Announces $460 Million of Accretive Investments: Southgate Towers ($298M) and Share Repurchases ($162M)

Apartment Income REIT Corp. ("AIR") (NYSE:AIRC) announced today third quarter results for 2022.

Chief Executive Officer Terry Considine comments: "Business is good! In 3Q:

Keith and his Ops team are on track to deliver peer leading margins and record NOI growth in our Same Store portfolio. NOI in our 2021 Acquisition portfolio is growing even faster.
John and his investment team continue to make accretive acquisitions that improve the quality and profitability of our real estate portfolio. During the quarter, we committed to purchase Southgate Towers in Miami Beach for $298 million, and we bought back (through November 2, 2022) 4.3 million shares of AIR common stock.
AIR's business is well prepared for the key macro risks of the day: soaring interest rates, high inflation, and possible recession.
- With Paul's good work, Pro forma Net Leverage: EBITDAre is 5.9:1, and AIR has only minor refunding and re-pricing exposure until 2025.
- Inflation provided a boost to AIR's top-line, but was no match for Keith's continuing productivity gains: controllable operating expenses are down.
- A future recession will find AIR with stable cash flows due to its disciplined customer selection. For example, new customers during 3Q had average household income of $250,000 and median household income of $170,000…together with FICO scores averaging 90 points higher than the national average for renters."

"AIR's prospects for 2023 are excellent. A 5% earn-in from 2022 leases provides a baseline for growth in Same Store Revenue. Current loss-to-lease is 5%. Rents continue to increase. NOI from our 2021 acquisitions is increasing at more than twice the Same Store NOI growth rate. 2022 acquisitions are performing in line with expectations."

"AIR enjoys peer leading margins and peer leading conversion of rent to free cash flow. These advantages are considerable, and durable."

Commenting further, Chief Financial Officer Paul Beldin added: "We are pleased with our third quarter results, and continue to see strong momentum through year-end 2022, and into 2023. The transformation of AIR's balance sheet was completed in the quarter. With the Aimco note fully repaid, and approximately $500 million of property sales expected later this month, third quarter Pro forma leverage to EBITDAre is 5.9:1, consistent with our targeted 5.0x to 6.0x leverage ratio range. EBITDAre at projected 2022 levels is sufficient to repay annual average debt service plus fund maturities through 2031, with a 30% cushion."

"Third quarter Pro forma FFO was $0.58 per share, $0.02 above the midpoint of guidance, due primarily to the timing of favorable litigation outcomes and real estate tax appeals, all of which were previously anticipated to occur in the fourth quarter. During the third quarter, Same Store revenue increased by 9.6%. During a period of inflationary pressure, property level expenses were almost flat and controllable operating expenses were down 400 bps, resulting in a 13.3% increase in year-over-year NOI."

"Looking forward, we are maintaining our Same Store revenue growth expectations of 10.25% at the midpoint and reducing expense growth expectations by 125 basis points to 1%, at the midpoint. The result is a 40 basis point increase in expected NOI growth."

"Full year, Pro forma FFO is expected to be between $2.39 and $2.43 per share, unchanged the midpoint of $2.41, as incremental Same Store NOI is offset by higher general and administrative expenses. Similarly, our expectations for Pro forma Run Rate FFO are unchanged at $2.19 per share at the midpoint."

Financial Results: Third Quarter Pro Forma FFO Per Share

	THIRD QUARTER							YEAR-TO-DATE
(all items per common share – diluted)	2022		2021		Variance			2022		2021		Variance
Net income	$	0.01	$	0.06		(83.3	%)	$	3.68	$	0.48	nm
NAREIT Funds From Operations (FFO)	$	0.53	$	0.47		12.8	%	$	1.59	$	1.22		30.3	%
Pro forma adjustments *		0.05		0.09		(44.4	%)		0.22		0.36		(38.9	%)
Pro forma Funds From Operations (Pro forma FFO)	$	0.58	$	0.56		3.6	%	$	1.81	$	1.58		14.6	%

* Third quarter and year-to-date 2022 includes adjustments related to casualty losses due to Hurricane Ian-related wind damage, primarily at one of our communities in South Florida, currently estimated to be $2.3 million, and flooding at one of our communities in Boston, currently estimated at $1.7 million.

