APARTMENT INCOME REIT CORP. 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 Quarterly Report on Form 10-Q contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding: the ongoing relationship between AIR and Aimco (the "Separate Entities") following the Separation; the payment of dividends and distributions in the future; the impact of the COVID-19 pandemic, including our ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding consumer demand, growth in revenue and strength of other performance metrics and models; the effect of acquisitions and dispositions; expectations regarding sales of our apartment communities and the use of proceeds thereof; the availability and cost of corporate debt; our ability to comply with debt covenants, including financial coverage ratios; risks related to the provision of property management services to Aimco and our ability to collect property management related fees; and risks related to the inability to fully collect the notes receivable due from Aimco. These forward-looking statements are based on management's judgment as of this date, which is subject to risks and uncertainties. Risks and uncertainties that could cause actual results to differ materially from our expectations include, but are not limited to: the effects of the coronavirus pandemic on AIR's business and on the global andU.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described herein, and the impact on entities in which AIR holds a partial interest, and the impact of governmental lockdowns on AIR's residents, commercial tenants, and operations; real estate and operating 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 housing supply; the timing and effects of acquisitions and dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIR's ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; 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 Aimco; the relationship between the Separate Entities after the Separation; the ability and willingness of the Separate Entities and their subsidiaries to meet and/or perform their obligations under any contractual arrangements that are entered into among the parties in connection with the Separation and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve some or all the benefits that we expect to achieve from the Separation; and such other risks and uncertainties described from time to time in filings by the Separate Entities with theSecurities and Exchange Commission ("SEC"). 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 of 1986, as amended (the "Code") and depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership. Readers should carefully review AIR's financial statements and the notes thereto, as well as the section entitled "Risk Factors" described in Item 1A ofAIR's and AIR Operating Partnership's combined Annual Report on Form 10-K for the year endedDecember 31, 2020 , and subsequent documents we file from time to time with theSEC . These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. As used herein and except as the context otherwise requires, "we," "our," and "us" refer toApartment Income REIT Corp. ("AIR"),Apartment Income REIT, L.P. ("AIR Operating Partnership ") and their consolidated subsidiaries, collectively. Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted inthe United States ("GAAP"). These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading and include: NAREIT Funds from Operations, Pro forma Funds from Operations, and the measures used to compute our leverage ratios. 28
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Table of Contents Executive Overview AIR provides investors with a simple and transparent way to invest in the multi-family sector with public market liquidity, the safety of a diversified portfolio of apartment communities with low financial leverage, best-in-class operations, and sector low general and administrative costs. Our principal financial objective is to be a low-cost and efficient way to invest inU.S. multi-family real estate. Many of our investors focus on multiples of Funds From Operations ("FFO") as defined by theNational Association of Real Estate Investment Trusts ("NAREIT"), referred to herein as "NAREIT FFO." These investors also focus on NAREIT FFO, as adjusted for non-cash, unusual or non-recurring items. We refer to this metric as Pro forma Funds From Operations ("Pro forma FFO") and use it as a secondary measure of operational performance.
Our business is organized around four areas of strategic focus: operational excellence; portfolio management; balance sheet; and team and culture. The results from the execution of our business plan are further described in the sections that follow.
The Separation
For financial reporting purposes, GAAP requires that Aimco is presented as the
predecessor ("AIR's Predecessor") for AIR's financial statements. As a result,
unless otherwise stated, financial results prior to the Separation on December
15, 2020 include the financial results of AIR's Predecessor. The financial
results prior to the Separation attributable to the apartment communities
retained by Aimco are presented as discontinued operations and are excluded from
our property net operating income ("NOI").
Operational Excellence
We own and operate a portfolio of stabilized apartment communities, diversified by both geography and price point. As ofJune 30, 2021 , our portfolio included 96 apartment communities with 26,422 apartment homes in which we held an average ownership of approximately 93%.
Same Store highlights for the second quarter include:
?
Recognition of 97.9% of all residential revenue billed during the quarter; of
which 96.7% was collected in cash;
?
Average daily occupancy ("ADO") of 95.4%, a year-over-year increase of
approximately 30 basis points due primarily to AIR's recovery efforts since the
onset of COVID-19;
?
For leases signed during the quarter, renewal rents increased by 4.6% and signed
new lease rents increased by 2.7%, for a weighted-average increase of 3.8%; and
?
For leases becoming effective during the quarter, renewal rents increased 3.2%,
whereas transacted new lease rents decreased 0.9%, for a weighted-average
increase of 1.1%.
Same Store Markets
Market conditions and leasing results in the second quarter exceeded our expectations at the beginning of the year. We continue to emphasize margin and long-term NOI growth over short-term revenue growth. This approach contributed to sequential revenue growth of 80 basis points from the first to second quarter, and more importantly positioned the business for continued acceleration through the second half of the year and into 2022.
Weighted-average signed lease changes have now trended upwards for 10
consecutive months with July new lease rates up 9.5% through
Year-to-date, we have transacted 11,700 leases with a weighted-average rate increase of 70 basis points compared to the prior lease. We have signed an additional 4,000 leases with average rate increases of 8.6%. These 15,700 leases represent approximately 80% of our anticipated full year leasing activity and have weighted-average rent increases of 2.7%. We anticipate another 3,700 leases to be signed with blended rent changes in the range of 6%-8%, and a full year blended rate increase of approximately 3%. In addition to accelerating market rents, leasing pace has also exceeded expectations, with second quarter leasing volume 65% ahead of 2020 and 10% above our previous high in the second quarter of 2019. ADO remained stable in the second quarter despite significant increases in frictional vacancy due to the number of lease expirations in peak season. While occupancy remained stable, our leased percent, which is the percent of total apartment homes currently leased, improved from 90.7% to 93.1% during the second quarter. As ofJuly 27, 2021 , our leased percentage is now 95%; 800 basis points ahead of the same day last year and 400 basis points ahead of 2019. 29
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Table of Contents Portfolio Management Our portfolio of apartment communities is diversified across "A," "B," and "C+" price points, averaging "B/B+" in quality, and is also diversified across several of the largest markets inthe United States . We measure the quality of apartment communities in our portfolio based on average rents of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance data and analysis. Under this rating system, we classify as "A" quality apartment communities those earning rents greater than 125% of local market average; as "B" quality apartment communities those earning rents between 90% and 125% of local market average; as "C+" quality apartment communities those earning rents greater than$1,100 per month, but lower than 90% of local market average; and as "C" quality apartment communities those earning 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 local market average rents. Although some companies and analysts within the multi-family real estate industry use apartment community quality 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 period for which local market 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 multi-family real estate industry.
