more detail in Item 1A, “Risk Factors.”

Insurance

Our primary lines of insurance coverage are property, general liability, and workers’ compensation. We believe that our insurance coverages adequately insure our apartment communities against the risk of loss attributable to fire, earthquake, hurricane, tornado, flood, terrorism and other perils, and adequately insure us against other risk. Our coverage includes deductibles, retentions and limits that are customary in the industry. We have established loss prevention, loss mitigation, claims handling and litigation management procedures to manage our exposure.

Employees

At December 31, 2015, we had 1,591 employees, of which 1,108 were at the apartment community level, performing various on-site functions, with the balance managing corporate and area operations, including investment and debt transactions, legal, financial reporting, accounting, information systems, human resources and other support functions. As of December 31, 2015, unions represented 89 of our employees. We have never experienced a work stoppage and believe we maintain satisfactory relations with our employees.

Available Information

Our combined Annual Report on Form 10-K, our combined Quarterly Reports on Form 10-Q, Current Reports on Form 8-K filed by Aimco or the Aimco Operating Partnership and any amendments to any of those reports that we file with the Securities and Exchange Commission are available free of charge as soon as reasonably practicable through Aimco’s website at www.aimco.com. The information contained on Aimco’s website is not incorporated into this Annual Report. Aimco’s Common Stock is listed on the New York Stock Exchange under the symbol “AIV.” In 2015, Aimco’s chief executive officer submitted his annual corporate governance listing standards certification to the New York Stock Exchange, which certification was unqualified.

Item 1A. Risk Factors

The risk factors noted in this section and other factors noted throughout this Annual Report, describe certain risks and uncertainties that could cause our actual results to differ materially from those contained in any forward-looking statement.

Redevelopment, development and construction risks could affect our profitability.

We are currently redeveloping, and we intend to continue to redevelop, certain of our apartment communities. Additionally, we are developing a 12-story apartment building in Boston, Massachusetts. During 2016, we expect to invest approximately $180 million to $220 million in conventional redevelopment and development activities. Redevelopment and development activities are subject to the following risks:


•	we may be unable to obtain, or experience delays in obtaining, necessary zoning, occupancy, or other required governmental or third party permits and authorizations, which could result in increased costs or the delay or abandonment of opportunities;


•	we may incur costs that exceed our original estimates due to increased material, labor or other costs, such as litigation;


•	we may be unable to complete construction and lease up of an apartment community on schedule, resulting in increased construction and financing costs and a decrease in expected rental revenues;


•	occupancy rates and rents at an apartment community may fail to meet our expectations for a number of reasons, including changes in market and economic conditions beyond our control and the development by competitors of competing communities;


•	we may be unable to obtain financing with favorable terms, or at all, which may cause us to delay or abandon an opportunity;


•	we may abandon opportunities that we have already begun to explore for a number of reasons, including changes in local market conditions or increases in construction or financing costs, and, as a result, we may fail to recover costs already incurred in exploring those opportunities;


•	we may incur liabilities to third parties during the redevelopment or development process;


•	unexpected events or circumstances may arise during the redevelopment or development process that affect the timing of completion and the cost and profitability of the project; and


•	loss of a key member of a project team could adversely affect our ability to deliver projects on time and within our budget.

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If we are not successful in our acquisition of apartment communities, our results of operations could be adversely affected.

The selective acquisition of apartment communities is a component of our strategy. However, we may not be able to complete transactions successfully in the future. Although we seek to acquire apartment communities when such acquisitions increase our Net Asset Value, Adjusted Funds From Operations, Pro forma Funds From Operations and property net operating income, such transactions may fail to perform in accordance with our expectations. In particular, following acquisition, the value and operational performance of an apartment community may be diminished if obsolescence or neighborhood changes occur before we are able to redevelop or sell the community.

Acquisitions of under development or unoccupied apartment communities may fail to perform as expected.

We may acquire apartment communities that are under development or otherwise unoccupied at the time of acquisition, and we may not be able to achieve expected occupancy levels or rental rates for these communities, resulting in lower than expected net operating income. Additionally, we may underestimate the costs necessary to bring such communities up to expected occupancy levels, which may result in lower than expected net operating income for these communities.

Because real estate investments are relatively illiquid, we may not be able to sell apartment communities when appropriate.

Real estate investments are relatively illiquid and cannot always be sold quickly. REIT tax rules also restrict our ability to sell apartment communities. Thus, we may not be able to change our portfolio promptly in response to changes in economic or other market conditions. Our ability to dispose of apartment communities in the future will depend on prevailing economic and market conditions, including the cost and availability of financing. This could have a material adverse effect on our financial condition or results of operations.

Competition could limit our ability to lease apartment homes or increase or maintain rents.

Our apartment communities compete for residents with other housing alternatives, including other rental apartments and condominiums, and, to a lesser degree, single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale. Competitive residential housing as well as household formation and job creation in a particular area could adversely affect our ability to lease apartment homes and to increase or maintain rental rates.

Failure to generate sufficient net operating income may adversely affect our liquidity, limit our ability to fund necessary capital expenditures or adversely affect our ability to pay dividends or distributions.

Our ability to fund necessary capital expenditures on our apartment communities depends on, among other things, our ability to generate net operating income in excess of required debt payments. If we are unable to fund capital expenditures on our apartment communities, we may not be able to preserve the competitiveness of our communities, which could adversely affect our net operating income and long term value.

Our ability to make payments to our investors depends on our ability to generate net operating income in excess of required debt payments and capital expenditure requirements. Our net operating income and liquidity may be adversely affected by events or conditions beyond our control, including:


•	the general economic climate;


•	an inflationary environment in which the costs to operate and maintain our communities increase at a rate greater than our ability to increase rents, which we can only do upon renewal of existing leases or at the inception of new leases;


•	competition from other apartment communities and other housing options;


•	local conditions, such as loss of jobs, unemployment rates or an increase in the supply of apartments, that might adversely affect apartment occupancy or rental rates;


•	changes in governmental regulations and the related cost of compliance;


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


•	changes in interest rates and the availability of financing.

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Our existing and future debt financing could render us unable to operate, result in foreclosure of our apartment communities, prevent us from making distributions on our equity or otherwise adversely affect our liquidity.

We are subject to the risk that our cash flow from operations will be insufficient to make required payments of principal and interest, and the risk that existing indebtedness may not be refinanced or that the terms of any refinancing will not be as favorable as the terms of existing indebtedness. If we fail to make required payments of principal and interest on our non-recourse debt, our lenders could foreclose on the apartment communities and other collateral securing such debt, which would result in loss of income and asset value to us. As of December 31, 2015, the majority of our apartment communities were encumbered by debt. Our organizational documents do not limit the amount of debt that we may incur, and we have significant amounts of debt outstanding. Payments of principal and interest may leave us with insufficient cash resources to operate our communities or pay distributions required to be paid in order to maintain Aimco’s qualification as a REIT.

Disruptions in the financial markets could affect our ability to obtain financing and the cost of available financing and could adversely affect our liquidity.

Our ability to obtain financing and the cost of such financing depends on the overall condition of the United States credit markets. During periods of economic uncertainty, the United States credit markets may experience significant liquidity disruptions, which may cause the spreads on debt financings to widen considerably and make obtaining financing, both non-recourse property debt and corporate borrowings, such as our Credit Agreement, more difficult. Additionally, Federal Home Loan Mortgage Corporation, or Freddie Mac, and Federal National Mortgage Association, or Fannie Mae, have historically provided significant capital at a relatively low cost to finance multifamily properties. Freddie Mac and Fannie Mae are under conservatorship by the Housing Finance Agency, and their future role in the housing finance market is uncertain. If there is any significant reduction in Freddie Mac’s or Fannie Mae’s level of involvement in the secondary credit markets, it may adversely affect the pricing at which we may obtain non-recourse property debt financing.

If our ability to obtain financing is adversely affected, we may be unable to satisfy scheduled maturities on existing financing through other sources of liquidity, which could result in lender foreclosure on the apartment communities securing such debt and loss of income and asset value, each of which would adversely affect our liquidity.

Increases in interest rates would increase our interest expense and reduce our profitability.

As of December 31, 2015, on a consolidated basis, we had approximately $111.9 million of variable-rate indebtedness outstanding. We estimate that an increase in 30-day LIBOR of 100 basis points with constant credit risk spreads would result in our net income and the amount of net income attributable to our common security holders (including Aimco common stockholders and the Aimco Operating Partnership’s common unitholders) being reduced (or the amounts of net loss and net loss attributable to our common equity holders being increased) by approximately $0.9 million, on an annual basis.

At December 31, 2015, we had approximately $137.7 million in cash and cash equivalents and restricted cash, a portion of which bear interest at variable rates indexed to LIBOR-based rates, and which may mitigate the effect of an increase in variable rates on our variable-rate indebtedness discussed above.

Covenant restrictions may limit our ability to make payments to our investors.

Some of our debt and other securities contain covenants that restrict our ability to make distributions or other payments to our investors unless certain financial tests or other criteria are satisfied. Our Credit Agreement provides, among other things, that we may make distributions to our investors during any four consecutive fiscal quarters in an aggregate amount that does not exceed the greater of 95% of our Funds From Operations for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain Aimco’s REIT status. Our outstanding classes of preferred stock or preferred units prohibit the payment of dividends on our Common Stock or common partnership units if we fail to pay the dividends to which the holders of the preferred stock or preferred units are entitled.

Our subsidiaries may be prohibited from making distributions and other payments to us.

All of Aimco’s apartment communities are owned, and all of Aimco’s operations are conducted, by the Aimco Operating Partnership. Further, many of the Aimco Operating Partnership’s apartment communities are owned by other subsidiaries. As a result, Aimco depends on distributions and other payments from the Aimco Operating Partnership, and the Aimco Operating Partnership depends on distributions and payments from its subsidiaries in order to satisfy our collective financial obligations and make payments to our investors. The ability of the Aimco Operating Partnership and its subsidiaries to make such distributions and other payments depends on their earnings and cash flows and may be subject to statutory or contractual limitations. As an equity investor in the Aimco Operating Partnership and its subsidiaries, our right to receive assets upon their liquidation or reorganization will be effectively subordinated to the claims of their creditors. To the extent that we are recognized as a creditor

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of such subsidiaries, our claims may still be subordinate to any security interest in or other lien on their assets and to any of their debt or other obligations that are senior to our claims.

Potential liability or other expenditures associated with potential environmental contamination may be costly.

Various Federal, state and local laws subject apartment community owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Potentially hazardous materials may include polychlorinated biphenyls, petroleum-based fuels, lead-based paint, or asbestos. Such laws often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with investigation and remediation actions, damages to natural resources and for potential fines or penalties in connection with such damage or with respect to the improper management of hazardous materials. Moreover, private plaintiffs may potentially make claims for investigation and remediation costs they incur or personal injury, disease, disability or other infirmities related to the alleged presence of hazardous materials at an apartment community. In addition to potential environmental liabilities or costs associated with our current apartment communities, we may also be responsible for such liabilities or costs associated with communities we acquire or manage in the future, or apartment communities we no longer own or operate.

Laws benefiting disabled persons may result in our incurrence of unanticipated expenses.

Under the Americans with Disabilities Act of 1990, or ADA, all places intended to be used by the public are required to meet certain Federal requirements related to access and use by disabled persons. The Fair Housing Amendments Act of 1988, or FHAA, requires apartment communities first occupied after March 13, 1991, to comply with design and construction requirements for disabled access. For those projects receiving Federal funds, the Rehabilitation Act of 1973 also has requirements regarding disabled access. These and other Federal, state and local laws may require modifications to our apartment communities, or affect renovations of the communities. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. Although we believe that our apartment communities are substantially in compliance with present requirements, we may incur unanticipated expenses to comply with the ADA, the FHAA and the Rehabilitation Act of 1973 in connection with the ongoing operation or redevelopment of our apartment communities.

Moisture infiltration and resulting mold remediation may be costly.

Although we are proactively engaged in managing moisture intrusion and preventing the presence of mold at our apartment communities, it is not unusual for periodic moisture intrusion issues to cause mold in isolated locations within an apartment community. We have implemented policies, procedures and training, and include a detailed moisture intrusion and mold assessment during acquisition due diligence. We believe these measures will manage mold exposure at our apartment communities and will minimize the effects that mold may have on our residents. To date, we have not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. We have only limited insurance coverage for property damage claims arising from the presence of mold and for personal injury claims related to mold exposure. Because the law regarding mold is unsettled and subject to change, we can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on our consolidated financial condition or results of operations.

We may be subject to litigation associated with partnership transactions that could increase our expenses and prevent completion of beneficial transactions.

We have engaged in, and may continue to engage in, the selective acquisition of interests in partnerships controlled by us that own apartment communities. In some cases, we have acquired the general partner of a partnership and then made an offer to acquire the limited partners’ interests in the partnership. In these transactions, we may be subject to litigation based on claims that we, as the general partner, have breached our fiduciary duty to our limited partners or that the transaction violates the relevant partnership agreement or state law. Although we intend to comply with our fiduciary obligations and the relevant partnership agreements, we may incur costs in connection with the defense or settlement of this type of litigation. In some cases, this type of litigation may adversely affect our desire to proceed with, or our ability to complete, a particular transaction. Any litigation of this type could also have a material adverse effect on our financial condition or results of operations.

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Government housing regulations may limit the opportunities at some of our apartment communities and failure to comply with resident qualification requirements may result in financial penalties and/or loss of benefits, such as rental revenues paid by government agencies. Additionally, the government may cease to operate or reduce funding for government housing programs which would result in a loss of benefits.

We own equity interests in consolidated and unconsolidated entities that own certain apartment communities that benefit from governmental programs intended to provide housing to people with low or moderate incomes. These programs, which are usually administered by the United States Department of Housing and Urban Development, or HUD, or state housing finance agencies, typically provide one or more of the following: mortgage insurance; favorable financing terms; tax-exempt interest; historic or low-income housing tax-credits; or rental assistance payments to the apartment community owners. As a condition of the receipt of assistance under these programs, the apartment communities must comply with various requirements, which typically limit rents to pre-approved amounts and limit our choice of residents to those with incomes at or below certain levels. Failure to comply with these requirements may result in financial penalties or loss of benefits. We are usually required to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage a HUD-assisted apartment community. We may not always receive such approval.

Additionally, there is no guarantee that the government will continue to operate these programs or that the programs will be operated in a manner that generates benefits consistent with those received in the past. Any cessation of or change in the administration of benefits from these government housing programs may result in our loss or reduction in the amount of the benefits we receive under these programs, including rental subsidies. During 2015, 2014 and 2013, for continuing and discontinued operations, our rental revenues include $73.4 million, $74.6 million and $88.4 million, respectively, of subsidies from government agencies. Of the 2015 subsidies, approximately 14.5% related to communities benefiting from housing assistance contracts that expired in late 2015 or expire in 2016, which we are in the process of renewing or anticipate renewing, and the remainder related to communities benefiting from housing assistance contracts that expire after 2016 and have a weighted average term of 8.2 years. Any loss or reduction in the amount of these benefits may adversely affect our liquidity and results of operations.

Although we are insured for certain risks, the cost of insurance, increased claims activity or losses resulting from casualty events may affect our operating results and financial condition.