Operating Results: Third Quarter Same Store NOI Up 13.3% Year-Over-Year, 4.6% Sequentially, and 14.1% Year-to-Date

The table below includes the operating results of the 58 AIR properties that meet our definition of Same Store. During the third quarter, six properties were removed from our Same Store portfolio due to their expected sale in November. Same Store properties generated approximately 88% of AIR's year-to-date 2022 rental revenue.

	THIRD QUARTER												YEAR-TO-DATE
	Year-over-Year							Sequential					Year-over-Year
($ in millions) *	2022		2021		Variance			2nd Qtr.		Variance			2022		2021		Variance
Revenue, before utility reimbursements	$	138.9	$	126.8		9.6	%	$	133.8		3.8	%	$	402.8	$	365.6		10.2	%
Expenses, net of utility reimbursements		35.7		35.6		0.1	%		35.2		1.4	%		105.8		105.2		0.6	%
Net operating income (NOI)	$	103.3	$	91.1		13.3	%	$	98.7		4.6	%	$	297.1	$	260.4		14.1	%

*Amounts are presented on a rounded basis and the sum of the individual amounts may not foot; please refer to Supplemental Schedule 6.

Third quarter 2022 NOI margins were 74.3%, up 240 basis points from the third quarter of 2021. NOI margins benefited from Residential Rental Income growth of 9.8% and a decrease of 400 basis points in controllable operating expenses.

Components of Same Store Revenue Growth – The table below summarizes the change in the components of our Same Store Revenue growth.

	THIRD QUARTER						YEAR-TO-DATE
Same Store Revenue Components	Year-over-Year			Sequential			Year-over-Year
Residential Rents		10.4	%		5.0	%		7.6	%
Average Daily Occupancy		(0.6	%)		(0.8	%)		1.2	%
Residential Rental Income		9.8	%		4.2	%		8.8	%
Bad Debt, net of recoveries		0.3	%		(0.9	%)		1.0	%
Late Fees and Other		0.5	%		0.4	%		0.5	%
Residential Revenue		10.6	%		3.7	%		10.3	%
Commercial Revenue		(1.0	%)		0.1	%		(0.1	%)
Same Store Revenue Growth		9.6	%		3.8	%		10.2	%

Same Store Rental Rates – Changes in rental rates are measured by comparing, on a lease-by-lease basis, the effective rate on a newly executed lease to the effective rate on the expiring lease for the same apartment. A newly executed lease is classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal.

The table below depicts changes in lease rates, as well as the weighted-average blended lease rates for leases executed in the respective period. Transacted leases are those that became effective during a reporting period and are therefore the best measure of immediate effect on current revenues. Signed leases are those executed during a reporting period and are therefore the best measure of current pricing.

	THIRD QUARTER			YEAR-TO-DATE			2022
	2022	2021*	Variance	2022	2021*	Variance	July	Aug	Sept	Oct
Transacted Leases*
Renewal rent changes	11.1%	7.3%	3.8%	11.0%	4.7%	6.3%	10.4%	11.0%	12.9%	11.7%
New lease rent changes	17.1%	8.5%	8.6%	17.5%	1.8%	15.7%	17.8%	17.3%	15.8%	13.2%
Weighted-average rent changes	14.0%	7.9%	6.1%	14.0%	3.2%	10.8%	13.9%	13.9%	14.4%	12.9%

Signed Leases*
Renewal rent changes	11.8%	9.3%	2.5%	11.0%	5.5%	5.5%	11.5%	11.9%	12.9%	10.4%
New lease rent changes	17.0%	11.0%	6.0%	17.4%	3.0%	14.4%	19.4%	16.6%	13.8%	12.1%
Weighted-average rent changes	14.5%	10.3%	4.2%	14.0%	4.1%	9.9%	15.3%	14.1%	13.6%	11.8%

Average Daily Occupancy	95.9%	96.5%	(0.6%)	96.9%	95.7%	1.2%	95.5%	96.0%	96.3%	96.7%

*Amounts are based on our current Same Store population and represent AIR's share, whereas prior to 2022 these were reported on a non-ownership adjusted basis. Amounts may differ from those previously reported.