The following table summarizes information about our portfolio relative to the
market for the three months ended
Average revenue per apartment home (1)$2,215
Percentage A (average revenue per apartment home
(1) Represents average monthly rental and other property revenues (excluding resident reimbursement of utility cost) divided by the number of occupied apartment homes as of the end of the period.
Our average monthly revenue per apartment home was$2,215 for the three months endedJune 30, 2021 , representing a decrease of approximately 3% compared to the same period in 2020. As ofJune 30, 2021 , we leased four properties to Aimco for development and redevelopment with an initial value of$467.0 million and quarterly cash lease income of$6.6 million . AIR has the option to purchase the improved assets at a discount to their fair value, when property operations are stabilized, currently expected betweenJanuary 1, 2024 andJanuary 1, 2025 . Additionally, during the second quarter we leased one vacant land parcel to Aimco, with an initial value of$12.8 million , quarterly cash lease income of approximately$0.1 million , and expected stabilization in 2025. We also expect to improve the quality of our portfolio by allocating investment capital to enhance rent growth and increase long-term capital values through routine investments in property upgrades (such as upgrading kitchens, bathrooms and other interior design aspects) and through portfolio design, emphasizing land value as well as location and submarket. As part of our portfolio strategy, we seek to sell communities with lower expected free cash flow internal rates of return and reinvest the proceeds from such sales in accretive uses such as capital enhancements, share repurchases, and selective acquisitions of stabilized communities with projected free cash flow internal rates of return higher than expected from the communities being sold. When the cost of capital is favorable, we will look to grow through the acquisition of stabilized apartment communities that we believe we can operate better than their previous owners. Through this disciplined approach to capital allocation, we expect to increase the quality and expected growth rate of our portfolio.
Acquisitions and Dispositions
OnJune 17, 2021 , we acquired City Center on 7th, a 700-apartment home community located inPembroke Pines, Florida for$223 million . The acquisition was temporarily funded through borrowings on our revolving credit facility pending the completion of paired trade transactions later in 2021. We expect an NOI cap rate of 4.2% during our first year of ownership. An additional 160 basis points of growth is expected as we invest approximately$10 million in capital enhancements and implement fully our best-in-class operating platform. Since acquisition 45 days ago, we've signed 27 new leases with rate increases averaging 21.5%, while increasing occupancy by 70 basis points to 97.1%.
We did not dispose of any apartment communities during the three months ended
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Table of Contents Balance Sheet Components of Leverage
We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage, primarily long-dated debt; and we build financial flexibility by maintaining ample unused and available credit; holding properties with substantial value unencumbered by property debt; maintaining an investment grade rating; and using partners' capital when it enhances financial returns or reduces investment risk.
Our leverage includes our share of long-term, non-recourse property debt encumbering our apartment communities, together with outstanding borrowings under our revolving credit facility, our term loans, and our preferred equity. We have notes receivable from Aimco with an aggregate principal amount of$534 million . The notes will mature onJanuary 31, 2024 , and are secured by a pool of properties owned by Aimco. We consider the notes a reduction of leverage as we expect proceeds to be used to repay current amounts outstanding. We entered 2021 with approximately$3.2 billion of net leverage. We anticipate ending 2021 with net leverage of approximately$2.5 billion . The April equity offering and 2021 property sales are expected to reduce leverage by$920 million . This decline is somewhat offset by borrowings to fund capital projects and the City Center acquisition at a loan to value of approximately 25%.
Please see the Liquidity and Capital Resources section for additional information regarding our leverage.
Equity Issuance
As previously announced inApril 2021 , we sold 7.825 million shares of our Class A Common Stock in a private placement to a large global real estate-focused investment firm for a cash purchase price of$342 million , net of fees. Proceeds raised were used to repay$318.4 million of property debt with a weighted-average interest rate of 4.6%, which resulted in an approximate 0.9x reduction in Net Leverage to Adjusted EBITDAre. Prepayment penalties incurred in connection with the debt repayment totaled$33.8 million . The economic cost of these prepayment penalties is expected to be substantially recovered through lower future interest expense.
Financing Activities
OnApril 14, 2021 , we closed a new$1.4 billion credit facility, providing four-to-five-year money at a current all-in cost of 1.6%. The facility is comprised of a$600 million revolving credit facility and$800 million of variable rate term loans. Proceeds were used to extend the maturity of our previous$350 million term loan, repay$213 million of property debt, and reduce borrowings on our revolving credit facility. The term loans were structured to maintain our balanced maturity ladder, and to also maximize flexibility through the ability to prepay freely and extend the maturity date of shorter duration loans. On Track Leverage Reduction We target Net Leverage to Adjusted EBITDAre below 6.0x, with a current target of 5.5x by year-end. Our leverage ratios for the three months endedJune 30, 2021 are presented below: AnnualizedCurrent Quarter Proportionate Debt to Adjusted EBITDAre 7.1x Net Leverage to Adjusted EBITDAre 7.3x
Please see the Leverage Ratios subsection of the Non-GAAP Measures section for further information about the calculation of our leverage ratios.