We are insured for a portion of our consolidated apartment communities’ exposure to casualty losses resulting from fire, earthquake, hurricane, tornado, flood and other perils, which insurance is subject to deductibles and self-insurance retention. We recognize casualty losses or gains based on the net book value of the affected apartment community and the amount of any related insurance proceeds. In many instances, the actual cost to repair or replace the apartment community may exceed its net book value and any insurance proceeds. We recognize the uninsured portion of losses as casualty losses in the periods in which they are incurred. In addition, we are self-insured for a portion of our exposure to third-party claims related to our employee health insurance plans, workers’ compensation coverage and general liability exposure. With respect to our exposure to claims of third parties, we establish reserves at levels that reflect our known and estimated losses. The ultimate cost of losses and the impact of unforeseen events may vary materially from recorded reserves, and variances may adversely affect our operating results and financial condition. We purchase insurance to reduce our exposure to losses and limit our financial losses on large individual risks. The availability and cost of insurance are determined by market conditions outside our control. No assurance can be made that we will be able to obtain and maintain insurance at the same levels and on the same terms as we do today. If we are not able to obtain or maintain insurance in amounts we consider appropriate for our business, or if the cost of obtaining such insurance increases materially, we may have to retain a larger portion of the potential loss associated with our exposures to risks.

Natural disasters and severe weather may affect our operating results and financial condition.

Natural disasters such as earthquakes and severe weather such as hurricanes may result in significant damage to our apartment communities. The extent of our casualty losses and loss in operating income in connection with such events is a function of the severity of the event and the total amount of exposure in the affected area. When we have geographic concentration of exposures, a single catastrophe (such as an earthquake) or destructive weather event (such as a hurricane) affecting a region may have a significant adverse effect on our financial condition and results of operations. We cannot accurately predict natural disasters or severe weather, or the number and type of such events that will affect us. As a result, our operating and financial results may vary significantly from one period to the next. Although we anticipate and plan for losses, there can be no assurance that our financial results will not be adversely affected by our exposure to losses arising from natural disasters or severe weather in the future that exceed our previous experience and assumptions.

We depend on our senior management.

Our success depends upon the retention of our senior management, including Terry Considine, our chief executive officer. We have a succession planning and talent development process that is designed to identify potential replacements and develop our team members to provide depth in the organization and a bench of talent on which to draw. However, there are no assurances that

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we would be able to find qualified replacements for the individuals who make up our senior management if their services were no longer available. The loss of services of one or more members of our senior management team could have a material adverse effect on our business, financial condition and results of operations. We do not currently maintain key-man life insurance for any of our employees.

Aimco may fail to qualify as a REIT.

If Aimco fails to qualify as a REIT, Aimco will not be allowed a deduction for dividends paid to its stockholders in computing its taxable income, and will be subject to United States Federal income tax at regular corporate rates, including any applicable AMT. This would substantially reduce our funds available for distribution to our investors. Unless entitled to relief under certain provisions of the Code, Aimco also would be disqualified from taxation as a REIT for the four taxable years following the year during which it ceased to qualify as a REIT. In addition, Aimco’s failure to qualify as a REIT would place us in default under our Credit Agreement.

We believe that Aimco operates, and has since its taxable year ended December 31, 1994 operated, in a manner that enables it to meet the requirements for qualification as a REIT for United States Federal income tax purposes. Aimco’s continued qualification as a REIT will depend on its satisfaction of certain asset, income, investment, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Aimco’s ability to satisfy the asset tests depends upon our analysis of the fair market values of our assets, some of which are not susceptible to a precise determination, and for which we do not obtain independent appraisals. Aimco’s compliance with the REIT income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our income and assets on an ongoing basis. Moreover, the proper classification of an instrument as debt or equity for United States Federal income tax purposes may be uncertain in some circumstances, which could affect the application of the REIT qualification requirements. Accordingly, there can be no assurance that the Internal Revenue Service, or the IRS, will not contend that our interests in subsidiaries or other issuers constitutes a violation of the REIT requirements. Moreover, future economic, market, legal, tax or other considerations may cause Aimco to fail to qualify as a REIT, or Aimco’s Board of Directors may determine to revoke its REIT status.

REIT distribution requirements limit our available cash.

As a REIT, Aimco is subject to annual distribution requirements. As Aimco’s operating partnership, the Aimco Operating Partnership pays distributions intended to satisfy Aimco’s distribution requirements. This limits the amount of cash available for other business purposes, including amounts to fund our growth. Aimco generally must distribute annually at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, in order for its distributed earnings not to be subject to United States Federal corporate income tax. We intend to make distributions to Aimco’s stockholders to comply with the requirements of the Code. However, differences in timing between the recognition of taxable income and the actual receipt of cash could require us to sell apartment communities or borrow funds on a short-term or long-term basis to meet the 90% distribution requirement of the Code.

Aimco may be subject to federal and state income taxes, in certain circumstances.

Even if Aimco qualifies as a REIT, Aimco may be subject to United States Federal income and excise taxes in various situations, such as on its undistributed income. Aimco could also be required to pay a 100% tax on any net income on non-arm's length transactions between Aimco and a taxable REIT subsidiary and on any net income from sales of apartment communities that were held for sale to customers in the ordinary course. In addition, Aimco could be subject to alternative minimum tax, or AMT, on items of tax preference. State and local tax laws may not conform to the United States Federal income tax treatment, and Aimco may be subject to state or local taxation in various state or local jurisdictions, including those in which Aimco transacts business. Any taxes imposed on Aimco would reduce our operating cash flow and net income and could negatively impact our ability to pay dividends and distributions.

Recent Tax Legislation Impacts Certain U.S. Federal Income Tax Rules Applicable to REITs

The recently enacted Protecting Americans from Tax Hikes Act of 2015, or PATH Act, contains changes to certain aspects of the U.S. federal income tax rules applicable to REITs. The PATH Act modifies various rules that apply to a REIT’s ownership of and business relationship with its TRS entities and reduces (beginning in 2018) the value of a REIT’s assets that may be in TRS entities from 25% to 20%. The PATH Act makes permanent the reduction of the period (from ten years to five years) during which a REIT is subject to corporate-level tax on the recognition of built-in gains in assets of an acquired corporation. The PATH Act also makes multiple changes related to the Foreign Investment in Real Property Tax Act, expands prohibited transaction safe harbors and qualifying hedges, and repeals the preferential dividend rule for publicly-offered REITs. Lastly, the PATH Act adjusts the way a REIT calculates earnings and profits in certain circumstances to avoid double taxation at the shareholder level, and expands the types of assets and income treated as qualifying for purposes of the REIT requirements. Investors are urged to consult their tax advisors with respect to these changes and the potential impact on their investment in our common stock and debt securities.

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Limits on ownership of shares in Aimco’s charter may result in the loss of economic and voting rights by purchasers that violate those limits.

Aimco’s charter limits ownership of Common Stock by any single stockholder (applying certain “beneficial ownership” rules under the Federal securities laws) to 8.7% (or up to 12.0% upon a waiver from Aimco’s Board of Directors) of outstanding shares of Common Stock, or 15% in the case of certain pension trusts, registered investment companies and Mr. Considine (or up to 18.0% for such pension trusts or registered investment companies upon a waiver from Aimco’s Board of Directors). Aimco’s charter also limits ownership of Aimco’s Common Stock and preferred stock by any single stockholder to 8.7% of the value of the outstanding Common Stock and preferred stock, or 15% in the case of certain pension trusts, registered investment companies and Mr. Considine. The charter also prohibits anyone from buying shares of Aimco’s capital stock if the purchase would result in Aimco losing its REIT status. This could happen if a transaction results in fewer than 100 persons owning all of Aimco’s shares of capital stock or results in five or fewer persons (applying certain attribution rules of the Code) owning 50% or more of the value of all of Aimco’s shares of capital stock. If anyone acquires shares in excess of the ownership limit or in violation of the ownership requirements of the Code for REITs:


•	the transfer will be considered null and void;


•	we will not reflect the transaction on Aimco’s books;


•	we may institute legal action to enjoin the transaction;


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


•	we may redeem the shares;


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


•	the shares (and all voting and dividend rights of the shares) will be held in trust for the benefit of one or more charitable organizations designated by Aimco.

Aimco may purchase the shares of capital stock held in trust at a price equal to the lesser of the price paid by the transferee of the shares or the then current market price. If the trust transfers any of the shares of capital stock, the affected person will receive the lesser of the price paid for the shares or the then current market price. An individual who acquires shares of capital stock that violate the above rules bears the risk that the individual:


•	may lose control over the power to dispose of such shares;


•	may not recognize profit from the sale of such shares if the market price of the shares increases;


•	may be required to recognize a loss from the sale of such shares if the market price decreases; and


•	may be required to repay to us any distributions received from us as a result of his or her ownership of the shares.

Aimco’s charter may limit the ability of a third party to acquire control of Aimco.

The 8.7% ownership limit discussed above may have the effect of delaying or precluding acquisition of control of Aimco by a third party without the consent of Aimco’s Board of Directors. Aimco’s charter authorizes its Board of Directors to issue up to 510,587,500 shares of capital stock. As of December 31, 2015, 500,787,260 shares were classified as Common Stock, of which 156,326,416 were outstanding, and 9,800,240 shares were classified as preferred stock, of which 6,391,643 were outstanding. Under Aimco’s charter, its Board of Directors has the authority to classify and reclassify any of Aimco’s unissued shares of capital stock into shares of capital stock with such preferences, conversion or other rights, voting power restrictions, limitations as to dividends, qualifications or terms or conditions of redemptions as the Board of Directors may determine. The authorization and issuance of a new class of capital stock could have the effect of delaying or preventing someone from taking control of Aimco, even if a change in control were in Aimco’s stockholders’ best interests.

The Maryland General Corporation Law may limit the ability of a third party to acquire control of Aimco.

As a Maryland corporation, Aimco is subject to various Maryland laws that may have the effect of discouraging offers to acquire Aimco and increasing the difficulty of consummating any such offers, even if an acquisition would be in Aimco’s stockholders’ best interests. The Maryland General Corporation Law, specifically the Maryland Business Combination Act, restricts mergers and other business combination transactions between Aimco and any person who acquires, directly or indirectly, beneficial ownership of shares of Aimco’s stock representing 10% or more of the voting power without Aimco’s Board of Directors’ prior approval. Any such business combination transaction could not be completed until five years after the person acquired such voting power, and generally only with the approval of stockholders representing 80% of all votes entitled to be cast and 66-2/3% of the votes entitled to be cast, excluding the interested stockholder, or upon payment of a fair price. The Maryland General Corporation

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Law, specifically the Maryland Control Share Acquisition Act, provides generally that a person who acquires shares of Aimco’s capital stock representing 10% or more of the voting power in electing directors will have no voting rights unless approved by a vote of two-thirds of the shares eligible to vote. Additionally, the Maryland General Corporation Law provides, among other things, that the board of directors has broad discretion in adopting stockholders’ rights plans and has the sole power to fix the record date, time and place for special meetings of the stockholders. To date, Aimco has not adopted a stockholders’ rights plan. In addition, the Maryland General Corporation Law provides that a corporation that:


•	has at least three directors who are not officers or employees of the entity or related to an acquiring person; and


•	has a class of equity securities registered under the Securities Exchange Act of 1934, as amended,

may elect in its charter or bylaws or by resolution of the board of directors to be subject to all or part of a special subtitle that provides that:


•	the corporation will have a staggered board of directors;


•	any director may be removed only for cause and by the vote of two-thirds of the votes entitled to be cast in the election of directors generally, even if a lesser proportion is provided in the charter or bylaws;


•	the number of directors may only be set by the board of directors, even if the procedure is contrary to the charter or bylaws;


•	vacancies may only be filled by the remaining directors, even if the procedure is contrary to the charter or bylaws; and


•	the secretary of the corporation may call a special meeting of stockholders at the request of stockholders only on the written request of the stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting, even if the procedure is contrary to the charter or bylaws.

To date, Aimco has not made any of the elections described above.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our portfolio includes garden style, mid-rise and high-rise apartment communities located in 22 states and the District of Columbia. Our geographic allocation strategy focuses on the largest coastal and job growth markets in the United States. The following table sets forth information on all of our apartment communities as of December 31, 2015:



	Number of Apartment Communities	Number of Apartment Homes	Average Ownership
Conventional:
Atlanta	8	1,497	99	%
Bay Area	11	2,169	100	%
Boston	15	4,689	100	%
Chicago	10	3,246	100	%
Denver	8	2,065	98	%
Greater DC	14	6,547	100	%
Greater LA	15	5,313	88	%
Miami	5	2,571	100	%
New York	18	1,040	100	%
Philadelphia	6	3,525	98	%
San Diego	12	2,423	97	%
Seattle	2	239	100	%
Total target markets	124	35,324	97	%
Other markets	16	5,140	98	%
Total conventional owned and managed	140	40,464	98	%
Affordable	56	8,685	95	%
Total	196	49,149	97	%

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At December 31, 2015, we owned an equity interest in and consolidated within our financial statements 185 apartment communities containing 48,320 apartment homes. These consolidated apartment communities contain, on average, 261 apartment homes, with the largest community containing 2,113 apartment homes. These apartment communities offer residents a range of amenities, including resort pools with cabanas, grills and other amenities, clubhouses, spas, fitness centers, dog parks and large open spaces. Many of the apartment homes offer features such as granite countertops, wood flooring and cabinets, stainless steel appliances, fireplaces, spacious closets, washer and dryer connections, and balconies and patios. Some of our premier apartment communities also offer premium features including designer kitchens and bathroom finishes. Additional information on our consolidated apartment communities is contained in “Schedule III - Real Estate and Accumulated Depreciation” in this Annual Report on Form 10-K. At December 31, 2015, we held an equity interest in and did not consolidate within our financial statements 11 apartment communities containing 829 apartment homes.

The majority of our consolidated apartment communities are encumbered by property debt. At December 31, 2015, 157 of our consolidated apartment communities were encumbered by, in aggregate, $3.8 billion of property debt with a weighted average interest rate of 5.01% and a weighted average maturity of 8.1 years, respectively. Each of the non-recourse property debt instruments comprising this total are collateralized by one of our apartment communities, without cross-collateralization, with an aggregate gross book value of $6.9 billion. Refer to Note 5 to the consolidated financial statements in Item 8 for additional information regarding our property debt. As of December 31, 2015, we had an unencumbered pool that included 25 consolidated apartment communities and had an estimated fair value of $1.8 billion. At December 31, 2015, we also had two recently acquired consolidated apartment communities which we anticipate encumbering but for which financing was not yet in place.

Item 3. Legal Proceedings

As further discussed in Note 7 to the consolidated financial statements in Item 8, we are engaged in discussions with regulatory agencies regarding environmental matters at apartment communities we, or predecessor entities, previously owned. Although the outcome of the process we are undergoing for these environmental matters is uncertain, we do not expect the resolution to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Aimco

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



Quarter Ended	High		Low		Dividends Declared (per share)
December 31, 2015	$	40.83	$	35.88	$	0.30
September 30, 2015	40.43		34.71		0.30
June 30, 2015	39.66		36.52		0.30
March 31, 2015	41.55		36.59		0.28

December 31, 2014	$	38.53	$	31.62	$	0.26
September 30, 2014	34.87		31.51		0.26
June 30, 2014	32.76		28.95		0.26
March 31, 2014	31.28		25.52		0.26

Aimco’s Board of Directors determines and declares its dividends. In making a dividend determination, Aimco’s Board of Directors considers a variety of factors, including: REIT distribution requirements; current market conditions; liquidity needs and other uses of cash, such as for deleveraging and accretive investment activities. Aimco’s Board of Directors targets a dividend payout ratio of approximately 65% of Adjusted Funds From Operations (which is defined in Item 7). In January 2016, Aimco’s Board of Directors declared a cash dividend of $0.33 per share on its Common Stock. On an annualized basis, this represents an increase of 12% compared to the dividends paid in 2015. This dividend is payable on February 29, 2016, to stockholders of record on February 19, 2016. Aimco’s Board of Directors anticipates similar per share quarterly cash dividends for the remainder of 2016. However, the Board of Directors may adjust the dividend amount or the frequency with which the dividend is paid based on then prevailing facts and circumstances.