Same Store Markets – Consumer demand remained strong through the quarter, with signed new lease rates up 17.0% from the prior leases and renewals up 11.8%, resulting in a weighted-average increase of 14.5%. We saw a sequential decline in ADO of 90 basis points to 95.9%, reflecting the frictional vacancy consistent with the higher move out volume that is typical during the summer leasing season. Year-to-date ADO of 96.9% was 120 bps higher than in the prior year. We anticipate continued occupancy gains throughout the fourth quarter.

Acquisition Portfolio – The acquisition portfolio is currently comprised of five properties acquired in 2021, four acquired in 2022, and represents 14% of AIR GAV. At those properties acquired in 2021, leasing continues to exceed expectations. Signed new lease rates were up 25.1% in the third quarter, with renewals up 23.2%, resulting in a weighted-average increase of 24.1%. Fourth quarter revenue growth for the 2021 acquisitions, the first reporting period with a year-over-year comparison, is anticipated to be 50% above the Same Store portfolio. At properties we acquired in 2022, performance is consistent with our expectations, and rental rate achievement is ahead of our initial projections. We will provide year-over-year comparable data as it becomes available.

Rent Collection Update

We measure residential rent collection as the dollar value of payments received as a percentage of all residential amounts owed. In the third quarter, residents paid, on a current basis, 98.1% of all residential revenue billed during the quarter. The remaining 1.9% of revenue was treated as bad debt. Offsetting this bad debt was $1.1 million of government assistance payments, reducing our bad debt percentage by 80 basis points. The result was net bad debt expense of 1.1% of third quarter residential revenues.

Outside of California, 99.1% of our residents are current, leaving approximately 100 residents where eviction notices have been filed, but the eviction process is not complete due to a slowed cycle time. Previously, in these locales, an eviction took between 45 and 90 days to complete. Today, the eviction timeline is extended and less predictable, resulting in greater amounts of unpaid rent and increased bad debt. We estimate that the prolonged timeline increased our third quarter bad debt by approximately 100 basis points.

In California, our ability to pursue remedies for unpaid rent now has fewer restrictions, though protections and moratoriums continue to prevent normal pursuit of delinquent balances. This has allowed approximately 300 California residents, about 3.5% of the total, to become delinquent by two or more months. Of the 300 California residents with multiple months of past due balances, approximately 175 are currently in the eviction process. The remaining 125 residents have continuing protections, that for now are scheduled to expire in February 2023.

As of September 30, 2022, our proportionate share of gross residential accounts receivable was $8.6 million. After consideration of tenant security deposits and reserves for uncollectible amounts, our net exposure is $0.2 million, an amount expected to be collected during the fourth quarter of 2022.

Portfolio Management

Our portfolio of apartment communities is diversified across primarily "A" and "B" price points, averaging "B/B+" in quality, and also across eight core markets in the United States. In the past two years, AIR has recycled approximately $5.4 billion, or 40%, of its gross asset value as part of and since the Separation, property sales, and joint ventures, all during a period of attractive pricing for multi-family properties, using the proceeds to simplify its business, reduce leverage, and improve the quality and expected profitability of its real estate portfolio.

We have improved AIR's portfolio through reducing our allocation to New York City and Chicago markets with regulatory risk, and reallocating capital into higher growth submarkets, such as Miami-Dade and Broward counties, now 19% of AIR GAV, in markets with limited REIT competition.