Liquidity
We use our revolving credit facility for working capital and other short-term purposes and to secure letters of credit. As ofJune 30, 2021 , our share of cash and restricted cash was$66.6 million and we had the capacity to borrow up to$248.9 million , under our revolving 31
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credit facility, bringing total liquidity to
We manage our financial flexibility by maintaining an investment grade rating and holding communities that are unencumbered by property debt. AIR has been rated BBB byStandard & Poor's . As ofJune 30, 2021 , we held unencumbered communities with property debt with an estimated fair market value of approximately$4.2 billion ; an increase of 50% fromDecember 31, 2020 . We anticipate seeking an investment grade credit rating from Moody's. In assigning ratings, Moody's places significant emphasis on the amount of non-recourse property debt as a percentage of the undepreciated book value of a company's assets. To achieve Moody's required thresholds, we estimate that a Moody's investment grade rating will require property debt to approximate$1.8 billion . AtJune 30, 2021 our share of property debt is$2.6 billion .
Dividend
OnJuly 27, 2021 , our Board of Directors increased our quarterly cash dividend from$0.43 to$0.44 per share of AIR Common Stock. This amount is payable onAugust 27, 2021 , to stockholders of record onAugust 13, 2021 .
Team and Culture
Our team and culture are keys to our success. Our intentional focus on a collaborative and productive culture based on respect for others and personal responsibility is reinforced by a preference for promotion from within. We focus on succession planning and talent development to produce a strong, stable team that is the enduring foundation of our success. We offer benefits reinforcing our value of caring for each other, including an opportunity to manage one's life through flexible work schedules and "dress for your day," paid time for parental leave, profit sharing, retirement plans for all, financial support for our teammates who are becomingUnited States citizens, and a bonus structure at all levels of the organization. Consistent with the duration of our other leave policies, we also pay full compensation and benefits for teammates who are actively deployed bythe United States military. A critical element of our culture is a relentless focus on efficiency. We continuously seek to reduce costs through the use of additional automation and continued technological investment. We expect this focus will enable our general and administrative expenses to be lower, as a percentage of gross asset value, than our peers. Our focus on our team and our culture is recognized externally, as well. Out of hundreds of participating companies in 2021, AIR was one of only six recognized as a "Top Workplace" inColorado for each of the past nine years, and was one of only two real estate companies to receive a BEST award from theAssociation for Talent Development in recognition of our company-wide success in talent development, marking its third consecutive year receiving this award, and received for the first time the "Top Workplaces 2021" honor from theWashington Post . 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 acquire and dispose of our apartment communities affects 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 condensed consolidated financial statements included in Item 1.
Financial Highlights
Net income (loss) from continuing operations attributable to common stockholders per common share, on a dilutive basis, decreased$0.42 for the three months endedJune 30, 2021 , due primarily to prepayment penalties incurred as a result of the early payment of property debt and the write-off of deferred financing costs associated with our previous credit facility, partially offset by an increase in interest income as further described below. Net income (loss) from continuing operations attributable to common stockholders per common share, on a dilutive basis, increased$0.11 for the six months endedJune 30, 2021 , due primarily to a gain on derecognition of leased properties and higher interest income, offset partially by increased prepayment penalties.
Pro forma FFO per share was
Residential Rent Collection Update
We measure residential rent collection as the amount of payments received as a
percentage of all residential amounts owed. In the second quarter, we recognized
97.9% of all residential revenue owed during the quarter, treating the balance
of 2.1% as bad debt. Of
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the 97.9% of residential revenue recognized, as of quarter-end, we collected in cash all but 120 basis points, with 96.7% of the residential rents collected. Year-to-date we have recognized 97.9% of all residential revenue and collected 97.6% of billed rents. As ofJune 30, 2021 , our proportionate share of gross residential accounts receivable was$12.7 million . After consideration of tenant security deposits and reserves for uncollectible amounts, our net exposure is$1.1 million . Most of this balance is expected to be collected during the third quarter of 2021. Of our uncollected accounts receivable, 73% relate toCalifornia residents. The state ofCalifornia has recently expanded the SB-91 rent relief program, to allow for 100% of past due rents to be paid by state funding (vs. 80% previously). As ofJune 30, 2021 , we had received$0.7 million in payments under these programs. We remain cautiously optimistic that this program will allow us to recover rent that was uncollected in 2020 or 2021. We expect bad debt expense to decline as emergency ordinances are lifted that suspended legal action to collect past due rents. Commercial rental income comprised 2.7% of second quarter revenue. In the second half of 2021, we expect an increased contribution from commercial tenants as their businesses re-open and rent payments resume.
Detailed Results of Operations for the Three and Six Months Ended
Net income (loss) from continuing operations decreased by
Property Operations
We have two segments: Same Store andOther Real Estate . Our Same Store segment includes communities that: (i) are owned and managed by AIR and (ii) had reached a stabilized level of operations. OurOther Real Estate segment includes communities that do not meet the criteria to be classified as Same Store.
As of
Proportionate Property Net Operating Income (Non-GAAP)
Our proportionate share of financial information includes our share of
unconsolidated real estate partnerships and excludes the noncontrolling interest
partners' share of consolidated real estate partnerships. We believe
proportionate information benefits the users of our financial information by
providing the amount of revenues, expenses, assets, liabilities, and other items
attributable to our stockholders. Other companies may calculate their
proportionate information differently than we do, limiting the usefulness as a
comparative measure. Because of these limitations, the non-GAAP proportionate
financial information should not be considered in isolation or as a substitute
for information included in our financial statements as reported under GAAP.