On February 25, 2016, the closing price of the Common Stock was $36.62 per share, as reported on the NYSE, and there were 156,599,775 shares of Common Stock outstanding, held by 1,958 stockholders of record. The number of holders does not include individuals or entities who beneficially own shares but whose shares are held of record by a broker or clearing agency, but does include each such broker or clearing agency as one recordholder.

As a REIT, Aimco is required to distribute annually to holders of its Common Stock at least 90% of its “real estate investment trust taxable income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income.

From time to time, Aimco may issue shares of Common Stock in exchange for common and preferred OP Units tendered to the Aimco Operating Partnership for redemption in accordance with the terms and provisions of the agreement of limited partnership of the Aimco Operating Partnership. Such shares are issued based on an exchange ratio of one share for each common OP Unit or the applicable conversion ratio for preferred OP Units. Additionally, from time to time, Aimco may also issue shares of Common Stock in exchange for limited partnership units in consolidated real estate partnerships that are tendered to the Aimco Operating Partnership for redemption in accordance with the terms and provisions of the related limited partnership agreement. The shares are generally issued in exchange for OP Units or limited partnership units in private transactions exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. During the year ended December 31, 2015, we did not issue any shares of Common Stock in exchange for common OP Units or preferred OP Units. During the year ended December 31, 2015, we did not issue any shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships.

Aimco’s Board of Directors has, from time to time, authorized Aimco to repurchase shares of its outstanding capital stock. There were no repurchases of Aimco shares during the year ended December 31, 2015. As of December 31, 2015, Aimco was authorized to repurchase approximately 19.3 million shares. This authorization has no expiration date. These repurchases may be made from time to time in the open market or in privately negotiated transactions.

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Performance Graph

The following graph compares cumulative total returns for Aimco’s Common Stock, the MSCI US REIT Index, the Standard & Poor’s 500 Total Return Index (the “S&P 500”), and the NAREIT Apartment Index. The MSCI US REIT Index is published by Morgan Stanley Capital International Inc., a provider of equity indices. The NAREIT Apartment Index is published by The National Association of Real Estate Investment Trusts, or NAREIT, a representative of real estate investment trusts and publicly traded real estate companies with interests in United States real estate and capital markets. The MSCI REIT Index reflects total shareholder return for a broad range of REITs and the NAREIT Apartment Index provides a more direct multifamily peer comparison of total shareholder return. The indices are weighted for all companies that fit the definitional criteria of the particular index and are calculated to exclude companies as they are acquired and add them to the index calculation as they become publicly traded companies. All companies of the definitional criteria in existence at the point in time presented are included in the index calculations. The graph assumes the investment of $100 in Aimco’s Common Stock and in each index on December 31, 2010, and that all dividends paid have been reinvested. The historical information set forth below is not necessarily indicative of future performance.



	For the fiscal years ended December 31,
Index	2010		2011		2012		2013		2014		2015
Aimco (1)	$	100.00	$	90.39	$	109.99	$	108.83	$	161.12	$	179.08
MSCI US REIT (1)	100.00		108.69		128.00		131.17		171.01		175.32
S&P 500 (1)	100.00		102.11		118.45		156.82		178.28		180.75
NAREIT Apartment Index (2)	100.00		115.10		123.08		115.45		161.20		187.72

(2) Source: National Association of Real Estate Investment Trusts

The Performance Graph will not be deemed to be incorporated by reference into any filing by Aimco under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Aimco specifically incorporates the same by reference.

The information required by Item 5 with respect to securities authorized for issuance under equity compensation plans set forth below in Part III, Item 12 of this Annual Report, is incorporated herein by reference.

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The Aimco Operating Partnership

There is no public market for the Aimco Operating Partnership’s common partnership units, including OP Units, and we have no intention of listing the common partnership units on any securities exchange. In addition, the Aimco Operating Partnership’s Partnership Agreement restricts the transferability of common partnership units, including OP Units. The following table sets forth the distributions declared per common partnership unit in each quarterly period during the two years ended December 31, 2015 and 2014:



Quarter Ended	2015		2014
December 31	$	0.30	$	0.26
September 30	0.30		0.26
June 30	0.30		0.26
March 31	0.28		0.26

We intend for the Aimco Operating Partnership’s future distributions per common partnership unit to be equal to Aimco’s Common Stock dividends.

At February 25, 2016, there were 164,453,698 common partnership units and equivalents outstanding (156,599,775 of which were held by Aimco) that were held by 2,806 unitholders of record.

The Aimco Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one year, limited partners other than Aimco have the right to redeem their common OP Units for cash, subject to our prior right to cause Aimco to acquire some or all of the common OP Units tendered for redemption in exchange for shares of Aimco Common Stock. Common OP Units redeemed for shares of Aimco Common Stock are exchanged on a one-for-one basis (subject to antidilution adjustments).

No common OP Units or preferred OP Units held by Limited Partners were redeemed in exchange for shares of Aimco Common Stock during the year ended December 31, 2015.

The following table summarizes the Aimco Operating Partnership’s repurchases of common OP Units for the three months ended December 31, 2015:



Fiscal period	Total Number of Units Purchased	Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Units that May Yet Be Purchased Under Plans or Programs (1)
October 1 - October 31, 2015	34,064	$	35.98	N/A	N/A
November 1 - November 30, 2015	5,436	39.69		N/A	N/A
December 1 - December 31, 2015	3,920	37.39		N/A	N/A
Total	43,420	$	36.57

(1)

The terms of the Aimco Operating Partnership’s Partnership Agreement do not provide for a maximum number of units that may be repurchased, and other than the express terms of the Aimco Operating Partnership’s Partnership Agreement, the Aimco Operating Partnership has no publicly announced plans or programs of repurchase. However, whenever Aimco repurchases its Common Stock, it is expected that Aimco will fund the repurchase with a concurrent repurchase by the Aimco Operating Partnership of common partnership units held by Aimco at a price per unit that is equal to the price per share paid for the Common Stock. Refer to the preceding discussion of Aimco’s authorization for equity repurchases.

Dividend and Distribution Payments

Our Credit Agreement includes customary covenants, including a restriction on dividends and other restricted payments, but permits dividends and distributions during any four consecutive fiscal quarters in an aggregate amount of up to 95% of Aimco’s Funds From Operations for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain Aimco’s REIT status.

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Item 6. Selected Financial Data

The following selected financial data is based on audited historical financial statements of Aimco and the Aimco Operating Partnership. This information should be read in conjunction with such financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein or in previous filings with the Securities and Exchange Commission.



	For The Years Ended December 31,
	2015		2014		2013		2012			2011
	(dollar amounts in thousands, except per share data)
OPERATING DATA:
Total revenues	$	981,310	$	984,363	$	974,053	$	958,511		$	914,355
Income (loss) from continuing operations (1)	91,390		67,475		34,596		(18,756		)	(136,237		)
Earnings (loss) per common share - basic and diluted:
Income (loss) from continuing operations attributable to Aimco common stockholders	$	1.52	$	2.06	$	0.29	$	(0.60	)	$	(1.22	)

BALANCE SHEET INFORMATION:
Total assets	$	6,144,194	$	6,097,028	$	6,079,413	$	6,401,380		$	6,871,862
Total indebtedness	3,873,160		4,135,139		4,388,185		4,413,083			4,488,822

OTHER INFORMATION:
Dividends declared per common share (2)	$	1.18	$	1.04	$	0.96	$	0.76		$	0.48

(1)

Effective January 1, 2014, we adopted ASU 2014-08, which revised the definition of a discontinued operation. In the selected financial data presentation above, the results of operations for apartment communities sold or classified as held for sale during 2015 and 2014 are reflected within income from continuing operations for all periods presented. The Aimco Operating Partnership's loss from continuing operations for the year ended December 31, 2011, was $134.4 million, which differed from Aimco due to interest income earned by the Aimco Operating Partnership on notes receivable from Aimco. The notes were repaid in late 2011 and the interest amounts were eliminated within Aimco's consolidated financial statements.


(2)	The Aimco Operating Partnership’s distributions declared per common unit equaled the Aimco dividends declared per common share for the years ended December 31, 2012-2015. During the year ended December 31, 2011, the Aimco Operating Partnership's distributions per common included a $0.15 per unit special distribution.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Aimco and the Aimco Operating Partnership are focused on the ownership, management, redevelopment and limited development of quality apartment communities located in the largest coastal and job growth markets in the United States. Our business and strategic areas of focus are described in more detail within the Business Overview in Item 1. Execution of our goals within our strategic areas of focus drove good results for Aimco in 2015, summarized below.

In Property Operations, across our diversified conventional same store portfolio, new and renewal rent growth was 4.9% in 2015, higher than in 2014 by 50 basis points.

In Redevelopment, strong consumer demand for our redeveloped apartment homes drove: the lease up of Ocean House on Prospect in La Jolla, one quarter earlier than expected; absorption above seasonal expectations at Park Towne Place and The Sterling in Philadelphia; and second generation rent increases averaging 13% for our occupancy-stabilized redevelopments at Lincoln Place, Pacific Bay Vistas and Preserve at Marin.

In Portfolio Management, fourth quarter 2015 average revenue per apartment home was up 10% from fourth quarter 2014, reaching $1,840, a record high for Aimco.

On the Balance Sheet, at December 31, 2015, we had approximately $675 million of cash and restricted cash on-hand and credit available on our revolving credit facility. Leverage, as measured by the ratio of Debt plus Preferred Equity to Adjusted EBITDA (defined under the Non-GAAP Performance and Liquidity Measures heading), was down year-over-year by 11%.

Further information about the accomplishments in each of these strategic areas of focus is included in the sections that follow.

Property Operations

We own and operate a diversified portfolio of conventional apartment communities. At December 31, 2015, our conventional portfolio included 140 apartment communities with 40,464 apartment homes in which we held an average ownership of approximately 98%. We also operate a portfolio of affordable apartment communities, which consists of apartments with rents that are generally paid, in whole or part, by a government agency. At December 31, 2015, our affordable portfolio consisted of 56 apartment communities with 8,685 apartment homes in which we held an average ownership of approximately 95%. Our conventional and affordable portfolios comprise our reportable segments and generated 90% and 10%, respectively, of our proportionate property net operating income (defined below under the Results of Operations – Real Estate Operations heading) during the year ended December 31, 2015.

For the year ended December 31, 2015, our conventional portfolio provided 67% operating margins and 60% free cash flow margins. Free cash flow and average revenue per effective apartment home are both defined under the Non-GAAP Performance and Liquidity Measures heading.

Redevelopment and Development

During the year ended December 31, 2015, we invested approximately $118 million in redevelopment projects, enhancing seven communities with a total of more than 2,500 apartment homes. During the year, we completed construction on our multi-year redevelopments at Lincoln Place, located in Venice, California, and Preserve at Marin, located in Marin County, California. We also completed construction at 2900 on First, in Seattle, Washington, and Ocean House on Prospect, located in La Jolla, California. During the year, we also continued the phased redevelopment of two Center City Philadelphia, Pennsylvania communities, Park Towne Place and The Sterling.

At Park Towne Place, 2015 saw the near completion of the redevelopment of one of the four towers that comprise the community, as well as the town center. At the end of January 2016, we had leased 83% of the completed apartment homes in this tower, with rents above underwriting, and we have now completed construction of the remaining apartment homes in this tower. Based on these successful results, we approved a plan during 2015 to redevelop a second tower at Park Towne Place with 245 apartment homes. We began de-leasing this tower during the fourth quarter and construction is underway. We anticipate construction completion for the second tower in the fourth quarter of 2016. By the end of January 2016, we had signed leases for 55% of the 12,560 square feet of commercial space in the community, at rents above underwriting.

At The Sterling, during 2015, we completed renovation of the common areas and retail space, at a cost consistent with underwriting. Based on the success of the lease-up pace and pricing of the apartment homes that have been completed, in the fourth quarter 2015, we approved a plan to expand the phased redevelopment of The Sterling with another five floors containing

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130 apartment homes. By the end of January 2016, 62% of the 409 apartment homes approved for redevelopment were complete, at a cost consistent with underwriting, and we had leased 97% of the completed apartment homes, with rents above underwriting. We had also signed leases for 84% of the 19,845 square feet of retail space at rents above underwriting.

During 2015, we also invested a total of $116 million in development, about $100 million of which was in our One Canal property in Boston. We expect completion of construction for One Canal in April 2016 and we are pre-leasing now. We also invested $16 million in the completion of Vivo, a community we acquired in Cambridge mid-year while under construction. We saw our first move-ins at Vivo in October and at the end of January 2016, the community was 48% leased at rents above underwriting.

See below under the Liquidity and Capital Resources – Redevelopment and Development heading for additional information regarding our ongoing redevelopment and development projects at December 31, 2015.

Portfolio Management

Average revenue per effective apartment home for our conventional portfolio increased by 10%, from $1,669 for the three months ended December 31, 2014, to $1,840 for the three months ended December 31, 2015, as a result of year-over-year revenue growth of 4.5% for our conventional same store apartment communities, the sale of conventional apartment communities during 2015 with average revenues per home lower than the apartment communities in our retained portfolio and the reinvestment of the sales proceeds through redevelopment and acquisition of apartment communities with better prospects and higher rents.

In total, we sold 11 apartment communities with 3,855 apartment homes during the year ended December 31, 2015. These sales represented roughly 4% of our beginning of year real estate asset value. Eight of these communities were from our conventional portfolio, with average monthly revenues per apartment home of $1,043, 43% below the average of our retained conventional portfolio. Among the properties sold, was the last one we held in Phoenix. We also continued the sell-down of our affordable portfolio with the sale of three communities.

Consistent with our paired-trade discipline, proceeds from these sales were reinvested in redevelopment and development projects described above, acquisitions, and property upgrades with a weighted average Free Cash Flow internal rate of return (defined under the Non-GAAP Performance and Liquidity Measures heading) approximately 350 basis points higher than the communities sold to fund them.

In addition to our acquisition of the under construction community, Vivo, which is described under the Redevelopment and Development heading above, during 2015, we purchased two other communities: Mezzo, an operating community in Atlanta; and Axiom, a lease-up community in Cambridge. Our total purchase price for these three communities was $129 million.

At the end of January 2016, Axiom was 89% leased at rents above underwriting. We expect to reach occupancy stabilization on this community during the second quarter of 2016.

In addition to the acquisitions of these three communities, during the year we entered into a contract to acquire an apartment community currently under construction in Northern California for $320 million. The acquisition is expected to close upon completion of construction in the summer of 2016. We intend to fund the acquisition through a ten-year property loan, with the balance funded primarily by proceeds from the sale of two apartment communities: one in Alexandra, Virginia; and our last community in Phoenix, which sale closed in December 2015.