	Aimco	AIR
	Q4 2019 or 2019A	Q3 2022	Change
Residents
Average Household Income	$165,000	$251,000	52%
Median Household Income	$116,000	$170,000	47%
CSAT Score (out of 5)	4.30	4.33 (2021)	0.03
Kingsley Index*	4.09	4.05	(0.04)
Portfolio
Properties	124	80	(35%)
Apartment Homes	32,598	23,499	(28%)
Average Revenue per Apartment Home	2,272	$2,711	19%
Redevelopment and Development ($M)	$230	$–	($230)
Mezzanine Investments ($M)	$280	$–	($280)
Low G&A
Net G&A as % of GAV	36 bps (per GSA)	<15 bps (at AIR Target)	-21 bps
Balance Sheet
Net Leverage / EBITDAre	7.6x	5.9x	(1.7x)
Refunding: Next 3-Years (% Total Debt)	23%	10%	(13%)
Repricing: Next 3-Years (% Total Debt)	23%	10%	(13%)
Unencumbered Properties ($B)	$2.4	$8.3	$5.9

* AIR named Kingsley Elite Five in 2022, #2 among all operators and #1 for public REITs.

AIR uses "paired trades" to fund acquisitions, basing our cost of capital on the anticipated unlevered internal rates of return ("IRR") of the communities or joint venture interests sold. We require a "spread" or accretion of an unlevered IRR at least 200 basis points higher on the communities purchased. This excess return is driven in part by what we call the AIR Edge, the cumulative result of our focus on resident selection, satisfaction, and retention, as well as relentless innovation in delivering best-in-class property management.

In the past two years, we have acquired $1.4 billion, or 14% of GAV, of properties new to the AIR operating platform. New purchases will increase to 17% of GAV with the anticipated acquisition in early next year of Southgate Towers in Miami Beach. (Please see below for further information regarding this acquisition.)

We estimate real estate values declined by approximately 10% during 2022, the result of approximately 85 basis points of NOI cap rate expansion, about half offset by strong NOI growth. As a paired trade investor, AIR is agnostic as to market changes insofar as it buys and sells properties in the same market conditions, and is focused on gaining an accretive "spread". As market conditions change, AIR adjusts its target returns and spreads to reflect its new cost of capital. Our "paired trade" approach is intended to ensure that new acquisitions are accretive to earnings in the near-term, and will generate attractive spreads to IRRs in the long-term.

Transactions

Acquisitions

As previously announced, we acquired The District at Flagler Village in Fort Lauderdale, FL for $173 million in the third quarter. The property has 350 apartment homes and was newly constructed in 2021. It sits in the affluent and growing Flagler Village neighborhood with access to the Brightline train station. Year-to-date, we have acquired $640 million of properties new to the AIR platform.

Additionally, and as previously announced, we canceled existing master leases at four properties owned by AIR and previously leased to Aimco for purpose of their development. As part of the cancellation, AIR paid $200 million to Aimco for the added improvements. The four properties include 865 apartment homes with average revenue per apartment home of $3,669 and are located in the South Beach neighborhood of Miami Beach, FL, Kendall Square in Cambridge, MA, the Anschutz Medical Campus in Aurora, CO, and Redwood City, CA.

In aggregate, we expect a NOI yield in 2023 of mid 4%s and a long-term unlevered IRR of approximately 9%.

During the quarter, we also went under contract with a non-refundable deposit to acquire Southgate Towers, located in the South Beach neighborhood of Miami Beach with 495 apartment homes for $298 million. The acquisition is expected to close in early January 2023. We expect unlevered IRRs greater than 10% and at a spread of more than 200 basis points to the properties sold to fund its acquisition.

Dispositions

We had no dispositions in the third quarter. We anticipate selling six properties located in the New England area in November for a gross sales price of approximately $500 million, representing a trailing twelve-month NOI cap rate of 4.4%. These have been classified as held for sale as of September 30, 2022.

Capital Allocation – Share Repurchases

During the third quarter, AIR repurchased 1.2 million shares for $47 million, at an average price of $39.07 per share. Subsequent to quarter end and through November 2, 2022 we have purchased an additional 3.1 million shares for $115 million. In aggregate, we have repurchased 7.2 million shares during 2022 at an average price of $39.96. We are authorized by the AIR Board of Directors to repurchase an additional $213 million of shares. We consider share buybacks as part of a balanced investment program.

Balance Sheet

We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage and primarily long-dated debt. We target a Net Leverage to EBITDAre ratio between 5.0x and 6.0x and anticipate the actual ratio will vary based on the timing of transactions. We maintain financial flexibility through 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. We seek to minimize refunding and repricing risk.