We use proportionate property NOI to assess the operating performance of our
communities, which excludes the results of properties retained by Aimco in
connection with the Separation, which are included in discontinued operations.
Proportionate property NOI is a non-GAAP measure that reflects our share of
rental and other property revenues, excluding utility reimbursements, less
direct property operating expenses, net of utility reimbursements, for
consolidated communities. Accordingly, the results of operations of our segments
discussed below are presented on a proportionate ("Ownership-Effected") basis.
In our condensed consolidated statements of operations, utility reimbursements
are included in rental and other property revenues in accordance with GAAP. In
September 2020 , we formed a joint venture with a passive institutional investor
to own a portfolio of 12 multi-family communities in California . In order for
both periods to be comparable, we have presented, in addition to the actual
historical changes in results of operations of our segments, the property
operating results as if the California joint venture had closed at the beginning
of the earliest period presented.
We do not include offsite costs associated with property management, casualty
gains or losses, or the results of apartment communities sold, held for sale, or
retained by Aimco in the Separation, which are included in discontinued
operations, reported in consolidated amounts, in our assessment of segment
performance. Accordingly, these items are not allocated to our segment results
discussed below.
Please see Note 8 to the condensed consolidated financial statements in Item 1
for further discussion regarding our segments, including a reconciliation of
these proportionate amounts to consolidated rental and other property revenues
and property operating expenses.
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Ownership-Effected
Three Months Ended June 30, Historical Change Change (1)
(in thousands) 2021 2020 $ % $ %
Rental and other property
revenues, before utility
reimbursements:
Same Store $ 154,154 $ 170,392 $ (16,238 ) (9.5 %) $ (2,978 ) (1.9 %)
Other Real Estate 2,395 1,515 880 58.1 % 880 58.1 %
Total 156,549 171,907 (15,358 ) (8.9 %) (2,098 ) (1.3 %)
Property operating expenses, net
of utility reimbursements:
Same Store 45,133 46,398 (1,265 ) (2.7 %) 2,146 5.0 %
Other Real Estate 1,355 1,144 211 18.4 % 211 18.4 %
Total 46,488 47,542 (1,054 ) (2.2 %) 2,357 5.3 %
Proportionate property net
operating income:
Same Store 109,021 123,994 (14,973 ) (12.1 %) (5,124 ) (4.5 %)
Other Real Estate 1,040 371 669 180.3 % 669 180.3 %
Total $ 110,061 $ 124,365 $ (14,304 ) (11.5 %) $ (4,455 ) (3.9 %)
(1)
Reflects the change for the three months ended
For the three months endedJune 30, 2021 , compared to 2020, after giving effect to the sale of partial interest in certain Same Store communities in theCalifornia joint venture, our Same Store proportionate property NOI decreased by$5.1 million , or 4.5%. This decrease was attributable primarily to a$3.0 million , or 1.9%, decrease in rental and other property revenues due to a 230 basis point decrease in residential rental rates. The decrease in proportionate property NOI was also attributable to an increase of$2.1 million , or 5.0%, in Same Store property operating expenses. Controllable operating expenses, which we define as property expenses less taxes, insurance, and utility expenses, were up$0.6 million , or 2.8%, compared to the three months endedJune 30, 2020 , while real estate taxes and insurance costs increased by$0.8 million and$0.6 million , respectively.
Other Real Estate proportionate property NOI for the three months ended
Ownership-Effected
Six Months Ended June 30, Historical Change Change (1)
(in thousands) 2021 2020 $ % $ %
Rental and other property
revenues, before utility
reimbursements:
Same Store $ 307,151 $ 347,148 $ (39,997 ) (11.5 %) $ (12,870 ) (4.0 %)
Other Real Estate 4,106 3,230 876 27.1 % 876 27.1 %
Total 311,257 350,378 (39,121 ) (11.2 %) (11,994 ) (3.7 %) Property operating expenses, net of utility reimbursements:
Same Store 89,082 92,383 (3,301 ) (3.6 %) 3,413 4.0 % Other Real Estate 2,570 2,301 269 11.7 % 269 11.7 % Total 91,652 94,684 (3,032 ) (3.2 %) 3,682 4.2 % Proportionate property net operating income: Same Store 218,069 254,765
(36,696 ) (14.4 %) (16,283 ) (6.9 %)
Other Real Estate 1,536 929 607 65.3 % 607 65.3 % Total$ 219,605 $ 255,694 $ (36,089 ) (14.1 %)$ (15,676 ) (6.7 %) (1)
Reflects the change for the six months ended
For the six months endedJune 30, 2021 , compared to 2020, after giving effect to the sale of partial interest in certain Same Store communities in theCalifornia joint venture, our Same Store proportionate property NOI decreased by$16.3 million , or 6.9%. This decrease was attributable primarily to a$12.9 million , or 4.0%, decrease in rental and other property revenues due to a 210 basis point decrease in residential rental rates, a 110 basis point increase in bad debt, and a 60 basis point decrease in ADO. The decrease in proportionate property NOI was also attributable to an increase of$3.4 million , or 4.0%, in Same Store property operating expenses. Controllable operating expenses were up$0.7 million , or 1.8%, compared to the six months endedJune 30, 2020 , while real estate taxes and insurance costs increased by$1.7 million and$0.9 million , respectively.
Other Real Estate proportionate property NOI for the six months ended
Non-Segment Real Estate Operations
Operating income amounts not attributed to our segments include revenues and
offsite costs associated with property management, casualty losses, write-off of
straight-line rent receivables, and the results of apartment communities sold or
held for sale, reported in consolidated amounts, which we do not allocate to our
segments for purposes of evaluating segment performance.