Through our disciplined execution of our portfolio management strategy, over the three year period from December 31, 2012 to December 31, 2015, we:


•	increased our period-end conventional portfolio average revenue per apartment home by 35% to $1,840. This rate of growth reflects the impact of market rent growth, and more significantly, the impact of portfolio management through dispositions, redevelopment and acquisitions;


•	increased our conventional portfolio Free Cash Flow margin by 9% through the sale of lower-rated communities and reinvestment in communities of greater quality commanding higher rents; and


•	increased to 91% the percentage of our conventional property net operating income earned in our target markets.

As a result of these efforts, as of September 30, 2015, the most recent period for which market information is available, approximately 51%, 32% and 17% of Aimco's portfolio is invested in “A,” “B” and “C+” quality apartment homes, respectively, as measured under our portfolio quality rating system discussed in the Portfolio Management heading in Item 1.

As we continue to execute our portfolio strategy, we expect to continue to increase conventional portfolio average revenue per apartment home at a rate greater than market rent growth; to increase further Free Cash Flow margins; to sell our lower rated

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apartment communities; and to increase to 95% or more the percentage of our conventional property net operating income earned in our target markets.

Balance Sheet and Liquidity

Our leverage strategy seeks to increase financial returns while using leverage with appropriate caution. We target the ratio of Debt plus Preferred Equity to Adjusted EBITDA to be below 7.0x and we target the ratio of Adjusted EBITDA Coverage of Interest and Preferred Dividends to be greater than 2.5x. We also focus on the ratios of Debt to Adjusted EBITDA and Adjusted EBITDA Coverage of Interest. Proportionate Debt, Adjusted EBITDA and Adjusted Interest, as used in these ratios, are non-GAAP financial measures, which are further discussed and reconciled under the Non-GAAP Performance and Liquidity Measures - Leverage Ratios heading. Preferred Equity represents Aimco's preferred stock and the Aimco Operating Partnership's preferred OP units.

Our leverage ratios for the trailing twelve month periods ended December 31, 2015 and 2014, are presented below:



	Trailing Twelve Months Ended December 31,		Pro-forma Trailing Twelve Months Ended December 31,
	2015	2014	2014 (1)
Proportionate Debt to Adjusted EBITDA	6.4x	7.1x	6.5x
Proportionate Debt plus Preferred Equity to Adjusted EBITDA	6.8x	7.6x	7.0x
Adjusted EBITDA to Adjusted Interest	3.1x	2.7x	2.9x
Adjusted EBITDA to Adjusted Interest and Preferred Dividends	2.8x	2.5x	2.7x

(1)

During January 2015, Aimco completed a Common Stock offering resulting in net proceeds of approximately $367 million. The pro-forma ratios presented for the trailing twelve months ended December 31, 2014, have been adjusted to reflect the following: a) Repayment of $112.3 million of outstanding borrowings under our Credit Agreement at December 31, 2014; b) Repayment of $102.2 million of property debt; c) Redemption of $27.0 million of Aimco’s CRA Preferred Stock; and d) Investment of the remaining proceeds from the common offering. Refer to Note 9 to the consolidated financial statements in Item 8 for additional information regarding this stock offering.

We expect future leverage reduction from both earnings growth, especially as apartment communities now being redeveloped or developed are completed and leased, and from regularly scheduled property debt amortization repaid from operating cash flows. As of December 31, 2015, we had an unencumbered pool that included 25 consolidated apartment communities and had an estimated fair value of approximately $1.8 billion.

Two credit rating agencies rate our creditworthiness, using different methodologies and ratios for assessing our credit. In 2015, both of these agencies upgraded our credit rating and outlook to BBB- (stable), an investment grade rating. In addition to lowering the cost of borrowings under our line of credit, an improvement to an investment grade rating may lower the cost of any future preferred equity issuance, provide additional flexibility for sources of capital, and provide other intangible benefits. Although some of the ratios they use are similar to those we use to measure our leverage, there are differences in our methods of calculation and therefore our leverage ratios disclosed above are not indicative of the ratios that may be calculated by these agencies. While an investment grade rating provides for ready access to the issuance of corporate debt, we do not anticipate doing so.

At December 31, 2015, we had $675 million of cash and restricted cash on hand and credit available on our Senior Secured Credit Agreement.

Culture

Key Financial Indicators

Key financial indicators that we use in managing our business and in evaluating our financial condition and operating performance include: Economic Income, Net Asset Value and Adjusted Funds From Operations. In addition to these indicators, we also use Pro forma Funds From Operations; Free Cash Flow, Free Cash Flow internal rate of return, Free Cash Flow capitalization rate, net operating income, or NOI, capitalization rate, same store property operating results, proportionate property net operating income, average revenue per effective apartment home, financial coverage ratios, and leverage as shown on our balance sheet to evaluate our operating performance and financial condition. Most of these financial indicators are non-GAAP financial measures, which are defined, further described and, for certain of the measures, reconciled to comparable GAAP-based measures, under the Non-GAAP Performance and Liquidity Measures heading.

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Results of Operations

Because our operating results depend primarily on income from our apartment communities, the supply of and demand for apartments influences our operating results. Additionally, the level of expenses required to operate and maintain our apartment communities and the pace and price at which we redevelop, acquire and dispose of our apartment communities affect our operating results.

The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying consolidated financial statements in Item 8.

Overview

2015 compared to 2014

Net income attributable to Aimco and net income attributable to the Aimco Operating Partnership decreased by $60.5 million and $64.3 million, respectively, during the year ended December 31, 2015, as compared to the year ended December 31, 2014. The decrease in income was principally due to a decrease in gains on dispositions, partially offset by the effect of various other items further discussed below.

2014 compared to 2013

Net income attributable to Aimco and net income attributable to the Aimco Operating Partnership increased by $102.0 million and $106.2 million, respectively, during the year ended December 31, 2014, as compared to the year ended December 31, 2013. The increase in income was principally due to an increase in gains on dispositions and a decrease in interest expense.

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

Property Operations

As described under the preceding Executive Overview heading, our owned real estate portfolio consists primarily of conventional apartment communities, and we also operate a portfolio of affordable apartment communities. Our conventional and affordable real estate operations comprise our reportable segments.

Due to the diversity of our economic ownership interests in our apartment communities, our chief executive officer, who is our chief operating decision maker, uses proportionate property net operating income to assess the operating performance of our apartment communities. Proportionate property net operating income reflects our share of rental and other property revenues less direct property operating expenses, including real estate taxes, for the consolidated and unconsolidated apartment communities that we own and manage. Accordingly, the results of operations of our conventional and affordable segments discussed below are presented on a proportionate basis and exclude the results of four conventional apartment communities with 142 apartment homes and nine affordable apartment communities with 779 apartment homes that we do not manage.

We do not include property management revenues, offsite costs associated with property management or casualty-related amounts, in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below. Refer to Note 15 in the consolidated financial statements in Item 8 for further discussion regarding our reportable segments, including a reconciliation of these proportionate amounts to consolidated rental and other property revenues and property operating expenses.

Conventional Real Estate Operations

Our conventional segment consists of apartment communities we classify as Conventional Same Store, Conventional Redevelopment and Development, Conventional Acquisition and Other Conventional apartment communities. Conventional Same Store apartment communities are those we manage, that have reached and maintained a stabilized occupancy (greater than 90%) during the current year and prior year periods, and that are not expected to be sold within 12 months. Conventional Redevelopment and Development apartment communities are those in which a substantial number of available apartment homes have been vacated for major renovations or have not been stabilized in occupancy during the current year or prior year periods, due to ongoing or completed renovations, such as exteriors, common areas or apartment home improvements, as well as those being constructed from the ground up. Conventional Acquisition apartment communities are those we have acquired since January 1, 2014. Other Conventional apartment communities includes conventional apartment communities that have significant rent control restrictions; apartment communities that had not reached and maintained a stabilized level of occupancy during the current year or prior year periods, often due to a casualty event; the operations of properties that are not multifamily, such as fitness centers; and those

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apartment communities we expect to sell in the next 12 months, but that have not yet met the criteria to be classified as held for sale.

As of December 31, 2015, as defined by our segment performance metrics, our conventional portfolio consisted of the following:


•	107 Conventional Same Store apartment communities with 33,149 apartment homes;


•	nine Conventional Redevelopment and Development apartment communities with 3,301 apartment homes;


•	eight Conventional Acquisition apartment communities with 1,391 apartment homes; and


•	11 Other Conventional apartment communities with 2,385 apartment homes.

From December 31, 2014, to December 31, 2015, on a net basis, our Conventional Same Store portfolio increased by four apartment communities and decreased by 3,571 apartment homes. This change consisted of:


•	two apartment communities with 83 apartment homes that were reclassified from our Conventional Acquisition portfolio after being owned by Aimco for both periods;


•	one apartment community with 488 apartment homes that was reclassified from our Other Conventional portfolio upon maintaining stabilized occupancy following increased vacancy associated with the termination of corporate housing leases; and


•	eight New York apartment communities with 230 apartment homes that were reclassified from our Other Conventional portfolio upon determination that the prospective rental rates for these communities are expected to be more comparable to market rental rate growth in that market, independent of government regulation.

These increases were offset by the removal of six apartment communities with 3,150 apartment homes that were sold during the period and one apartment community with 1,222 apartment homes that is expected to be sold within 12 months, but does not yet meet the criteria to be classified as held for sale in accordance with GAAP.

Our conventional portfolio results for the years ended December 31, 2015 and 2014, as presented below, are based on the apartment community populations as of December 31, 2015.



	Year Ended December 31,
(in thousands)	2015		2014		$ Change		% Change
Rental and other property revenues:
Conventional Same Store	$	646,693	$	618,990	$	27,703	4.5	%
Conventional Redevelopment and Development	69,186		51,452		17,734		34.5	%
Conventional Acquisition	27,003		4,555		22,448		492.8	%
Other Conventional	55,439		54,660		779		1.4	%
Total	798,321		729,657		68,664		9.4	%
Property operating expenses:
Conventional Same Store	203,603		199,463		4,140		2.1	%
Conventional Redevelopment and Development	24,943		20,579		4,364		21.2	%
Conventional Acquisition	10,759		1,692		9,067		535.9	%
Other Conventional	24,268		23,530		738		3.1	%
Total	263,573		245,264		18,309		7.5	%
Property net operating income:
Conventional Same Store	443,090		419,527		23,563		5.6	%
Conventional Redevelopment and Development	44,243		30,873		13,370		43.3	%
Conventional Acquisition	16,244		2,863		13,381		467.4	%
Other Conventional	31,171		31,130		41		0.1	%
Total	$	534,748	$	484,393	$	50,355	10.4	%

For the year ended December 31, 2015, as compared to 2014, our conventional segment’s proportionate property net operating income increased $50.4 million, or 10.4%.

For the year ended December 31, 2015, as compared to 2014, Conventional Same Store proportionate property net operating income increased by $23.6 million, or 5.6%. This increase was primarily attributable to a $27.7 million, or 4.5%, increase in rental

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and other property revenues due to higher average revenues (approximately $75 per effective home), comprised of increases in rental rates, utility reimbursements and other fees including parking. Rental rates on new leases transacted during the year ended December 31, 2015, were 4.4% higher than expiring lease rates, and renewal rates were 5.5% higher than expiring lease rates. The increase in Conventional Same Store rental and other property revenues was partially offset by a $4.1 million, or 2.1%, increase in property operating expenses, primarily due to increases in real estate taxes and repairs and maintenance. During the year ended December 31, 2015, as compared to 2014, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, increased by $2.2 million or 2.4%.

Our Conventional Redevelopment and Development proportionate property net operating income increased by $13.4 million during the year ended December 31, 2015, as compared to 2014, primarily due to increases in net operating income associated with higher revenues per occupied home and higher average daily occupancy associated with apartment homes placed into service following completion of construction activities. During 2015, as compared to 2014, average daily occupancy associated with our Lincoln Place, The Preserve at Marin and Pacific Bay Vistas redevelopment communities increased by 440 basis points, 560 basis points and 200 basis points, to 90%, 79% and 95%, respectively. Additionally, these communities generated significant increases in average revenue per apartment home as construction on these projects was completed. These communities contributed an increase in property net operating income of $16.9 million from 2014 to 2015. This increase in property net operating income contribution was partially offset by a reduction in revenue associated with approximately 375 apartment homes taken out of service at our Park Towne Place and The Sterling redevelopments.

Our Conventional Acquisition proportionate property net operating income increased by $13.4 million during the year ended December 31, 2015, as compared to 2014, due to apartment communities we acquired during 2015 and 2014.

As of December 31, 2014, our conventional portfolio consisted of the following:


•	98 Conventional Same Store apartment communities with 34,058 apartment homes;


•	seven Conventional Redevelopment apartment communities with 2,891 apartment homes;


•	eight Conventional Acquisition apartment communities with 1,256 apartment homes; and


•	18 Other Conventional apartment communities with 1,353 apartment homes.

Our conventional portfolio results for the years ended December 31, 2014 and 2013, as presented below, are based on the apartment community populations as of December 31, 2014 (excluding amounts related to apartment communities sold or classified as held for sale during 2015).



	Year Ended December 31,
(in thousands)	2014		2013		$ Change		% Change
Rental and other property revenues:
Conventional Same Store	$	630,175	$	603,654	$	26,521	4.4	%
Conventional Redevelopment	51,452		35,768		15,684		43.8	%
Conventional Acquisition	7,300		992		6,308		635.9	%
Other Conventional	40,730		39,008		1,722		4.4	%
Total	729,657		679,422		50,235		7.4	%
Property operating expenses:
Conventional Same Store	202,814		198,161		4,653		2.3	%
Conventional Redevelopment	20,579		16,479		4,100		24.9	%
Conventional Acquisition	3,156		573		2,583		450.8	%
Other Conventional	18,715		17,970		745		4.1	%
Total	245,264		233,183		12,081		5.2	%
Property net operating income:
Conventional Same Store	427,361		405,493		21,868		5.4	%
Conventional Redevelopment	30,873		19,289		11,584		60.1	%
Conventional Acquisition	4,144		419		3,725		889.0	%
Other Conventional	22,015		21,038		977		4.6	%
Total	$	484,393	$	446,239	$	38,154	8.6	%

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For the year ended December 31, 2014, as compared to 2013, our conventional segment’s proportionate property net operating income increased $38.2 million, or 8.6%.

For the year ended December 31, 2014, as compared to 2013, Conventional Same Store proportionate property net operating income increased by $21.9 million, or 5.4%. This increase was primarily attributable to a $26.5 million, or 4.4%, increase in rental and other property revenues due to higher average revenues (approximately $65 per effective home), comprised of increases in rental rates, utility reimbursements, and other fees including parking, and a 20 basis point increase in average daily occupancy. Rental rates on new leases transacted during the year ended December 31, 2014, were 3.7% higher than expiring lease rates, and renewal rates were 5.2% higher than expiring lease rates. The increase in Conventional Same Store rental and other property revenues was partially offset by a $4.7 million, or 2.3%, increase in property operating expenses, primarily due to an increase in utilities and real estate taxes, partially offset by a decrease in insurance costs. During the year ended December 31, 2014, as compared to 2013, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, increased by $0.5 million or 0.5%.

Our Conventional Redevelopment proportionate property net operating income increased by $11.6 million during the year ended December 31, 2014, as compared to 2013, primarily due to increases in net operating income associated with apartment homes placed into service following completion of construction activities. From December 31, 2013 to December 31, 2014, we placed an additional 632, 308 and 72 apartment homes into service at our Lincoln Place, Pacific Bay Vistas and The Preserve at Marin redevelopment communities, respectively.