Components of Leverage

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, unsecured notes payable, and preferred equity.

	SEPTEMBER 30, 2022
($ in millions)*	Amount			Weighted-Avg. Maturity (Yrs.)		Weighted-Avg. Term Before Repricing (Yrs.)
Fixed rate loans payable	$	1,499			8.7		9.2
Floating rate loans payable**		138			3.3		4.0
AIR share of long-term, non-recourse property debt		1,637			8.2		8.6

Term loans		800			3.3		4.7
Unsecured notes payable		400			7.7		7.7
Outstanding borrowings on revolving credit facility		479			3.5		3.5
Preferred equity***		81			9.8		9.8
Total Leverage	$	3,397			6.4		6.9
Cash and restricted cash		(100	)
Net Leverage	$	3,298
Leverage reduction funded by anticipated November 2022 property sales		(460	)
Net Leverage, Pro forma for anticipated November 2022 sales	$	2,838

Floating rate leverage not subject to interest rate caps and excluding borrowings on the revolving credit facility	3%

Net Leverage to Adjusted EBITDAre, Pro forma for anticipated November sales	5.9x

* Amounts are presented on a rounded basis and the sum of the individual amounts may not foot; please refer to Supplemental Schedule 5.

** Includes one loan with an interest rate cap at 5.35% and a second floating rate loan that is expected to be refinanced during the fourth quarter.

*** AIR's Preferred equity is perpetual in nature; however, for illustrative purposes, we have computed the weighted-average maturity of our preferred OP Units assuming a 10-year maturity, and of our preferred stock assuming it is called at the expiration of its no-call period.

As of September 30, 2022, about $170 million of AIR's debt matures before 2025 and it is expected to be refunded before year end with $55 million at 4.9%, $14 million repaid and the remainder at a fixed rate to be determined. Once completed, AIR will have no debt maturing before the second quarter of 2025.

AIR anticipates using the net proceeds from the November property sales discussed above to reduce borrowings on its revolving credit facility.

Pro forma the completion of these refinancing activities, and exclusive of any remaining borrowings under its revolving credit facility, AIR's floating rate debt exposure is anticipated to be $79 million. This debt has is subject to an interest rate cap at an effective rate of 5.35%.

Liquidity

We use our revolving credit facility for working capital, other short-term purposes, and to secure letters of credit. At September 30, 2022, our share of cash and restricted cash, excluding amounts related to tenant security deposits, was $100 million and we had the capacity to borrow up to $510 million on our revolving credit facility, bringing total liquidity to $610 million. Liquidity is expected to increase by approximately $460 million with the closing of the November property sales.

We manage our financial flexibility by maintaining an investment grade rating from S&P and holding communities that are unencumbered by property debt. As of September 30, 2022, we held unencumbered apartment communities with an estimated fair market value of approximately $8.3 billion, almost triple the amount as of December 31, 2020.

As previously announced, AIR is seeking an investment-grade Issuer Credit Rating from Moody's and we anticipate receiving our rating during the fourth quarter.

Dividend and Equity Capital Markets

On November 1, 2022, our Board of Directors declared a quarterly cash dividend of $0.45 per share of Common Stock. This amount is payable on November 30, 2022, to stockholders of record on November 18, 2022. On an annualized basis, the dividend represents $1.80 per share, reflecting a dividend yield of approximately 4.7% based on AIR's closing share price on Tuesday, November 1, 2022. In setting AIR's 2022 dividend, our Board of Directors targeted a dividend level of approximately 75% of full year FFO per share.

The after-tax dividend will benefit from AIR's refreshed tax basis. Two-thirds of the 2021 dividend was a tax-free return of capital while the remaining one-third was taxable at capital gain rates. In the same year, approximately 60% of peer dividends were taxed at ordinary income rates, with the remaining 40% taxed at capital gain rates.