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For the three months ended
For the six months ended
?$3.3 million of property management revenues recognized in 2021 related to the management of Aimco communities as a result of the Separation; ?$2.9 million of write-off of straight-line rent receivables during 2020, due to the economic impact of COVID-19; ?$1.5 million of lower property management expenses; and ?$1.3 million of lower casualty losses; offset partially by ?$3.1 million of lower NOI attributable to sold properties and properties leased to Aimco. Depreciation and Amortization
For the three and six months ended
General and Administrative Expenses
For the three and six months endedJune 30, 2021 , compared to 2020, general and administrative expenses decreased by$2.3 million , or 31.0%, and$5.4 million , or 36.0%, respectively, due primarily to lower personnel costs and structural changes made to reflect AIR's more focused business model.
Other expenses, net
Other expenses, net, includes costs associated with our risk management
activities, partnership administration expenses, and certain non-recurring
items. For the three months ended
For the six months ended
Interest Income For the three and six months endedJune 30, 2021 , compared to 2020, interest income increased by$13.4 million and$25.4 million , respectively. Interest income for the three and six months endedJune 30, 2021 includes$6.9 million and$13.9 million , respectively, of income associated from our notes receivable from Aimco, and$6.5 million and$12.9 million , respectively, of interest income associated with the four properties and one land parcel leased to Aimco.
Interest Expense
For the three months endedJune 30, 2021 , compared to 2020, interest expense increased by$26.6 million , or 60.1%, due primarily to$37.2 million of prepayment penalties incurred from the early payment of property debt and the write-off of deferred financing costs associated with our previous revolving credit facility and a decrease in capitalized interest related to redevelopment and development communities, offset partially by lower interest expense on property-level debt following refinancing and debt payoff activity. For the six months endedJune 30, 2021 , compared to 2020, interest expense increased by$26.8 million , or 33.1%, due primarily to$38.2 million of prepayment penalties incurred from the early payment of property debt and the write-off of deferred financing costs associated with our previous revolving credit facility, a decrease in capitalized interest related to redevelopment and development communities and an increase in expense related to our term loans, offset partially by lower interest expense on property-level debt following refinancing and debt payoff activity.
Through
Gain on Derecognition of
During the three and six months endedJune 30, 2021 , we recognized$3.4 million and$87.1 million , respectively, of gain associated with the derecognition of the net book value of the five properties leased to Aimco for redevelopment and development. 35
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Mezzanine Investment Income, Net
In connection with the Separation, Aimco was allocated economic ownership of the mezzanine loan investment and option to acquire a 30% equity interest in the partnership. Subsequent to the Separation, all risks and rewards of ownership are Aimco's, but legal transfer is not complete. During the three and six months endedJune 30, 2020 , we recognized$6.9 million and$13.7 million , respectively, of income in connection with the mezzanine loan. For the three and six months endedJune 30, 2021 , the mezzanine investment income was offset by an expense to recognize the requirement that this income be contributed to Aimco.
Income Tax (Expense) Benefit
Certain of our operations, including property management, are conducted through taxable REIT subsidiaries ("TRS entities").
Our income tax (expense) benefit calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities for which the tax consequences have been realized or will be realized in future periods. Income taxes related to these items, as well as changes in valuation allowance, are included in income tax (expense) benefit in our condensed consolidated statements of operations. For the three months endedJune 30, 2021 , compared to 2020, we recognized income tax benefit of$2.0 million , compared to$0.8 million during the same period in 2020.
For the six months ended
Income from Discontinued Operations, net
For the three and six months endedJune 30, 2020 , apartment communities that were included in discontinued operations generated net income of$3.1 million and$7.2 million , respectively.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions. We believe that the critical accounting policies that involve our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements relate to capitalized costs and the impairment of long-lived assets.
Our critical accounting policies are described in more detail in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of AIR's and the
In addition to the Critical Accounting Policies and Estimates described in the Annual Report on Form 10-K, we believe the sales-type lease arrangements entered into in 2021 require significant judgment. We have entered into leases of existing properties and a land parcel with Aimco for redevelopment and development, which are generally accounted for as sales-type leases in accordance with ASC 842. The terms of such leases range from 10 to 25 years. We are required to estimate the fair value of the leased property for the purposes of lease classification and, for sales-type leases, the rate implicit in the lease. We estimate the fair value of our properties using various estimates and assumptions, the most significant being the capitalization rate. As ofJune 30, 2021 , we have assets recorded reflecting our net investment in such leased properties totaling$479 million . Our net investment includes the present value of lease payments not yet received, the present value of the guaranteed amount of the underlying asset's residual value at the end of the lease term, and the present value of the unguaranteed amount of the underlying asset's residual value at the end of the lease term. The present value is determined based on the rate implicit in the lease. The residual value is based on the current estimated fair value of the leased property, adjusted for annual depreciation and cost of inflation. Over the respective lease term, we expect our net investment to be recovered as lease payments are made by Aimco. Other than stated above, there have been no other significant changes in our critical accounting policies from those reported in our Form 10-K and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented.
Non-GAAP Measures
Certain 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
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or disclosed within this quarterly report, we provide reconciliations of the non-GAAP measures to the most comparable financial measure computed in accordance with GAAP.
NAREIT Funds From Operations and Pro forma Funds From Operations
NAREIT FFO is a non-GAAP 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 assets generally appreciate over time or maintain residual value to a much greater extent than do other depreciable assets such as machinery, computers, or other personal property. NAREIT defines FFO as net income (loss) computed in accordance with GAAP, excluding: (i) depreciation and amortization related to real estate; (ii) gains and losses from sales and impairment of depreciable assets and land used in our primary business; and (iii) income taxes directly associated with a gain or loss on the sale of real estate, and including (iv) our share of the FFO of unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine NAREIT FFO. We calculate NAREIT FFO attributable to AIR common stockholders (diluted) by subtracting dividends on preferred stock and preferred units and amounts allocated from NAREIT FFO to participating securities.