Our Conventional Acquisition proportionate property net operating income increased by $3.7 million during the year ended December 31, 2014, as compared to 2013, due to apartment communities we acquired in 2014 and the latter part of 2013.

Our Other Conventional proportionate property net operating income increased by $1.0 million, or 4.6%, during the year ended December 31, 2014, as compared to 2013, primarily due to recovery of previously recognized bad debts related to one of our apartment communities in New York City.

Affordable Real Estate Operations

Our affordable segment consists of apartment communities we classify as Affordable Same Store or Other Affordable. Affordable Same Store apartment communities are those we manage that are subject to tax credit agreements and that have reached and maintained a stabilized occupancy (greater than 90%) during the current year and prior year-to-date periods. Other Affordable apartment communities are those that do not meet the Affordable Same Store apartment community definition because they have not maintained a stabilized level of occupancy, often due to a casualty event, we do not manage them, or they are not subject to tax credit agreements.

At December 31, 2015, as defined by our segment performance metrics, our affordable portfolio consisted of 45 Affordable Same Store apartment communities with 7,311 apartment homes and two Other Affordable apartment communities with 595 apartment homes.

From December 31, 2014, to December 31, 2015, on a net basis, our Affordable Same Store portfolio increased by one apartment community with 200 apartment homes that was reclassified to our Affordable Same Store portfolio upon maintaining a stabilized level of occupancy following a casualty event.

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Our affordable results for the years ended December 31, 2015 and 2014, presented below are based on the apartment community populations at December 31, 2015.



	Year Ended December 31,
(in thousands)	2015		2014		$ Change			% Change
Rental and other property revenues:
Affordable Same Store	$	88,376	$	86,441	$	1,935		2.2	%
Other Affordable	8,173		8,060		113			1.4	%
Total	96,549		94,501		2,048			2.2	%
Property operating expenses:
Affordable Same Store	35,063		35,089		(26		)	(0.1	)%
Other Affordable	3,421		3,318		103			3.1	%
Total	38,484		38,407		77			0.2	%
Property net operating income:
Affordable Same Store	53,313		51,352		1,961			3.8	%
Other Affordable	4,752		4,742		10			0.2	%
Total	$	58,065	$	56,094	$	1,971		3.5	%

For the year ended December 31, 2015, as compared to 2014, our affordable segment’s proportionate property net operating income increased $2.0 million, or 3.5%. The increase was attributable to a $2.0 million increase in rental income driven primarily by higher rental rates of $22 per month on apartment homes.

At December 31, 2014, our affordable portfolio consisted of 44 Affordable Same Store apartment communities with 7,111 apartment homes and three Other Affordable apartment communities and 795 apartment homes.

Our affordable results for the years ended December 31, 2014 and 2013 presented below are based on the apartment community populations at December 31, 2014 (excluding amounts related to apartment communities sold or classified as held for sale during 2015).



	Year Ended December 31,
(in thousands)	2014		2013		$ Change			% Change
Rental and other property revenues:
Affordable Same Store	$	84,816	$	83,332	$	1,484		1.8	%
Other Affordable	9,685		9,701		(16		)	(0.2	)%
Total	94,501		93,033		1,468			1.6	%
Property operating expenses:
Affordable Same Store	34,182		33,176		1,006			3.0	%
Other Affordable	4,225		4,257		(32		)	(0.8	)%
Total	38,407		37,433		974			2.6	%
Property net operating income:
Affordable Same Store	50,634		50,156		478			1.0	%
Other Affordable	5,460		5,444		16			0.3	%
Total	$	56,094	$	55,600	$	494		0.9	%

For the year ended December 31, 2014, as compared to 2013, the proportionate property net operating income of our affordable apartment communities increased $0.5 million, or 0.9%. The increase in proportionate property net operating income was primarily attributable to an increase in rental income driven by higher rental rates, partially offset by an increase in utilities expense.

Non-Segment Real Estate Operations

Real estate operations net operating income amounts not attributed to our conventional or affordable segments include property management revenues, offsite costs associated with property management, and casualty losses, reported in consolidated amounts, which we do not allocate to our conventional or affordable segments for purposes of evaluating segment performance (see Note 15 to the consolidated financial statements in Item 8). We also exclude the results of apartment communities sold and classified as held for sale from our conventional or affordable segments for purposes of evaluating segment performance.

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For the years ended December 31, 2015, 2014 and 2013, property management expenses, which include offsite costs associated with managing apartment communities we own (both our share and the share that we allocate to the limited partners in our consolidated partnerships), totaled $24.7 million, $25.3 million and $30.7 million, respectively. The decrease in property management expenses in these periods was primarily due to reductions in personnel and related costs based on the reduction in the number of apartment communities we own and manage.

For the years ended December 31, 2015, 2014 and 2013, casualty losses totaled $8.3 million, $11.8 million and $6.7 million, respectively. Casualty losses during the year ended December 31, 2015, included losses resulting from property damage and snow removal costs associated with the severe snow storms in the Northeast. Casualty losses during the year ended December 31, 2014, included losses from the severe weather associated with the 2014 “Polar Vortex,” which affected many of our apartment communities in the Northeast and Midwest, as well damage to one of our apartment communities resulting from a severe hail storm.

Tax Credit and Asset Management Revenues

We sponsor certain consolidated partnerships that acquire, develop and operate qualifying affordable housing apartment communities and are structured to provide for the pass-through of tax credits and deductions to their partners. We recognize income associated with the delivery of tax credits and benefits associated with these partnerships to their partners.

For the year ended December 31, 2015, as compared to the year ended December 31, 2014, tax credit and asset management revenues decreased $7.2 million. This decrease was attributable to a decrease in amortization of deferred tax credit income due to delivery of substantially all of the tax credits on various apartment communities during 2014 and 2015, and a decrease in disposition and other transactional fees earned in 2015 as compared to 2014.

For the year ended December 31, 2014, as compared to the year ended December 31, 2013, tax credit and asset management revenues decreased $3.3 million. This decrease was attributable to a decrease in amortization of tax credit income, and a decrease in disposition and other transactional fees earned in 2014, as compared to 2013.

Certain of the apartment communities within our tax credit partnerships have delivered substantially all of the tax credits, or are anticipated to deliver substantially all of the tax credits during 2016. As the tax credit delivery and compliance periods for these apartment communities expire, amortization of deferred income associated with the delivery of tax credits and benefits decreases. We expect amortization of deferred tax credit income to decrease from $24.1 million in the year ended December 31, 2015, to approximately $19 million for the year ending December 31, 2016.

Investment Management Expenses

For the year ended December 31, 2015, compared to the year ended December 31, 2014, investment management expenses decreased $1.5 million primarily due to decreases in acquisition and other costs, partially offset by an increase in personnel and related costs.

For the year ended December 31, 2014, compared to the year ended December 31, 2013, investment management expenses increased $3.0 million primarily due to increases in acquisition and other costs, partially offset by a decrease in personnel and related costs.

Depreciation and Amortization

During the years ended December 31, 2015, 2014 and 2013, depreciation and amortization totaled $306.3 million, $282.6 million and $291.9 million, respectively. The $23.7 million increase from 2014 to 2015 was primarily due to assets placed into service as we completed apartment homes in our redevelopment projects, and assets we acquired in 2014 and 2015, partially offset by decreases associated with apartment communities sold. The $9.3 million decrease from 2013 to 2014 was primarily due to assets that became fully depreciated and apartment community sales, partially offset by an increase associated with our redevelopment apartment communities as completed apartment homes were placed into service.

Provision for Real Estate Impairment Losses

Based on periodic tests of recoverability of long-lived assets, during the year ended December 31, 2014, we recognized a $1.8 million provision for real estate impairment loss related to an asset that was sold during the year ended December 31, 2014. The impairment loss was driven by inclusion of estimated costs to sell, inclusive of a debt prepayment penalty, in the impairment calculation when the property became held for sale.

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General and Administrative Expenses

In recent years, we have worked toward simplifying our business, including winding down the portion of our business that generates transaction-based activity fees and reducing the number of partnerships that own our conventional apartment communities by acquiring the noncontrolling interests in these partnerships, which allowed us to reduce overhead and other costs associated with these activities. These and other simplification activities, along with our scale reductions have allowed us to reduce our offsite costs, which consist of general and administrative expenses as well as property management and investment management expenses, by $23.4 million, or 24%, over the last three years.

For the year ended December 31, 2015, compared to the year ended December 31, 2014, general and administrative expenses decreased $0.9 million, or 2.1%, primarily due to reductions in personnel and related costs, partially offset by an increase in administrative costs, including travel and consulting costs.

For the year ended December 31, 2014, compared to the year ended December 31, 2013, general and administrative expenses decreased $1.6 million, or 3.5%, primarily due to reductions in personnel and related costs.

Other Expenses, Net

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

For the year ended December 31, 2015, compared to the year ended December 31, 2014, other expenses, net decreased by $2.2 million. The decrease was primarily due to lower legal and other costs as well as the favorable resolution of certain legal matters in 2015, partially offset by higher environmental costs associated with an apartment community we no longer own.

For the year ended December 31, 2014, compared to the year ended December 31, 2013, other expenses, net increased by $5.1 million. The net increase was primarily due to an increase in legal and other costs and due to certain nonrecurring recoveries recognized during 2013.

Interest Income

Interest income consists primarily of interest on notes receivable, accretion of discounts on certain notes receivable, interest on cash and restricted cash accounts and interest on investments in debt securities of a securitization that holds certain of our property debt, which investments are classified within other assets in our consolidated balance sheets.

For the year ended December 31, 2015, as compared to the year ended December 31, 2014, interest income increased by less than $0.1 million.

For the year ended December 31, 2014, as compared to the year ended December 31, 2013, interest income decreased by $11.1 million. Interest income decreased by $4.5 million due to accretion income recognized in 2013 related to an apartment community sale for which the net proceeds available for repayment of partnership loans exceeded the amounts previously anticipated. Interest income also decreased by $4.7 million due to interest on certain property loans we purchased in 2013 and held for approximately six months prior to their repayment.

Interest Expense

For the year ended December 31, 2015, compared to the year ended December 31, 2014, interest expense, which includes the amortization of deferred financing costs and prepayment penalties incurred on debt refinancings, decreased by $21.3 million, or 9.6%. The decrease was primarily the result of lower average outstanding balances on non-recourse property debt for our existing apartment communities, decreases in property debt resulting from apartment community dispositions and higher prepayment penalties incurred in 2014. These decreases in interest expense were partially offset by increases related to our acquisition of apartment communities and on three of our redevelopment projects which reached completion of construction and therefore ceased capitalization of related interest expense.

For the year ended December 31, 2014, compared to the year ended December 31, 2013, interest expense decreased by $16.1 million, or 6.8%. The decrease was primarily the result of lower average outstanding balances on non-recourse property debt for our existing apartment communities and from sales, partially offset by an increase in interest expense on three of our redevelopment projects nearing or reaching completion and an increase in corporate interest due to higher average borrowings.

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Other, Net

Other, net includes gains or losses on disposition of interests in unconsolidated real estate partnerships, our equity in the income or loss of unconsolidated real estate partnerships, and the results of operations related to our legacy asset management business, which we account for under the profit sharing method, as further discussed in Note 3 to the consolidated financial statements in Item 8.

During the years ended December 31, 2015, 2014 and 2013, other, net primarily consisted of $0.2 million of net income, $0.8 million of net losses, and $1.8 million of net income, respectively, related to our legacy asset management business. After income taxes and noncontrolling interest allocations, our share of the net losses and income of the legacy asset management business totaled $3.6 million of net income, $1.2 million of net losses and $22.5 million of net income for the years ended December 31, 2015, 2014 and 2013, respectively (see Note 3 to the consolidated financial statements in Item 8).

Income Tax Benefit

Certain of our operations or a portion thereof, including property management, asset management and risk management are conducted through TRS entities. Income taxes related to the results of continuing operations of our TRS entities (before gains on dispositions) are included in income tax benefit in our consolidated statements of operations.

Prior to December 15, 2014, the interests in our tax credit business were owned through TRS entities. On December 15, 2014, our TRS entities sold the interests held in our tax credit business to the Aimco Operating Partnership. Through the date of sale the income resulting from these interests was subject to income taxes. The Federal tax liabilities resulting from the sale were substantially offset through the utilization of net operating loss carry forwards and historic and other tax credits. In accordance with GAAP applicable to income tax accounting for intercompany transactions, net tax expense associated with the sale, totaling approximately $3.5 million, has been deferred within our consolidated balance sheet, and is being recognized in earnings as the assets of the tax credit business affect our GAAP income or loss, through depreciation, impairment losses, or sales to third party entities. Subsequent to the sale of the tax credit business, the income resulting from interests held in the tax credit business will not result in Federal income tax liability to the Aimco Operating Partnership.

For the year ended December 31, 2015, compared to the year ended December 31, 2014, income tax benefit increased by $7.5 million, from $20.0 million to $27.5 million, primarily due to the taxable income generated by our tax credit business prior to the intercompany sale of this business in late 2014 to the Aimco Operating Partnership, and an increase in historic tax credits.

For the year ended December 31, 2014, compared to the year ended December 31, 2013, income tax benefit increased by $18.1 million, from $2.0 million to $20.0 million, primarily due to a $7.6 million increase in the tax benefit associated with historic tax credits earned from the redevelopment of our Lincoln Place apartment community as well as an increase in taxable losses recognized by our TRS entities.

Income from Discontinued Operations, Net

Effective January 1, 2014, we adopted ASU 2014-08, which generally eliminates the requirement that we classify within discontinued operations the results of operations and any gain or loss on sale related to apartment communities sold or classified as held for sale commencing in 2014. Based on the prospective application of the new accounting standard, the net earnings for any consolidated apartment communities sold through December 31, 2013, are included within income from discontinued operations. The components of net earnings that were classified as discontinued operations included all property-related revenues and operating expenses, depreciation expense recognized prior to the sale, property-specific interest expense and debt extinguishment gains and losses to the extent there was debt on the apartment community. In addition, any impairment losses on assets sold or held for sale and the net gain or loss on the disposal of apartment communities held for sale are reported in discontinued operations for the year ended December 31, 2013.

For the year ended December 31, 2013, income from discontinued operations totaled $203.2 million. During the year ended December 31, 2013, we sold 29 consolidated apartment communities for an aggregate sales price of $515.8 million, resulting in net proceeds of $233.1 million and a net gain of approximately $200.6 million (which is net of $11.8 million of related income taxes).

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Gain on Dispositions of Real Estate, Net of Tax

As discussed above, commencing in 2014, the results of operations (both for current and prior periods) and gain or loss on sale for apartment communities sold or classified as held are generally no longer required to be classified within income from discontinued operations. During the year ended December 31, 2015, we sold 11 consolidated apartment communities for an aggregate sale price of $404.3 million, resulting in net proceeds of $229.4 million, and a net gain of $180.6 million (which is net of $1.8 million of related income taxes). During the year ended December 31, 2014, we sold 30 consolidated apartment communities for an aggregate sales price of $735.6 million, resulting in net proceeds of $456.6 million and a net gain of approximately $288.6 million (which is net of $36.1 million of related income taxes).

