Apartment Income REIT LP
11/12/2026 | Press release | Distributed by Public on 11/12/2026 11:26
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except as the context otherwise requires, references to "we," "our," and "us" refer to Apartment Income REIT, L.P. ("AIR Operating Partnership" or "Operating Partnership") and its consolidated subsidiaries collectively.
Forward-Looking Statements
This Quarterly Report on Form 10-Q ("report") contains information that is forward-looking, including, without limitation, statements regarding: 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 and expectations regarding dispositions and the use of proceeds thereof; the availability and cost of debt; our ability to comply with debt covenants; the payment of distributions in the future; and risks related to the provision of property management services to third parties and our ability to collect property management and asset management related fees.
These forward-looking statements are based on management's current expectations, estimates and assumptions and are subject to risks and uncertainties, that could cause actual results to differ materially from such forward-looking statements, including, but not limited to: our dependence on, and relationship with, Blackstone Inc. ("Blackstone") and its affiliates, which may have interests that conflict with ours; 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 inflation, the pace of job growth, the level of unemployment, immigration, recession, and trade policies; the amount, location, and quality of competitive new housing supply, which may be impacted by global supply chain disruptions; the timing and effects of dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; the ability of the AIR Operating Partnership to hire and retain key personnel; the AIR Operating Partnership'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 interest rate changes and the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; our ability to fund future distributions; the risk that earnings may not be sufficient to maintain compliance with debt covenants; our net asset value ("NAV") calculations; 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 AIR Operating Partnership; unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, outbreaks of war or hostilities or a pandemic, as well as management's response to any of the aforementioned factors; and those other risks and uncertainties are described in this report, as well as the section entitled "Risk Factors" in Item 1A of the AIR Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 2025, and subsequent filings with the Securities and Exchange Commission ("SEC").
The forward-looking statements relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this report that could cause actual results to differ. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect the AIR Operating Partnership.
Executive Overview
We own and operate a portfolio of stabilized apartment communities, diversified by both geography and price point, in nine states and the District of Columbia. As of September 30, 2026, our portfolio included 65 apartment communities with 23,943 apartment homes, in which we held an average ownership of approximately 82%.
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 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 attributable to our common unitholders per unit, on a dilutive basis, was $0.83 for the three months ended September 30, 2026, which reflects an increase from net loss of ($0.42) for the three months ended September 30, 2025, due primarily to:
•Gains on dispositions of real estate in the current year;
•Increased unrealized gains on derivative instruments attributable to mark-to-market adjustments on interest rate swaps and caps;
•Decreased interest expense due to debt repayments from apartment community sales; and
•Increased Same Store property NOI due to higher residential rental rates and a higher Average Daily Occupancy ("ADO").
Results of Operations for the Three and Nine Months Ended September 30, 2026, Compared to 2025
Real Estate Operations
Real Estate Operations includes proportionate property NOI for two business segments: Same Store and Other Real Estate. There are currently no properties in our Other Real Estate business segment. See Note 12 to the condensed consolidated financial statements included 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.
We use proportionate property NOI to assess the operating performance of our communities. 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 unitholders.
Proportionate property NOI reflects our share of rental and other property revenues, less property management and operating expenses. Revenues include utility reimbursements. Property management and operating expenses include property management fees charged to the properties, cash ground lease expense, real estate taxes, and insurance.
We do not include indirect offsite costs associated with centralized property support services billed to the properties, corporate property management expense, or casualty gains or losses in our assessment of segment performance. Accordingly, these items are included within Corporate and Other results discussed below.
For the three months ended September 30, 2026, compared to 2025, our proportionate property NOI increased by $2.4 million, or 2.2%. Within proportionate property NOI, revenues increased by $2.5 million, or 1.4%, primarily attributable to a 1.1% increase in residential net rental income driven by a 0.7% increase in residential rents and a 0.4% increase in ADO. The remaining revenue growth was attributable to increased utility reimbursements. Property management and operating expenses remained relatively flat.