In addition to NAREIT FFO, we use Pro forma FFO to measure short-term performance. Pro forma FFO represents NAREIT FFO as defined above, excluding the results of operations of properties retained by Aimco in the Separation and certain amounts that are unique or occur infrequently.
In computing Pro forma FFO, we made the following adjustments to NAREIT FFO:
? Separation costs: during 2021, we incurred tax, legal and other costs in connection with the separation. We excluded these costs from Pro forma FFO because we believe they are not representative of ongoing operating performance. ? Prepayment penalties: as a result of refinancing activities in 2021, we incurred debt extinguishment costs and wrote-off capitalized deferred financing costs related to our previous credit facility and the prepayment of debt during the quarter. We excluded such costs from Pro forma FFO because we believe these costs are not representative of ongoing operating performance. ? Non-cash straight-line rent: in 2018, we assumed a 99-year ground lease with scheduled rent increases. Due to the terms of the lease, GAAP rent expense will exceed cash rent payments until 2076. We include the cash rent payments for this ground lease in Pro forma FFO but exclude the incremental straight-line non-cash rent expense. The rent expense for this lease is included in other expenses, net, on our consolidated statements of operations. ? Incremental cash received from leased properties: commencing onJanuary 1 2021 andJune 1, 2021 , we leased four properties and one land parcel, respectively, to Aimco for redevelopment and development, which resulted in derecognizing the net book value of these properties and recording of leased real estate assets on the respective lease commencement date. During the three and six months endedJune 30, 2021 , we recognized$3.4 million and$87.1 million of gain, respectively, associated with these transactions. Due to the terms of these leases, during 2021 cash received exceeded GAAP income. We include the cash lease income in Pro forma FFO. NAREIT FFO and Pro forma FFO should not be considered alternatives to net income determined in accordance with GAAP, as indications of our performance. Although we use these non-GAAP measures for comparability in assessing our performance compared to other REITs, not all REITs compute these same measures and those who do may not compute them in the same manner. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other REITs. 37
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NAREIT FFO and Pro forma FFO are calculated as follows (in thousands, except per
share data):
Three Months Ended Six Months Ended
June 30, June 30,
2021 2021
Net income (loss) attributable to AIR common
stockholders $ (18,030 ) $ 65,166
Adjustments:
Real estate depreciation and amortization, net
of noncontrolling partners' interest 69,588 139,083
Gain on derecognition of leased properties and dispositions of real estate (3,353 ) (87,385 ) Income tax adjustments related to gain on dispositions and other tax-related items (1,528 ) 272 Common noncontrolling interests in AIR OP's share of above Adjustments (3,217 ) (2,573 ) Amounts allocable to participating securities (7 ) - NAREIT FFO attributable to AIR common stockholders $ 43,453 $ 114,563 Adjustments, all net of common noncontrolling interests inAIR Operating Partnership and participating securities: Separation costs 285 2,342 Prepayment penalties 36,047 36,990 Non-cash straight-line rent 635 1,270 Incremental cash received from leased properties 140 294 Pro forma FFO $ 80,560 $ 155,459 Weighted-average common shares outstanding - basic 154,608
151,609
Dilutive common share equivalents 504 474 Pro forma shares and dilutive share equivalents used to calculate Pro forma FFO per share 155,112
152,083
Net income (loss) attributable to AIR per common share - basic and diluted $ (0.12 ) $ 0.43 NAREIT FFO per share - diluted $ 0.28 $ 0.75 Pro forma FFO per share - diluted $ 0.52 $ 1.02
Please see the Results of Operations section for discussion of the factors affecting our Pro forma FFO for 2021.
The AIR Operating Partnership does not separately compute or report NAREIT FFO or Pro forma FFO. However, based on AIR's method for allocation of such amounts to noncontrolling interests in theAIR Operating Partnership , as well as limited differences between the amounts of net income attributable to AIR's common stockholders and theAIR Operating Partnership's unitholders during the periods presented, NAREIT FFO and Pro forma FFO amounts on a per unit basis for theAIR Operating Partnership would be expected to be substantially the same as the corresponding per share amounts for AIR.