NOI capitalization rate and Free Cash Flow capitalization rate are common benchmarks used in the real estate industry for relative comparison of real estate valuations, including for apartment community sales, and are defined and further described under the Non-GAAP Performance and Liquidity Measures heading. The NOI and Free Cash Flow capitalization rates for our conventional and affordable apartment community sales during the years ended December 31, 2015, 2014 and 2013, were as follows:



	2015		2014		2013
NOI capitalization rate:
Conventional	6.1	%	6.8	%	7.6	%
Affordable	3.8	%	6.3	%	5.8	%
Free Cash Flow capitalization rate:
Conventional	4.9	%	5.3	%	5.8	%
Affordable	2.7	%	5.3	%	4.8	%

The apartment communities sold during 2015, 2014 and 2013 were primarily outside of our target markets or in less desirable locations within our target markets and had average revenues per apartment home significantly below those of our retained portfolio. Accordingly, the NOI and Free Cash Flow capitalization rates for these properties may not be indicative of those of our retained portfolio.

Noncontrolling Interests in Consolidated Real Estate Partnerships

Noncontrolling interests in consolidated real estate partnerships reflects the results of our consolidated real estate partnerships allocated to the owners who are not affiliated with Aimco. The amounts of income or loss of our consolidated real estate partnerships that we allocate to owners not affiliated with Aimco include their share of property management fees, interest on notes and other amounts that we charge to these partnerships.

For the years ended December 31, 2015 and 2014, we allocated net income of $4.8 million and $24.6 million, respectively, to noncontrolling interests in consolidated real estate partnerships, a decrease of $19.8 million. The amounts of net income allocated to noncontrolling interests decreased primarily due to a decrease in the amount of gains on dispositions allocated to noncontrolling interests in our consolidated real estate partnerships, as well as a decrease in the amount of income allocated to noncontrolling interests due to deferred asset management fees recognized by the legacy asset management business during the year ended December 31, 2015.

For the years ended December 31, 2014 and 2013, we allocated net income of $24.6 million and $12.5 million, respectively, to noncontrolling interests in consolidated real estate partnerships, an increase of $12.1 million. Income allocable to noncontrolling interests in the legacy asset management business increased by $19.5 million, primarily due to the sales of interests in or dissolution of partnerships (see Note 3 to the consolidated financial statements in Item 8). The amounts of net income allocated to noncontrolling interests in other Aimco apartment communities decreased by $7.4 million, primarily due to a reduction in the amount of allocatable gains.

Noncontrolling Interests in Aimco Operating Partnership

In Aimco’s consolidated financial statements, noncontrolling interests in Aimco Operating Partnership reflects the results of the Aimco Operating Partnership that are allocated to the holders of OP Units. The amount of the Aimco Operating Partnership’s income allocated to holders of preferred OP Units is equal to the amount of distributions they receive, which totaled $6.9 million, $6.5 million and $6.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Aimco allocates the Aimco Operating Partnership’s income or loss to the holders of common OP Units and equivalents based on the weighted average number of these units (including those held by Aimco) outstanding during the period.

For the years ended December 31, 2015, 2014 and 2013, income allocated to common noncontrolling interests in the Aimco Operating Partnership were $11.6 million and $15.8 million and $11.6 million, respectively.

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Net Income Attributable to Aimco Preferred Stockholders and the Aimco Operating Partnership’s Preferred Unitholders

Net income attributable to Aimco preferred stockholders and the Aimco Operating Partnership’s preferred unitholders increased by $3.8 million and $4.3 million, respectively, during the year ended December 31, 2015, as compared to the year ended December 31, 2014. These increases were primarily due to the issuance during May 2014 of $125.0 million of preferred securities with a 6.875% dividend/distribution rate, and were also partly attributable to the write-off of previously deferred issuance costs in connection with our March 2015 redemption of preferred securities.

Net income attributable to Aimco preferred stockholders and the Aimco Operating Partnership’s preferred unitholders increased by $5.1 million and $5.2 million, respectively, during the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to the May 2014 issuance of preferred securities discussed above. See Notes 9 and 10 to the consolidated financial statements in Item 8 for further discussion of our preferred securities.

Critical Accounting Policies and Estimates

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

Impairment of Long-Lived Assets

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

Our portfolio strategy is to sell each year the 5% to 10% of our portfolio with lower projected returns, lower operating margins, and lower expected future rent growth, and reinvest the sale proceeds in apartment communities already in our portfolio, through property upgrades and redevelopment, or through the purchase of other apartment communities and, in limited situations, the development of apartment communities. As we execute this strategy, we evaluate alternatives to sell or reduce our interest in apartment communities that do not align with our long-term investment strategy, although there is no assurance that we will sell or reduce our investment in such apartment communities during the desired time frame. For any apartment communities that are sold or meet the criteria to be classified as held for sale during the next 12 months, the reduction in the estimated holding period for these apartment communities may result in impairment losses.

Capitalized Costs

We capitalize costs, including certain indirect costs, incurred in connection with our capital additions activities, including redevelopment, development and construction projects, other tangible apartment community improvements and replacements of existing apartment community components. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital additions activities at the apartment community level. We characterize as “indirect costs” an allocation of certain department costs, including payroll, at the area operations and corporate levels that clearly relate to capital additions activities. We also capitalize interest, property taxes and insurance during periods in which redevelopment, development and construction projects are in progress. We commence capitalization of costs, including certain indirect costs, incurred in connection with our capital addition activities, at the point in time when activities necessary to get apartment communities ready for their intended use begin. These activities include when apartment communities or apartment homes are undergoing physical construction, as well as when apartment homes are held vacant in advance of planned construction, provided that other activities such as permitting, planning and design are in progress. We cease the capitalization of costs when the assets are substantially complete and ready for their intended use, which is typically when construction has been completed and apartment homes are available for occupancy. We charge costs including ordinary repairs, maintenance and resident turnover costs to property operating expense, as incurred. Refer to the discussion of investing activities within the Liquidity and Capital Resources section for a summary of costs capitalized during the periods presented.

Non-GAAP Performance and Liquidity Measures

Various of the key financial indicators we use in managing our business and in evaluating our financial condition and operating performance are non-GAAP measures. Key non-GAAP measures we use are defined and described below, and for those non-GAAP measures used or disclosed within this annual report, reconciliations of the non-GAAP measures to the most comparable financial measure computed in accordance with GAAP are provided.

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Economic Income represents the annual change in Net Asset Value per share plus cash dividends per share. Net Asset Value is the estimated fair value of our assets, net of liabilities, noncontrolling interests and preferred equity.

Funds from Operations, Pro forma Funds From Operations and Adjusted Funds From Operations are non-GAAP financial measures, which are defined and further described below under the Funds From Operations and Adjusted Funds From Operations heading.

Free Cash Flow, as calculated for our retained portfolio, represents an apartment community’s property net operating income, less spending for capital replacements (further discussed under the Liquidity and Capital Resources heading). Free Cash Flow internal rate of return represents the rate of return generated from an apartment community’s Free Cash Flow and the proceeds from its eventual sale.

Free Cash Flow capitalization rate and NOI capitalization rate are common benchmarks used in the real estate industry for relative comparison of real estate valuations, including for apartment community sales. For purposes of calculating such capitalization rates for apartment community sales, Free Cash Flow capitalization rate represents an apartment community’s trailing twelve month NOI prior to sale, less $1,200 of assumed annual capital replacement spending, divided by gross proceeds, and NOI capitalization rate represents an apartment community’s trailing twelve month NOI prior to sale, less a management fee equal to 3% of revenue, divided by gross proceeds.

Same store property operating results and proportionate property net operating income are defined and further described under the preceding Results of Operations – Real Estate Operations heading. Average revenue per effective apartment home represents rental and other property revenues divided by the number of occupied apartment homes multiplied by our ownership interest in the apartment community as of the end of the current period.

Funds From Operations and Adjusted Funds From Operations

Funds From Operations, or FFO, is a non-GAAP financial measure that we believe, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers or other personal property. The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income or loss computed in accordance with GAAP, excluding gains from sales of, and impairment losses recognized with respect to, depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine FFO. We calculate FFO attributable to Aimco common stockholders (diluted) by subtracting, if dilutive, redemption or repurchase related preferred stock issuance costs and dividends on preferred stock, and adding back dividends/distributions on dilutive preferred securities and premiums or discounts on preferred stock redemptions or repurchases.

In addition to FFO, we compute Pro forma FFO and Adjusted FFO, or AFFO, which are also non-GAAP financial measures that we believe are helpful to investors in understanding our performance. Pro forma FFO represents FFO attributable to Aimco common stockholders (diluted), excluding preferred equity redemption-related amounts (adjusted for noncontrolling interests). Preferred equity redemption-related amounts (gains or losses) are items that periodically affect our operating results and we exclude these items from our calculation of Pro forma FFO because such amounts are not representative of our operating performance. AFFO represents Pro forma FFO reduced by Capital Replacements (also adjusted for noncontrolling interests), which represents our estimation of the capital additions made to replace capital assets consumed during our ownership. When we make capital additions at an apartment community, we evaluate whether the additions enhance the value, profitability or useful life of an asset as compared to its condition at the time we purchased the asset. We classify as Capital Improvements those capital additions that meet these criteria and we classify as Capital Replacements those that do not. AFFO is a key financial indicator we use to evaluate our operational performance and is used to help determine the amounts of our dividend payments.

FFO, Pro forma FFO and AFFO should not be considered alternatives to net income (loss) or net cash flows from operating activities, as determined in accordance with GAAP, as indications of our performance or as measures of liquidity. Although we use these non-GAAP measures for comparability in assessing our performance against other REITs, not all REITs compute these same measures. Additionally, computation of AFFO is subject to definitions of capital spending, which are subjective. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other REITs.

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For the years ended December 31, 2015, 2014 and 2013, Aimco’s FFO, Pro forma FFO and AFFO are calculated as follows (in thousands):



	2015			2014			2013
Net income attributable to Aimco common stockholders (1)	$	235,966		$	300,220		$	203,673
Adjustments:
Depreciation and amortization, net of noncontrolling partners’ interest	298,880			275,175			282,235
Depreciation and amortization related to non-real estate assets, net of noncontrolling partners’ interest	(10,269		)	(9,627		)	(11,273		)
Gain on dispositions and other, net of income taxes and noncontrolling partners’ interest	(173,694		)	(265,358		)	(19,321		)
Provision for impairment losses related to depreciable real estate assets, net of noncontrolling partners’ interest	655			2,197			—
Discontinued operations:
Gain on dispositions and depreciation of rental property, net of noncontrolling partners’ interest	—			—			(152,567		)
Common noncontrolling interests in Aimco Operating Partnership’s share of above adjustments (2)	(5,548		)	(777		)	(5,346		)
Amounts allocable to participating securities	(473		)	(5		)	(377		)
FFO attributable to Aimco common stockholders – diluted	$	345,517		$	301,825		$	297,024
Preferred equity redemption related amounts	658			—			—
Pro forma FFO attributable to Aimco common stockholders – diluted	$	346,175		$	301,825		$	297,024
Capital Replacements, net of common noncontrolling interests in Aimco Operating Partnership and participating securities	(53,925		)	(56,051		)	(75,067		)
AFFO attributable to Aimco common stockholders – diluted	$	292,250		$	245,774		$	221,957

Weighted average common shares outstanding – diluted (FFO, Pro forma FFO and AFFO) (3)	155,570			146,002			145,532


(1)	Represents the numerator for calculating Aimco’s earnings per common share in accordance with GAAP (see Note 13 to the consolidated financial statements in Item 8).


(2)	During the years ended December 31, 2015, 2014 and 2013, the Aimco Operating Partnership had outstanding 7,656,626, 7,723,822 and 7,965,431 common OP Units and equivalents.


(3)	Represents the denominator for Aimco’s earnings per common share – diluted, calculated in accordance with GAAP, plus common share equivalents that are dilutive for FFO, Pro forma FFO and AFFO.

For the year ended December 31, 2015 as compared to the 2014, Pro forma FFO increased 8% (on a diluted per share basis) primarily as a result of improved property operating results and increased contribution from redevelopment and acquisition communities, offset by the loss of income from apartment communities that were sold. For the same period, AFFO increased 12% (on a diluted per share basis), as a result of the Pro forma FFO growth as well as a decrease in Capital Replacements spending as a percentage of net operating income. As we concentrate our investment capital in higher quality, higher price-point apartment communities, our free cash flow margins are increasing and contributing to higher AFFO. Refer to the Liquidity and Capital Resources section for further information regarding our Capital Replacements and other capital investing activities.

The Aimco Operating Partnership does not separately compute or report FFO, Pro forma FFO or AFFO. However, based on Aimco’s method for allocation of amounts of FFO, Pro forma FFO and AFFO to noncontrolling interests in the Aimco Operating Partnership, as well as the limited differences between Aimco’s and the Aimco Operating Partnership’s net income amounts during the periods presented, FFO, Pro forma FFO and AFFO amounts on a per unit basis for the Aimco Operating Partnership would be expected to be substantially the same as the corresponding per share amounts for Aimco.

Leverage Ratios

As discussed under the Balance Sheet and Liquidity heading, as part of our leverage strategy, we target the ratio of Proportionate Debt and Preferred Equity to Adjusted EBITDA to be below 7.0x and we target the ratio of Adjusted EBITDA to Adjusted Interest and Preferred Dividends to be greater than 2.5x. We believe these ratios are important measures as they are commonly used by investors and analysts to assess the relative financial risk associated with balance sheets of companies within the same industry, and they are believed to be similar to measures used by rating agencies to assess entity credit quality.

Proportionate Debt, as used in our leverage ratios, is a non-GAAP measure and represents our share of the debt obligations recognized in our consolidated financial statements, as well as our share of the debt obligations of our unconsolidated partnerships,

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reduced by our share of the cash and restricted cash of our consolidated and unconsolidated partnerships, and also by our investment in the subordinate tranches of a securitization that holds certain of our property debt (essentially, our investment in our own non-recourse property loans). In our Proportionate Debt computation, we reduce our recorded debt obligations by the amounts of cash and restricted cash on-hand (such restricted cash amounts being primarily restricted under the terms of our property debt agreements), assuming these amounts would be used to reduce our outstanding leverage. We further reduce our recorded debt obligations by the value of our investment in a securitization that holds certain of our property debt, as our payments of principal and interest associated with such property debt will ultimately repay our investments in the trust. We believe Proportionate Debt is useful to investors as it is a measure of our net exposure to debt obligations. Proportionate Debt, as used in our leverage ratios, is calculated as set forth in the table below.

Preferred Equity, as used in our leverage ratios, represents the redemption amounts for Aimco’s preferred stock and the Aimco Operating Partnership’s preferred OP Units. Preferred Equity, although perpetual in nature, is another component of our overall leverage.

Adjusted EBITDA is a non-GAAP performance measure. We believe Adjusted EBITDA provides investors relevant and useful information because it allows investors to view income from our operations on an unleveraged basis, before the effects of taxes, depreciation and amortization, gains or losses on sales of and impairment losses related to real estate, and various other items described below. The items excluded from Adjusted EBITDA are generally non-cash items included in net income computed in accordance with GAAP that do not affect our ability to service our debt obligations or preferred equity requirements.