For the nine months ended September 30, 2026, compared to 2025, our proportionate property NOI increased by $5.6 million, or 1.6%. Within proportionate property NOI, revenues increased by $10.1 million, or 1.9%, primarily attributable to a 1.2% increase in residential net rental income driven by a 1.4% increase in residential rents, offset partially by a 0.2% decrease in ADO. The remaining revenue growth was attributable to increased utility reimbursements and growth in ancillary revenues. Property management and operating expenses increased by $4.4 million, or 2.4%, primarily attributable to higher utility, renters insurance, and personnel expenses, offset partially by lower real estate taxes and insurance expense.
Corporate & Other
Total Income (loss) before income tax benefit (expense) for Corporate and Other contains the results from our apartment communities sold or held for sale, which we do not allocate to our operating segments for purposes of evaluating performance. Also included in Corporate and Other are third-party property management revenues, the financial impacts of casualty losses, indirect offsite costs associated with property general and administrative expenses, depreciation and amortization expense, and interest expense and income.
Total revenues and property management and operating expenses
Non-segment real estate operations includes property management revenue, the results of apartment communities sold or held for sale, corporate property management expenses, and indirect offsite costs.
For the three and nine months ended September 30, 2026, compared to 2025, non-segment real estate operations decreased by $6.7 million and $28.3 million, respectively, due primarily to a reduction in NOI from sold properties and an increase in small casualty claims.
Other expenses, net
Other expenses, net, includes legal costs, partnership administration expenses, ground lease expense, political contributions, and certain non-recurring items.
For the three and nine months ended September 30, 2026, compared to 2025, other expenses, net increased by $11.5 million and $30.9 million, respectively, due primarily to increased legal costs and certain other non-recurring costs associated with expanding property management services, which costs are generally reimbursed to AIR. For the nine month period, the increase is further driven by the write-off of costs associated with abandoned redevelopment projects and increased political contributions.
Interest income
For the three and nine months ended September 30, 2026, compared to 2025, interest income decreased by $2.5 million and $8.4 million, respectively, due primarily to lower funds held in short-term liquid investments.
Interest expense
For the three and nine months ended September 30, 2026, compared to 2025, interest expense decreased by $14.4 million and $37.3 million, respectively, due primarily to a decrease in recourse property debt attributable to communities sold during 2025 and 2026 and lower interest rates on outstanding variable-rate debt in 2026 compared to 2025.
Gain on dispositions of real estate
During the nine months ended September 30, 2026, we recognized $151.2 million of gain on dispositions of real estate due primarily to the sale of two apartment communities in the third quarter. We did not recognize any gains on dispositions of real estate in the second quarter as one apartment community was sold at its carrying value.
During the nine months ended September 30, 2025, we recognized $241.4 million of gain on dispositions of real estate due primarily to the sale of five apartment communities.
Loss on impairment of real estate
During the nine months ended September 30, 2026, we recognized $2.0 million of loss on impairment of real estate due to the evaluation of the expected hold period and likelihood of sale of one apartment community, which resulted in the reduction of the carrying value to its estimated fair value. The apartment community was sold at its carrying value during the second quarter.
Loss on impairment of goodwill
During the nine months ended September 30, 2026, we recognized $6.1 million of loss on impairment of goodwill related to our Other Real Estate operating segment. As of June 30, 2026, there were no communities classified within Other Real Estate, as the two remaining communities previously included were reclassified to Same Store. As a result, the goodwill assigned to Other Real Estate was determined to be fully impaired.
Gain (loss) on derivative instruments, net
During the three and nine months ended September 30, 2026, compared to 2025, gain (loss) on derivative instruments, net increased by $34.5 million and $85.8 million, respectively, due primarily to the mark-to-market valuation changes in interest rate swaps and interest rate caps, net during the period.