Leverage Ratios
As discussed under the Balance Sheet heading, we target Net Leverage to Adjusted EBITDAre below 6.0x. We also focus on Proportionate Debt to Adjusted EBITDAre. We believe these ratios, which are based in part on non-GAAP financial information, 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 includes our share of the long-term, non-recourse property debt, outstanding borrowings under our revolving credit facility, and our term loans. Proportionate Debt excludes unamortized debt issuance costs because these amounts represent cash expended in earlier periods and do not reduce our contractual obligations. We reduce our recorded debt by the amounts of cash and restricted cash on-hand (which are primarily restricted under the terms of our property debt agreements), excluding tenant security deposits included in restricted cash, assuming the remaining amounts of cash and restricted cash would be used to reduce our outstanding leverage. We further reduce our recorded debt by our notes receivable from Aimco, the proceeds from which we expect will be used to pay down property debt. 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 represents the redemption amounts for AIR's Preferred Stock and
the
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The reconciliation of total indebtedness to Proportionate Debt and Preferred Equity, as used in our leverage ratios, is as follows (in thousands):
June 30, 2021
Total indebtedness $ 4,208,661
Adjustments:Debt issuance costs related to non-recourse property debt and term loans
18,115
Proportionate share adjustments related to debt obligations (478,232 ) Cash and restricted cash (80,701 ) Tenant security deposits included in restricted cash
9,823
Proportionate share adjustments related to cash and restricted cash 4,305 Notes receivable from Aimco (534,127 ) Proportionate Debt$ 3,147,844 Perpetual preferred stock 2,000 Preferred noncontrolling interests in AIR Operating Partnership 79,375 Net Leverage$ 3,229,219 We calculated Adjusted EBITDAre used in our leverage ratios based on annualized current quarter amounts. EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are useful to investors, creditors and rating agencies as a supplemental measure of our ability to incur and service debt because they are recognized measures of performance by the real estate industry and facilitate comparison of credit strength between AIR and other companies. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income as determined in accordance with GAAP as indicators of liquidity. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts. NAREIT defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, which we have further adjusted for: ? gains and losses on the derecognition of leased properties and dispositions of depreciated property; ? impairment write-downs of depreciated property; and ? adjustments to reflect our share of EBITDAre of investments in unconsolidated entities. EBITDAre is defined by NAREIT and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted to exclude the effect of the following items for the reasons set forth below: ? net income attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests, 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; ? the amount of interest income recognized related to our investment in the subordinated tranches in a securitization trust holding primarily AIR property debt, as we view our interest cost on this debt to be net of any interest income received; ? the income recognized related to our notes receivable from Aimco, as their proceeds are expected to be used to repay current amounts outstanding; ? the amount by which GAAP rent expense exceeds cash rents for a long-term ground lease for which expense exceeds cash payments until 2076. The excess of GAAP rent expense over the cash payments for this lease does not reflect a current obligation that affects our ability to service debt; and ? the amount by which cash exceeds GAAP lease income for the four properties and one vacant land parcel leased to Aimco for redevelopment and development. 39
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The reconciliation of net income to EBITDAre and Adjusted EBITDAre, as used in our leverage ratios, is as follows (in thousands):
Three Months Ended
June 30, 2021
Net loss $ (19,687 )
Adjustments:
Interest expense 70,807
Income tax benefit (2,035 )
Depreciation and amortization 75,791Gain on derecognition of leased properties and dispositions of real estate
(3,353 )
EBITDAre $ 121,523
Net loss from continuing operations attributable to noncontrolling interests in consolidated real estate partnerships
2,397
EBITDAre adjustments attributable to noncontrolling interests
(9,200 ) Interest income on securitization investment and notes receivable from Aimco
(9,215 )
Pro forma FFO adjustments, net (1) 4,822
Adjusted EBITDAre $
110,327
Annualized Adjusted EBITDAre $
441,308
(1)
Pro forma adjustments, net, includes pro forma adjustments to NAREIT FFO under the heading NAREIT Funds From Operations and Pro forma Funds From Operations, excluding items that are not included in EBITDAre such as prepayment penalties, net and amounts attributable to noncontrolling interest share, and a$1.9 million adjustment to reflect the acquisition of City Center on 7th as if the transaction closed onApril 1, 2021 .
Liquidity and Capital Resources
Liquidity
Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flows from operations. Additional sources are proceeds from dispositions of apartment communities, proceeds from refinancing existing property debt, borrowings under new property debt, borrowings under our$1.4 billion credit facility, proceeds from our notes receivable from Aimco, and proceeds from equity offerings.
As of
?$59.4 million in cash and cash equivalents; ?$11.5 million of restricted cash, excluding amounts related to tenant security deposits, which consists primarily of escrows held by lenders for capital additions, property taxes, and insurance; and ?$248.9 million of available capacity to borrow under our revolving credit facility after consideration of letters of credit backed by the facility.
Pro forma for the closing of the July term loan, our liquidity increased to
Additional liquidity may also be provided through property debt financing at properties unencumbered by debt and proceeds from our notes receivable from Aimco. As ofJune 30, 2021 , we held unencumbered communities with property debt with an estimated fair market value of approximately$4.2 billion , an increase of 50% fromDecember 31, 2020 . Uses for liquidity include normal operating activities, payments of principal and interest on outstanding property debt, capital expenditures, dividends paid to stockholders, distributions paid to noncontrolling interest partners, and acquisitions of apartment communities. 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 meet 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 revolving credit facility 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, including apartment community acquisitions, through primarily non-recourse, long-term borrowings, the issuance of equity securities (including OP Units), the sale of apartment communities, and cash generated from operations. Additionally, we expect to meet our liquidity requirements associated with our debt maturities. 40
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Leverage and Capital Resources
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 financing is readily available. 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 debt. However, if financing options become unavailable for our future debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending or proceeds from apartment community dispositions. Historically, our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt. As ofJune 30, 2021 , approximately 67.9% of our total leverage consisted of property-level, non-recourse, long-dated, amortizing debt. As ofJune 30, 2021 , approximately 99.4% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates, and inflation. The weighted-average remaining term to maturity of our property-level debt was 8.9 years. On average, 1.7% of our unpaid principal balances will mature each year from 2021 through 2023.
The following table summarizes the payments due under our debt commitments,
excluding debt issuance costs, as of
More than Five
1-3 Years 3-5 Years Years (2026 and
Total Remaining 2021 (2022-2023) (2024-2025) Thereafter)
Non-recourse
property debt (1) $ 3,079,576 $ 26,576 $ 269,697 $ 464,957 $ 2,318,346
Revolving credit
facility borrowings
(2) 347,200 - - 347,200 -
Term loans (3) 800,000 - - 600,000 200,000
Total $ 4,226,776 $ 26,576 $ 269,697 $ 1,412,157 $ 2,518,346
(1)
Includes scheduled principle amortization and maturity payments.
(2)
Includes outstanding borrowings on our revolving credit facility assuming
repayment at the contractual maturity date.
(3)
Includes outstanding borrowings on our term loans assuming exercise of extension
options.
As of June 30, 2021 , our preferred equity, which includes outstanding preferred
OP Units and outstanding perpetual preferred stock, represented approximately
2.1% of our total leverage. Preferred OP Units are redeemable at the holder's
option and our preferred stock is redeemable by AIR on or after December 15,
2025 . For illustrative purposes, we compute the weighted-average maturity of our
preferred OP Units assuming a 10-year maturity and our preferred stock assuming
it is called at the expiration of the no-call period.