Adjusted EBITDA represents Aimco’s share of the consolidated amount of our net income, adjusted to exclude the effect of the following items for the reasons set forth below:


•	interest, to allow investors to compare a measure of our earnings before the effects of our capital structure and indebtedness with that of other companies in the real estate industry;


•	income taxes, to allow investors to measure our performance independent of income taxes, which may vary significantly from other companies within our industry due to leverage and tax planning strategies, among other drivers;


•	depreciation and amortization, gains or losses on dispositions and impairment losses related to real estate, for similar reasons to those set forth in our discussion of FFO and AFFO in the preceding section;


•	provisions for (or recoveries of) losses on notes receivable, gains on dispositions of non-depreciable assets and non-cash stock-based compensation, as these are items that periodically affect our operations but that are not necessarily representative of our ability to service our debt obligations;


•	the interest income we earn on our investment in the subordinate tranches of a securitization that holds certain of our property debt, as this income is being generated indirectly from our payments of principal and interest associated with the property debt held by the trust and such amounts will ultimately repay our investment in the trust; and


•	EBITDA amounts related to our legacy asset management business, including the debt obligations and associated interest expense for the legacy asset management business, as we are not responsible for the operation of this portfolio and associated interest payments are not funded from our operations.

While Adjusted EBITDA is a relevant measure of performance, it does not represent net income as defined by GAAP, and should not be considered as an alternative to net income in evaluating our performance. Further, our computation of Adjusted EBITDA may not be comparable to similar measures reported by other companies.

Adjusted Interest, as calculated in our leverage ratios, is a non-GAAP measure that we believe is meaningful for investors and analysts as it presents our current recurring interest requirements associated with leverage. Our calculation of Adjusted Interest is set forth in the table below. We exclude from our calculation of Adjusted Interest:


•	debt prepayment penalties, which are items that, from time to time, affect our operating results, but are not representative of our scheduled interest obligations;


•	the amortization of deferred financing costs, as these amounts have already been expended in previous periods and are not representative of our current or prospective debt service requirements; and


•	the income we receive on our investment in the securitization that holds certain of our property debt, as this income is being generated indirectly from interest we pay with respect to property debt held by the trust.

Preferred Dividends represents the preferred dividends paid on Aimco’s preferred stock and the preferred distributions paid on the Aimco Operating Partnership’s preferred OP Units, exclusive of preferred equity redemption related amounts. We add Preferred

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Dividends to Adjusted Interest for a more complete picture of the interest and dividend requirements of our leverage, inclusive of perpetual preferred equity.

For the years ended December 31, 2015 and 2014, reconciliations of the most closely related GAAP measures to our calculations of Proportionate Debt, Preferred Equity, Adjusted EBITDA, Adjusted Interest and Preferred Dividends, as used in our leverage ratios, are as follows (in thousands):



	December 31,
	2015			2014
Total indebtedness	$	3,873,160		$	4,135,139
Adjustments:
Proportionate share adjustments related to debt obligations of consolidated and unconsolidated partnerships	(139,295		)	(117,827		)
Cash and restricted cash	(137,745		)	(120,416		)
Proportionate share adjustments related to cash and restricted cash held by consolidated and unconsolidated partnerships	2,893			2,103
Securitization investment and other	(65,449		)	(66,074		)
Proportionate Debt	$	3,533,564		$	3,832,925

Preferred stock	$	159,126		$	186,126
Preferred OP Units	87,926			87,937
Preferred Equity	247,052			274,063
Proportionate Debt plus Preferred Equity	$	3,780,616		$	4,106,988



	Year Ended December 31,
	2015			2014
Net income attributable to Aimco Common Stockholders	$	235,966		$	300,220
Adjustments:
Interest expense, net of noncontrolling interest	195,934			216,882
Income tax benefit	(29,549		)	(20,026		)
Depreciation and amortization, net of noncontrolling interest	298,880			275,175
Gains on disposition and other, net of income taxes and noncontrolling partners' interests	(173,694		)	(265,358		)
Interest income received on securitization investment	(6,092		)	(5,697		)
Other items, net	32,631			36,075
Adjusted EBITDA	$	554,076		$	537,271

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	Year Ended December 31,
	2015			2014
Interest expense	$	199,685		$	220,971
Adjustments:
Proportionate share adjustments related to interest of consolidated and unconsolidated partnerships	(5,262		)	(6,064		)
Debt prepayment penalties and other non-interest items	(6,068		)	(9,231		)
Amortization of deferred loan costs	(4,227		)	(3,674		)
Interest income received on securitization investment	(6,092		)	(5,697		)
Adjusted Interest	$	178,036		$	196,305

Preferred stock dividends	$	11,794		$	7,947
Preferred stock redemption related amounts	(695		)	—
Preferred OP Unit distributions	6,943			6,497
Preferred Dividends	18,042			14,444
Adjusted Interest and Preferred Dividends	$	196,078		$	210,749

Liquidity and Capital Resources

Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flow from our operations. Additional sources are proceeds from sales of apartment communities, proceeds from refinancings of existing property debt, borrowings under new property debt, borrowings under our Credit Agreement and proceeds from equity offerings.

Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding property debt, dividends paid to stockholders, distributions paid to noncontrolling interest partners and acquisitions of, and investments in, apartment communities, including redevelopment, development and other capital spending. We use our cash and cash equivalents and our cash provided by operating activities to meet short-term liquidity needs. In the event that our cash and cash equivalents and cash provided by operating activities are not sufficient to cover our short-term liquidity needs, we have additional means, such as short-term borrowing availability and proceeds from apartment community sales and refinancings. We may use our Credit Agreement for working capital and other short-term purposes, such as funding investments on an interim basis. We expect to meet our long-term liquidity requirements, such as debt maturities and apartment community acquisitions, through long-term borrowings, primarily non-recourse, the issuance of equity securities (including OP Units), the sale of apartment communities, and cash generated from operations.

The availability of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through changes in interest rates and access to financing. Currently, interest rates are low compared to historical levels and many lenders are active in the market. However, any adverse changes in the lending environment could negatively affect our liquidity. We believe we have mitigated much of this exposure by reducing our short and intermediate term maturity risk through refinancing such loans with long-dated, fixed-rate property debt. However, if financing options become unavailable for our further debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending or proceeds from asset dispositions.

At December 31, 2015, approximately 93% of our leverage consisted of property-level, non-recourse, long-dated debt, 1% consisted of borrowings under our revolving credit agreement and 6% consisted of perpetual preferred equity, a combination which reduces our refunding and re-pricing risk. The weighted average maturity of our property-level debt was 8.1 years, with 6.7% of our unpaid principal balances maturing during 2016 and, on average, 9.0% of our unpaid principal balances maturing each year from 2017 through 2019. Approximately 98% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates and inflation.

Although our primary sources of leverage are property-level, non-recourse, long-dated, fixed-rate, amortizing debt and perpetual preferred equity, we also have a Senior Secured Credit Agreement with a syndicate of financial institutions, which we refer to as our Credit Agreement. The Credit Agreement provides for $600.0 million of revolving loan commitments, which we use for working capital and other short-term purposes. Borrowings under the Credit Agreement bear interest at a rate set forth on a pricing grid, which rate varies based on our leverage (initially either at LIBOR, plus 1.35%, or, at our option, Prime plus 0.35%). At December 31, 2015, we had $27.0 million of outstanding borrowings under the Credit Agreement, and we had the capacity to

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borrow $536.6 million, net of the outstanding borrowings and $36.4 million for undrawn letters of credit backed by the Credit Agreement. The interest rate on our outstanding borrowings was 1.59% at December 31, 2015.

Under the Credit Agreement, we have agreed to maintain Debt Service and Fixed Charge Coverage ratios of 1.50x and 1.40x, respectively, as well as other covenants customary for similar revolving credit arrangements. For the year ended December 31, 2015, our Debt Service and Fixed Charge Coverage ratios were 2.01x and 1.89x, respectively, compared to ratios of 1.82x and 1.73x, respectively, for the year ended December 31, 2014. We expect to remain in compliance with these covenants during the next 12 months.

At December 31, 2015, we had $50.8 million in cash and cash equivalents and $87.0 million of restricted cash, an increase of $21.8 million and a decrease of $4.5 million, respectively, from December 31, 2014. Restricted cash primarily consists of reserves and escrows held by lenders for bond sinking funds, capital additions, property taxes and insurance, and escrows related to resident security deposits.

The following discussion relates to changes in cash due to operating, investing and financing activities, which are presented in our consolidated statements of cash flows in Item 8.

Operating Activities

For the year ended December 31, 2015, our net cash provided by operating activities of $359.9 million was primarily related to operating income from our consolidated apartment communities, which is affected primarily by rental rates, occupancy levels and operating expenses related to our portfolio of apartment communities, in excess of payments of operating accounts payable and accrued liabilities. Cash provided by operating activities for the year ended December 31, 2015, increased by $38.5 million as compared to the year ended December 31, 2014, primarily due to an increase in the net operating income of apartment communities in our retained portfolio, primarily due to improved operating results as well as increased contribution from redevelopment apartment communities, and a decrease in cash paid for interest, partially offset by a decrease in the net operating income of apartment communities we sold during 2015 and 2014.

Investing Activities

For the year ended December 31, 2015, our net cash used in investing activities of $170.9 million consisted primarily of capital expenditures and purchases of real estate, partially offset by proceeds from dispositions of real estate. Capital expenditures totaled $367.2 million, $367.3 million and $350.3 million during the years ended December 31, 2015, 2014 and 2013, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from apartment community sales.

We categorize our capital spending broadly into six primary categories:


•	capital replacements, which represents our estimation of the capital additions made to replace capital assets consumed during our ownership;


•	capital improvements, which are non-redevelopment capital additions that are made to enhance the value, profitability or useful life of an asset from its original purchase condition;


•	property upgrades, which may include kitchen and bath remodeling, energy conservation projects, and investments in longer-lived materials designed to reduce turnover costs, all of which are generally lesser in scope than redevelopment additions and do not significantly disrupt property operations;


•	redevelopment additions, which represent capital additions intended to enhance the value of the apartment community through the ability to generate higher average rental rates, and may include costs related to entitlement, which enhance the value of a community through increased density, and costs related to renovation of exteriors, common areas or apartment homes;


•	development additions, which represent construction and related capitalized costs associated with our ground-up development projects; and


•	casualty replacements spending, which represent capitalized costs incurred in connection with the restoration of an asset after a casualty event such as a hurricane, tornado or flood.

We exclude from these measures the amounts of capital spending related to apartment communities sold or classified as held for sale at the end of the period. Note that we deduct capital replacements from Pro-forma FFO to calculate AFFO, which we use to help determine the amounts of our dividend payments.

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A summary of the capital spending for these categories, along with a reconciliation of the total for these categories to the capital expenditures reported in the accompanying consolidated statements of cash flow for the years ended December 31, 2015, 2014 and 2013, are presented below (dollars in thousands):



	2015		2014			2013
Capital replacements	$	49,432	$	48,791		$	62,536
Capital improvements	21,988		25,029			55,259
Property upgrades	49,433		49,287			32,709
Redevelopment additions	117,820		181,951			178,287
Development additions	115,638		46,928			15,898
Casualty replacements	7,004		5,800			6,650
Total capital additions	361,315		357,786			351,339
Plus: additions related to apartment communities sold or held for sale	1,633		9,668			24,699
Consolidated capital additions	362,948		367,454			376,038
Plus: net change in accrued capital spending	4,232		(130		)	(25,700		)
Capital expenditures per consolidated statement of cash flows	$	367,180	$	367,324		$	350,338

For the years ended December 31, 2015, 2014 and 2013, we capitalized $11.7 million, $14.2 million and $17.6 million of interest costs, respectively, and $28.2 million, $29.2 million and $33.2 million of other direct and indirect costs, respectively.

Redevelopment and Development

Information regarding our ongoing redevelopment and development projects at December 31, 2015, are presented below (dollars in millions):



						Schedule
	Total Number of Apartment Homes at Completion	Estimated Net Investment at Completion		Inception-to-Date Net Investment		Construction Start	Initial Occupancy	Stabilized Occupancy	Stabilized NOI
Redevelopment
Park Towne Place	948	$	97.0	$	62.7	Multiple	3Q 2015	1Q 2017	2Q 2018
The Sterling	535	62.5		47.1		Multiple	Multiple	3Q 2016	4Q 2017
Subtotal	1,483	$	159.5	$	109.8

Development
One Canal	310	$	195.0	$	162.7	4Q 2013	2Q 2016	3Q 2017	4Q 2018
Total	1,793	$	354.5	$	272.5

Redevelopment Construction Completed
Lincoln Place	795	$	360.0	$	359.0	Multiple	Multiple	2Q 2015	3Q 2016
The Preserve at Marin	126	124.0		123.4		4Q 2012	1Q 2014	3Q 2015	4Q 2016
2900 on First Apartments	135	15.2		14.7		1Q 2014	1Q 2014	2Q 2015	3Q 2016
Ocean House on Prospect	53	14.8		14.6		4Q 2014	3Q 2015	4Q 2015	1Q 2017
Subtotal	1,109	$	514.0	$	511.7

Development Construction Completed
Vivo	91	$	45.0	$	43.8	n/a	4Q 2015	3Q 2016	4Q 2017
Total Completed 2015	1,200	$	559.0	$	555.5

Stabilized Occupancy represents the period in which we expect the apartment communities being developed or redeveloped to achieve targeted physical occupancy, generally greater than 90%. Stabilized NOI represents the period in which we expect the communities to achieve stabilized rents and operating costs, generally five quarters after Stabilized Occupancy.

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During the year ended December 31, 2015, we invested $117.8 million in our redevelopment projects, and we completed construction at four redevelopment projects. Lincoln Place, in Venice, California, and The Preserve at Marin, in Corte Madera, California, were completed in the first quarter and, as of December 31, 2015, were 96% and 94% occupied, respectively. 2900 on First in Seattle, Washington, was completed during the second quarter and, as of December 31, 2015, was 90% occupied. Ocean House on Prospect, in La Jolla, California, was completed in the fourth quarter and, as of December 31, 2015, was 94% occupied.

Redevelopment of Park Towne Place includes significant renovation of existing commercial space, upgrading common areas and amenities, and the phased redevelopment of apartment homes. The first phase included redevelopment of the commercial space, common areas and amenities, and the apartment homes in the South Tower, one of the four residential towers that comprise the community. The estimated net investment for this first phase of redevelopment of $60 million, reflects a gross investment of $71 million, reduced by $11 million of historic tax credits. At the end of the year, 85% of the 229 apartment homes in the South Tower had been redeveloped and rent achievement to date is in excess of Aimco’s underwriting. Redevelopment of the remaining apartment homes in the South Tower, along with the common areas and amenities have since been substantially completed. Redevelopment of the 245 apartment home East Tower, approved in the third quarter 2015, is underway. This phase represents a net investment of $37 million, reflecting an estimated gross investment of $45.5 million reduced by approximately $8.5 million of historic tax credits. In total, 474 apartment homes at Park Towne Place have been approved for redevelopment. As of the end of January 2016, we had leased 83% of the apartment homes in the South Tower and signed leases for 55% of the 12,560 square feet of commercial space in the community, at rents above underwriting.

Redevelopment of The Sterling includes significant renovation of existing retail space, upgrading common areas, and the phased redevelopment of apartment homes. Renovation of the common areas and retail space was completed in second quarter 2015, at a cost consistent with underwriting. Based on the success of the lease-up pace and pricing of the apartment homes that have been completed, Aimco approved the redevelopment of an additional five floors, containing 130 apartment homes. The estimated net investment for the additional apartment homes is $13 million. At the end of fourth quarter, 58% of the 409 apartment homes approved for redevelopment were complete, at a cost consistent with underwriting and as of the end of January 2016, we had leased 97% of the completed apartment homes, with rents above underwriting and had signed leases for 84% of the 19,845 square feet of retail space at rents above underwriting.