In 2022, we currently project a majority of our dividend will be taxable at capital gain rates, with the remainder taxable at ordinary income rates. We believe the tax characteristics of our dividend makes our stock more attractive to taxable investors, such as foreign investors, taxable individuals, and corporations by comparison to peer shares whose dividends are taxed at higher rates. For example, if AIR's 2022 dividend is characterized as 50% capital gains and 50% as ordinary income and peer 2022 dividends are characterized consistently with 2021, AIR's estimated after tax dividend would be approximately 35% higher than peer average.

Corporate Governance and Responsibility Update

During the quarter, AIR engaged with holders of approximately 70% of outstanding common shares, which included the participation of multiple Board members alongside senior management, in a series of lunches, dinners, video meetings, and calls. Numerous topics were discussed such as governance, investment strategy, operations, and corporate responsibility, including CEO succession planning and matters related to Environmental, Social, and Governance ("ESG"). Board members have also participated in several industry conferences and private meetings throughout the year. AIR's Board is highly proactive and welcomes investor feedback to ensure stockholder perspectives are well heard in Board deliberations.

AIR launched new corporate responsibility webpages during the quarter to highlight our commitments to ESG, and published corporate responsibility goals consistent with the United Nations Sustainable Development Goals. AIR also launched an inaugural materiality assessment and surveyed investors, its Board of Directors, teammates, vendors, and community partners to identify which topics they consider most material to the Company. Subsequent to quarter end, AIR published its 2021-2022 Corporate Responsibility Report, which demonstrates AIR's commitment to being an outstanding corporate citizen, and reinforces its dedication to ESG goal setting and reporting on progress through transparent, data-driven disclosures consistent with the Sustainability Accounting and Standards Board ("SASB").

AIR has made progress on its goals to reduce the Company's environmental impact by 2025, which include a 15% energy use reduction, 10% water usage reduction, and 15% greenhouse gas reduction, all by 2025. This is in addition to more than a decade of investment in clean energy, energy efficiency and water conservation, including $7.9 million invested in energy conservation between 2019 and 2021.

AIR recently received its first public GRESB score of 78, which included an "A" grade for both ESG public disclosure and alignment with the Task Force for Climate-Related Financial Disclosures ("TCFD"). AIR received a "Green Star" from GRESB for overall Management and Performance in 2021, a perfect social responsibility score, and a near-perfect corporate governance score.

2022 Outlook

AIR's midpoint of FFO per share of $2.41 remains unchanged. Similarly, our expectations for run-rate FFO are unchanged at $2.19 per share. AIR expects full-year Pro forma FFO between $2.39 and $2.43 per share.

The following tables compare our 2021 FFO results to our full-year 2022 FFO expectations, at the midpoint:


2021 FFO per share	$	2.14
Growth in Same Store NOI		0.32
Contribution from lower leverage and acquisitions, net of related sales dilution		(0.02	)
Change in interest rates		(0.03	)
Change in contribution from Aimco note prepayment		0.05
Reacquisition of properties previously leased to Aimco		(0.02	)
Other		(0.03	)
2022 FFO per share at the midpoint	$	2.41

	Expectation of Pro forma Run Rate
2021 FFO per share	$	2.14
Less: Interest income on Aimco note, net of borrowing costs		(0.12	)
2021 FFO per share before Aimco note contribution	$	2.02
Growth in Same Store NOI		0.32
Net change in leverage, acquisitions and contribution from Aimco note prepayment		(0.05	)
Change in interest rates		(0.05	)
Reacquisition of properties previously leased to Aimco		(0.02	)
Other		(0.03	)
2022 FFO per share at the midpoint	$	2.19

Our guidance ranges are based on the following components:

	YEAR-TO-DATE September 30, 2022	FULL YEAR 2022	PREVIOUS FULL YEAR 2022
($ Amounts represent AIR Share)
Net Income per share (1)	$3.68	$3.42 to $3.49	$3.42 to $3.49
Pro forma FFO per share	$1.81	$2.39 to $2.43	$2.38 to $2.44
Run rate Pro forma FFO per share		$2.19	$2.19
Pro forma FFO per share at the midpoint		$2.41	$2.41