The combination of non-recourse property-level debt, borrowings under our
revolving credit facility, our term loans, our preferred OP Units, and our
redeemable noncontrolling interests in a consolidated real estate partnership
comprise our total leverage. The weighted-average remaining term to maturity for
our total leverage was 7.6 years as of June 30, 2021 .
Under our revolving credit facility we have agreed to maintain certain financial
covenants, as well as other covenants customary for similar credit arrangements.
The financial covenants we are required to maintain include a Maximum Leverage
ratio of no greater than 0.60 to 1.00; a Fixed Charge Coverage Ratio of greater
than 1.5x, a Maximum Secured Indebtedness to Total Assets ratio of no greater
than 0.45 to 1.00 through March 31, 2023 , and 0.40 to 1.00 thereafter, and a
Maximum Unsecured Leverage ratio no greater than 0.60 to 1.00. We were in
compliance with these covenants as of June 30, 2021 and expect to remain in
compliance during the next 12 months.
We like the discipline of financing a portion of our real estate investments
through the use of fixed-rate, amortizing, non-recourse property debt, as the
amortization gradually reduces our leverage and reduces our refunding risk, and
the fixed-rate provides a hedge against increases in interest rates, and the
non-recourse feature avoids entity risk.
Changes in Cash, Cash Equivalents, and Restricted Cash
The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash due to operating, investing and financing activities, which are presented in our condensed consolidated statements of cash flows in Item 1 of this report.
Operating Activities
For the six months endedJune 30, 2021 , net cash provided by operating activities was$93.8 million . Our operating cash flow is affected primarily by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment communities. Cash provided by operating activities for the six months endedJune 30, 2021 , decreased by$90.6 million compared to the same period in 2020. The decrease was due primarily to lower contribution from our apartment communities, which were negatively impacted by lower residential rental rates and increased bad debt expense, offset partially by higher ADO, increased late fees and a recovery in commercial rents. 41
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For the six months ended
Capital additions totaled$61.6 million and$167.7 million during the six months endedJune 30, 2021 and 2020, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.
We categorize capital spending for communities in our portfolio broadly into four primary categories:
?
capital replacements, which do not increase the useful life of an asset from its
original purchase condition. Capital replacements represent capital additions
made to replace the portion of our investment in acquired apartment communities
consumed during our period of ownership;
?
capital improvements, which represent capital additions made to replace the
portion of acquired apartment communities consumed prior to our period of
ownership;
?
capital enhancements, which may include kitchen and bath remodeling, energy
conservation projects, and investments in more durable, longer-lived materials
designed to reduce costs, and do not significantly disrupt property operations;
and
?
other additions, which represent capital additions: (i) contemplated in the
underwriting of our recently acquired communities; (ii) prior to the Separation,
costs 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; (iii) construction and related capitalized costs associated
with the ground-up development of apartment communities prior to the Separation;
and (iv) capitalized costs incurred in connection with the restoration of an
apartment community after a casualty event. We expect these amounts to be
significantly reduced under our business model. After the Separation, certain
properties are leased to Aimco for redevelopment and development.
We exclude the amounts of capital spending related to apartment communities sold
or classified as held for sale at the end of the period from the foregoing
measures. We have also excluded from these measures indirect capitalized costs,
which are not yet allocated to communities with capital additions, and their
related capital spending categories.
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 condensed consolidated statements of cash flows,
are presented below (in thousands):
Six Months Ended June 30,
2021 2020
Capital replacements $ 15,645 $ 15,203
Capital improvements 3,904 3,717
Capital enhancements 37,641 13,661
Other capital expenditures 4,457 135,091
Total capital additions $ 61,647 $ 167,672
Plus: additions related to apartment
communities sold - 1,631
Consolidated capital additions $ 61,647 $
169,303
Plus: net change in accrued capital spending from continuing operations 14,822
2,324
Total capital expenditures from continuing operations per condensed consolidated statement of cash flows $ 76,469 $
171,627
For the six months endedJune 30, 2021 and 2020, we capitalized$1.1 million and$3.7 million of interest costs, respectively, and$7.9 million and$9.3 million of other direct and indirect costs, respectively. Other capital expenditures decreased by$130.6 million for the six months endedJune 30, 2021 , compared to 2020, due primarily to increased spend incurred in 2020 related to the redevelopment and development of properties that have subsequently been leased to Aimco effectiveJanuary 1, 2021 .
Financing Activities
Net cash provided by financing activities for the six months endedJune 30, 2021 decreased by$127.6 million compared to 2020. The change was due primarily to proceeds from the April closing of the credit facility and the issuance of Common Stock in a private 42
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placement for
Equity and Partners' Capital Transactions
The following table presents the
Cash distributions paid by the AIR Operating Partnership to common$ 138,912 unitholders (1) Cash distributions paid by theAIR Operating Partnership to
3,300
preferred unitholders Cash distributions paid to holders of noncontrolling interests in 4,836 consolidated real estate partnerships
Total cash distributions paid by the
(1)
The following table presents AIR's dividend and distribution activity during the
six months ended
Cash dividends paid by AIR to common stockholders $
131,654
Cash distributions paid to AIR preferred stockholders
93
Cash distributions paid to holders of noncontrolling interests in 4,836 consolidated real estate partnerships Cash distributions paid to holders of OP Units
10,465
Total cash dividends and distributions paid by AIR$ 147,048 Future Capital Needs We expect to fund any future acquisitions and other capital spending principally with proceeds from apartment community sales, short-term borrowings, debt and equity financing, and operating cash flows. We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for 2021 and beyond.
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