Income (loss) from unconsolidated real estate partnerships
For the nine months ended September 30, 2026, compared to 2025, income (loss) from unconsolidated real estate partnerships increased by $22.7 million due primarily to the gain on the disposition of two apartment communities in the Virginia JV in January 2026 and May 2026.
Net Asset Value
The NAV of the common OP Unit is determined by the General Partner in good faith on the basis of such information as it considers, in its reasonable judgment, appropriate based on the valuation policy furnished as Exhibit 99.2 to our Current Report on Form 8-K filed with the SEC on July 1, 2024.
During the quarter ended September 30, 2026, the NAV of the common OP Units for purposes of redemption, as adjusted for special distributions was $30.19. As of September 30, 2026, the NAV of the common OP Units for purposes of redemption was determined to be $28.72 per common OP Unit, which will be the basis for the NAV through the quarter ending December 31, 2026, adjusted for any distributions or material changes.
Critical Accounting 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 the impairment of our long-lived assets.
Our critical accounting estimates are described in more detail in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no other significant changes in our critical accounting estimates 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.
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 and funding from our General Partner and Special Limited Partner. Additional sources are proceeds from dispositions of apartment communities, proceeds from refinancing existing property debt and borrowings under new property debt. As of September 30, 2026, our cash and cash equivalents and restricted cash was $187.8 million.
We have $37.3 million remaining in outstanding non-recourse property debt maturing through the fourth quarter of 2027. Based on current market conditions, we expect to refinance the maturing debt with new non-recourse property debt; however, if unforeseen market conditions occur, we expect to have sufficient cash and cash equivalents on hand to repay all debt with a maturity date through the fourth quarter of 2027.
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. Any adverse changes in the lending environment could negatively affect our liquidity. 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 the sale of apartment communities.
The combination of non-recourse debt, preferred OP Units, and redeemable noncontrolling interests in a consolidated real estate partnership comprise our total leverage. As of September 30, 2026, the weighted-average remaining term to maturity for our total leverage, inclusive of extension options, was 3.8 years with a weighted-average interest rate of 5.4%, after consideration of our interest rate swaps and interest rate caps.
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 nine months ended September 30, 2026, net cash provided by operating activities was $91.3 million. Our operating cash flow is affected primarily by rental rates, occupancy levels, operating expenses related to our portfolio of apartment communities, derivative activity, and changes in working capital. Cash provided by operating activities for the nine months ended September 30, 2026, decreased $16.6 million compared to the same period in 2025, due primarily to a reduction in NOI from sold properties and higher legal expenses.
Investing Activities
For the nine months ended September 30, 2026 and 2025, our net cash provided by investing activities of $433.5 million and $162.3 million, respectively, consisted primarily of proceeds from the dispositions of real estate and unconsolidated real estate partnerships, partially offset by capital expenditures.
Capital expenditures totaled $53.2 million and $93.1 million during the nine months ended September 30, 2026 and 2025, respectively. Of these amounts, expenditures anticipated to increase our rental revenues, which include kitchen and bath remodeling and investments in more durable, longer-lived materials, were $21.8 million and $45.8 million, respectively.
Financing Activities
For the nine months ended September 30, 2026, net cash used in financing activities of $709.4 million consisted primarily of payments of distributions to the holders of common OP Units, and principal payments, repayments, and paydowns of non-recourse property debt, partially offset by proceeds from non-recourse property debt.
For the nine months ended September 30, 2025, net cash used in financing activities of $474.0 million consisted primarily of principal payments, repayments, and paydowns of non-recourse property debt, payments of distributions to common unitholders, including merger-related distributions, and distributions to noncontrolling interests from disposition and debt refinancing proceeds.
Future Capital Needs
We expect to fund any future debt maturities and other capital spending principally with proceeds from apartment community sales, additional borrowings, operating cash flows, and funding from our General Partner and Special Limited Partner. 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 the next 12 months.
Apartment Income REIT LP published this content on November 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 12, 2026 at 17:26 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]