During the year ended December 31, 2015, we invested $115.6 million in our development projects. This included an investment of $99.7 million in the development of One Canal in the historic Bulfinch Triangle neighborhood of Boston’s West End. One Canal will include 310 apartment homes and 22,000 square feet of commercial space. During the three months ended December 31, 2015, we approved a $5.0 million increase in scope, comprised of additional tenant improvements, enhanced penthouse units, improved kitchen layouts and common area enhancements. The additional tenant improvements are based on the execution of a 15-year lease for all of the commercial space. This lease commences in Spring 2016, approximately three and a half years earlier than contemplated in the project underwriting. We anticipate the completion of construction in April, with the commencement of leasing shortly thereafter. Our investment in One Canal has been and will be funded in part by a $114.0 million non-recourse property loan, of which $27.8 million was available to draw at December 31, 2015.

Our development spending during the year ended December 31, 2015, also included $15.9 million at Vivo, the eight-story, 91-apartment home near Kendall Square in Cambridge, Massachusetts, under construction at the time we acquired it during the second quarter of 2015. Vivo is located two blocks from Axiom Apartment Homes, which we also acquired during the second quarter of 2015, and is contiguous to a large life science complex now under construction, the completion of which is planned for late spring or early summer 2016. At closing, we paid $27.9 million and agreed to fund the remaining construction costs. We expect a total investment of $45.0 million in this community, of which $43.8 million has been invested through December 31, 2015. Construction was completed during the third quarter, in line with plan. Leasing activity during the fourth quarter was in-line with underwriting. Amenity finishes, including completion of a fitness center and finishes to an outdoor rooftop terrace, are scheduled to be completed in the summer of 2016.

We expect our total redevelopment and development spending to range from $180 million to $220 million for the year ending December 31, 2016.

Financing Activities

For the year ended December 31, 2015, our net cash used in financing activities of $167.2 million was primarily attributed to principal payments on property loans, dividends paid to common security holders and distributions paid to noncontrolling interests, partially offset by proceeds from our issuance of common securities and proceeds from property loans.

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Principal payments on property loans during the year totaled $514.3 million, and included $79.8 million of scheduled principal amortization, $166.0 million related to the expansion of our unencumbered asset pool, and the remainder primarily related to debt payoffs in connection with dispositions. We like the discipline of financing our investments in real estate through the use of amortizing, fixed-rate property debt, as the amortization gradually reduces our leverage, reduces our refunding risk and the fixed-rate provides a hedge against increases in interest rates. Our net cash used in financing activities also includes $252.6 million of payments to equity holders, as further detailed in the table below.

Equity and Partners’ Capital Transactions

The following table presents our dividend and distribution activity during the year ended December 31, 2015 (dollars in thousands):



	2015
Cash distributions paid by the Aimco Operating Partnership to holders of noncontrolling interests in consolidated real estate partnerships	$	43,757
Cash distributions paid by the Aimco Operating Partnership to preferred unitholders (1)	18,042
Cash distributions paid by the Aimco Operating Partnership to common unitholders (2)	190,783
Total cash distributions paid by the Aimco Operating Partnership	$	252,582

Cash distributions paid by Aimco to holders of noncontrolling interests in consolidated real estate partnerships	$	43,757
Cash distributions paid by Aimco to holders of common OP Units	13,644
Cash dividends paid by Aimco to preferred stockholders	11,099
Cash dividends paid by Aimco to common stockholders	184,082
Total cash dividends and distributions paid by Aimco	$	252,582


(1)	$11.1 million represented distributions to Aimco, and $6.9 million represented distributions paid to holders of OP Units.


(2)	$184.1 million represented distributions to Aimco, and $6.7 million represented distributions paid to holders of OP Units.

Pursuant to an At-The-Market offering program active at December 31, 2015, Aimco has the capacity to issue up to 3.5 million shares of its Common Stock. In the event of any such issuances, Aimco would contribute the net proceeds to the Aimco Operating Partnership in exchange for a number of partnership common units equal to the number of shares issued and sold. Additionally, the Aimco Operating Partnership and Aimco have a shelf registration statement that provides for the issuance of debt securities by the Aimco Operating Partnership and equity securities by Aimco.

During January 2015, Aimco completed a public offering resulting in the sale of 9,430,000 shares of its Common Stock, par value $0.01 per share, in an underwritten public offering, generating net proceeds of approximately $366.6 million. Aimco contributed the net proceeds from the sale of Common Stock to the Aimco Operating Partnership in exchange for a number of common partnership units equal to the number of shares of Common Stock issued.

Contractual Obligations

This table summarizes information contained elsewhere in this Annual Report on Form 10-K regarding payments due under contractual obligations and commitments as of December 31, 2015 (in thousands):



	Total		Less than One Year		2-3 Years		4-5 Years		More than Five Years
Long-term debt (1)	$	3,846,160	$	325,973	$	682,639	$	952,213	$	1,885,335
Interest related to long-term debt (2)	1,082,198		190,390		320,217		219,171		352,420
Office space lease obligations	6,863		3,061		3,423		379		—
Ground lease obligations (3)	72,987		795		1,890		2,426		67,876
Construction obligations (4)	110,000		100,286		9,714		—		—
Total	$	5,118,208	$	620,505	$	1,017,883	$	1,174,189	$	2,305,631


(1)	Includes scheduled principal amortization and maturity payments related to our long-term debt.


(2)	Includes interest related to both fixed rate and variable rate debt. Interest related to variable rate debt is estimated based on the rate effective at December 31, 2015. Refer to Note 5 to the consolidated financial statements in Item 8 for a description of average interest rates associated with our debt.


(3)	These ground leases mature in years ranging from 2037 to 2084.

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(4)	Represents estimated obligations pursuant to construction contracts related to our development, redevelopment and other capital projects. Refer to Note 7 to the consolidated financial statements in Item 8 for additional information regarding these obligations.

In addition to the amounts presented in the table above, at December 31, 2015, we had $159.8 million (liquidation value) of perpetual preferred stock outstanding with a weighted average annual dividend yield of 6.9% and $87.9 million (liquidation value) of redeemable preferred OP Units of the Aimco Operating Partnership outstanding with annual distribution yields ranging from 1.9% to 8.8%. The dividends and distributions that accrue on the perpetual preferred stock and redeemable preferred OP Units are cumulative. As of December 31, 2015, we had no accrued dividends or distributions related to these securities.

Additionally, we may enter into commitments to purchase goods and services in connection with the operations of our apartment communities. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.

Future Capital Needs

In addition to the items set forth in “Contractual Obligations” above, we expect to fund any future acquisitions, redevelopment and development projects, and other capital spending principally with proceeds from apartment community sales (including tax-free exchange proceeds), short-term borrowings, debt and equity financing and operating cash flows. Our near-term business plan does not contemplate the issuance of equity.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

At December 31, 2015, we had approximately $137.7 million in cash and cash equivalents and restricted cash, a portion of which bear interest at variable rates and may mitigate the effect of an increase in variable rates on our variable-rate indebtedness discussed above.

We estimate the fair value for our debt instruments as described in Note 6 to the consolidated financial statements in Item 8. The estimated aggregate fair value of our consolidated total indebtedness was approximately $4.0 billion at December 31, 2015. The combined carrying value of our consolidated debt was $3.9 billion at December 31, 2015. If market rates for our fixed-rate debt were higher by 100 basis points with constant credit risk spreads, the estimated fair value of our debt discussed above would have decreased from $4.0 billion to $3.9 billion. If market rates for our debt discussed above were lower by 100 basis points with constant credit risk spreads, the estimated fair value of our fixed-rate debt would have increased from $4.0 billion to $4.1 billion.

Item 8. Financial Statements and Supplementary Data

The independent registered public accounting firm’s reports, consolidated financial statements and schedule listed in the accompanying index are filed as part of this report and incorporated herein by this reference. See “Index to Financial Statements” on page F-1 of this Annual Report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Aimco

Disclosure Controls and Procedures

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

Management’s Report on Internal Control Over Financial Reporting

Aimco’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;


•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and


•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of Aimco’s internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 Framework).

Based on their assessment, management concluded that, as of December 31, 2015, Aimco’s internal control over financial reporting is effective.

Aimco’s independent registered public accounting firm has issued an attestation report on Aimco’s internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There has been no change in Aimco’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2015 that has materially affected, or is reasonably likely to materially affect, Aimco’s internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Apartment Investment and Management Company

We have audited Apartment Investment and Management Company’s (the “Company”) internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2015, and our report dated February 26, 2016 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Denver, Colorado

February 26, 2016

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The Aimco Operating Partnership

Disclosure Controls and Procedures

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

Management’s Report on Internal Control Over Financial Reporting

Management of the Aimco Operating Partnership is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;


•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and


•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

Management assessed the effectiveness of the Aimco Operating Partnership’s internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 Framework).

Based on their assessment, management concluded that, as of December 31, 2015, the Aimco Operating Partnership’s internal control over financial reporting is effective.

The Aimco Operating Partnership’s independent registered public accounting firm has issued an attestation report on the Aimco Operating Partnership’s internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There has been no change in the Aimco Operating Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2015 that has materially affected, or is reasonably likely to materially affect, the Aimco Operating Partnership’s internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

The Partners of

AIMCO Properties, L.P.

We have audited AIMCO Properties, L.P.’s (the “Partnership”) internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). The Partnership’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit.

In our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Partnership as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2015, and our report dated February 26, 2016 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Denver, Colorado

February 26, 2016

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Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Each member of the board of directors of Aimco also is a director of the general partner of the Aimco Operating Partnership. The officers of Aimco are also the officers of the general partner of the Aimco Operating Partnership and hold the same titles. The information required by this item for both Aimco and the Aimco Operating Partnership is presented jointly under the captions “Board of Directors and Executive Officers,” “Corporate Governance Matters - Code of Ethics,” “Other Matters - Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance Matters - Nominating and Corporate Governance Committee,” “Corporate Governance Matters - Audit Committee” and “Corporate Governance Matters - Audit Committee Financial Expert” in the proxy statement for Aimco’s 2016 annual meeting of stockholders and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item is presented under the captions “Compensation Discussion & Analysis,” “Compensation and Human Resources Committee Report to Stockholders,” “Summary Compensation Table,” “Grants of Plan-Based Awards in 2015,” “Outstanding Equity Awards at Fiscal Year End 2015,” “Option Exercises and Stock Vested in 2015,” “Potential Payments Upon Termination or Change in Control” and “Corporate Governance Matters - Director Compensation” in the proxy statement for Aimco’s 2016 annual meeting of stockholders and is incorporated herein by reference.

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

The information required by this item, for both Aimco and the Aimco Operating Partnership, is presented under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” in the proxy statement for Aimco’s 2016 annual meeting of stockholders and is incorporated herein by reference. In addition, as of February 25, 2016, Aimco, through its consolidated subsidiaries, held 95.2% of the Aimco Operating Partnership’s common partnership units outstanding.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is presented under the caption “Certain Relationships and Related Transactions” and “Corporate Governance Matters - Independence of Directors” in the proxy statement for Aimco’s 2016 annual meeting of stockholders and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this item is presented under the caption “Principal Accountant Fees and Services” in the proxy statement for Aimco’s 2016 annual meeting of stockholders and is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules


(a)(1)	The financial statements listed in the Index to Financial Statements on Page F-1 of this report are filed as part of this report and incorporated herein by reference.


(a)(2)	The financial statement schedule listed in the Index to Financial Statements on Page F-1 of this report is filed as part of this report and incorporated herein by reference.


(a)(3)	The Exhibit Index is incorporated herein by reference.

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INDEX TO EXHIBITS (1) (2)



EXHIBIT NO.	DESCRIPTION



3.1	Charter (Exhibit 3.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, is incorporated herein by this reference)
3.2	Amended and Restated Bylaws (Exhibit 3.1 to Aimco’s Current Report on Form 8-K dated January 26, 2016, is incorporated herein by this reference)
10.1	Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of July 29, 1994, as amended and restated as of February 28, 2007 (Exhibit 10.1 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 2006, is incorporated herein by this reference)
10.2	First Amendment to Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of December 31, 2007 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 31, 2007, is incorporated herein by this reference)
10.3	Second Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of July 30, 2009 (Exhibit 10.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, is incorporated herein by this reference)
10.4	Third Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of September 2, 2010 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated September 3, 2010, is incorporated herein by this reference)
10.5	Fourth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of July 26, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated July 26, 2011, is incorporated herein by this reference)
10.6	Fifth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of August 24, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated August 24, 2011, is incorporated herein by this reference)
10.7	Sixth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of December 31, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 31, 2011, is incorporated herein by this reference)
10.8	Seventh Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of May 13, 2014 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated May 15, 2014, is incorporated herein by this reference)
10.9	Eighth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of October 31, 2014 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated November 4, 2014, is incorporated herein by this reference)
10.10	Senior Secured Credit Agreement, dated as of December 13, 2011, among Aimco, the Aimco Operating Partnership, AIMCO/Bethesda Holdings, Inc., the lenders from time to time party thereto, KeyBank National Association, as administrative agent, swing line lender and a letter of credit issuer, Wells Fargo Bank, N.A., as syndication agent and Bank of America, N.A. and Regions Bank, as co-documentation agents (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 13, 2011, is incorporated herein by this reference)
10.11	First Amendment to Senior Secured Credit Agreement, dated as of April 5, 2013, by and among Aimco, the Aimco Partnership, AIMCO/Bethesda Holdings, Inc., Keybank National Association, as Agent for itself and the other lenders from time to time a party to the Senior Secured Credit Agreement (Exhibit 10.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, is incorporated herein by this reference)
10.12	Second Amendment to Credit Agreement and Joinder to Guaranty, dated as of September 30, 2013, among Aimco, the Aimco Operating Partnership, AIMCO/Bethesda Holdings, Inc., the guarantors party thereto, the lenders party thereto and KeyBank National Association, as administrative agent (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated September 30, 2013, is incorporated herein by this reference)
10.13	Master Indemnification Agreement, dated December 3, 2001, by and among Aimco, the Aimco Operating Partnership., XYZ Holdings LLC, and the other parties signatory thereto (Exhibit 2.3 to Aimco’s Current Report on Form 8-K, dated December 6, 2001, is incorporated herein by this reference)
10.14	Tax Indemnification and Contest Agreement, dated December 3, 2001, by and among Aimco, National Partnership Investments, Corp., and XYZ Holdings LLC and the other parties signatory thereto (Exhibit 2.4 to Aimco’s Current Report on Form 8-K, dated December 6, 2001, is incorporated herein by this reference)
10.15	Employment Contract executed on December 29, 2008, by and between the Aimco Operating Partnership and Terry Considine (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 29, 2008, is incorporated herein by this reference)*
10.16	Apartment Investment and Management Company 1997 Stock Award and Incentive Plan (October 1999) (Exhibit 10.26 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 1999, is incorporated herein by this reference)*

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10.17	Form of Restricted Stock Agreement (1997 Stock Award and Incentive Plan) (Exhibit 10.11 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997, is incorporated herein by this reference)*
10.18	Form of Incentive Stock Option Agreement (1997 Stock Award and Incentive Plan) (Exhibit 10.42 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 1998, is incorporated herein by this reference)*
10.19