Same Store Operating Components
Revenue change compared to prior year	10.2%	10.0% to 10.5%	10.0% to 10.5%
Expense change compared to prior year	0.6%	0.5% to 1.5%	2.0% to 2.5%
NOI change compared to prior year	14.1%	13.4% to 14.4%	13.0% to 14.0%

Offsite Costs
General and administrative expenses, as defined below (2)	$15M	$17M to $19M	$16M to $18M

Other Earnings
Lease income	$18M	~$18M	~$18M
Value of property acquisitions and cost of lease cancellation (3)	$840M	$840M	~$840M
Proceeds from dispositions of real estate, net	$774M	~$1.3B	~$1.3B

AIR Share of Capital Enhancements
Capital Enhancements	$73M	$90M to $110M	$90M to $110M

Balance Sheet
Net Leverage to Adjusted EBITDAre (4)	5.9x	6.0x	~5.5x

(1)		Includes gains on completed and anticipated property sales.
(2)		For the purposes of this presentation, General and Administrative expenses are defined as follows:

All costs that are reported as G&A expenses in our consolidated statements of operations,
Less: Asset management fees paid by joint venture partners in reimbursement of G&A-type services provided by AIR. AIR earned $1.8 million of such fees during the quarter.
Effective in 2022, G&A expenses in our consolidated statements of operations includes the depreciation of capitalized costs of non-real estate assets applicable to corporate activities. Previously, these costs were presented separately as "depreciation and amortization related to non-real estate assets" in Supplemental Schedule 2a.
- Our policy is to limit G&A expenses, as defined, to 15 basis points of GAV. In 2021, our CEO waived his cash compensation and contributed $0.3 million to meet this metric.

(3)		Excludes the acquisition of Southgate Towers, which is expected to close during the first quarter of 2023.
(4)		The September 30th ratio is pro forma for the planned use of cash proceeds from the November sales of approximately $460 million. The increase in leverage at year-end is due primarily to opportunistic share repurchases during the second half of 2022.

In the fourth quarter of 2022, AIR anticipates Pro forma FFO between $0.58 and $0.62 per share.

Appendix A – AIR Perspective on Macroeconomic Factors

AIR was designed with emphasis on stability, predictability, and efficiency in its business model. Through our high-quality portfolio and best-in-class property operations, what we call the AIR Edge, we expect to be able to generate stable and durable growth across economic cycles. As markets remain turbulent, AIR is either well positioned, well prepared, or both, around several macroeconomic factors impacting operating performance and cost of capital.

Inflation – In 2022, we experienced the most significant CPI inflation in 40 years. Apartments have shown their ability to reprice their rental rates to offset inflation. Combined with the increase of demand following economic recovery from the pandemic, rent growth has been substantial as evidenced by the average midpoint of peer guidance for Same Store Revenue growth of 11.4%. Notwithstanding a high rate of inflation, AIR's emphasis on efficiency has resulted in negative 10 basis points of growth in controllable operating expense (i.e., property operating expense net of real estate taxes, insurance, and utilities) over the year-to-date, consistent with our 12-year track record at 10 basis points of annual negative growth. Also during 2022, AIR expects to maintain its net G&A expense at less than 15 basis points GAV.

The result of an increasing top-line and stable expenses make for levered improvement to growth in Same Store NOI, expected at 13.9% for 2022. In general, inflation that is "higher for longer" will support relative outperformance by apartment owners in general, and by AIR in particular.

Recession – Recessions can be mild and severe. The two most recent recessions were severe for the US economy, but much less so for the apartment business in general, and for AIR in particular.

In general, the rate of bad debt, early termination of leases, and rates of turnover are a function of the quality of the property's customer base at the arrival of the recession. In the third quarter of 2022, the average and median household income of AIR's new residents were $251,000 and $170,000, respectively, and our rent-to-income ratio was 18% for a household. More importantly, our residents also have FICO scores that average 90 points higher than the national renter average. We do not expect a significant increase in bad debt in the event of a recession.

Recessions are often localized to particular markets or industries. The recession in 2001 following the collapse of the "dot-com" economy was severe in the Bay Area technology markets, but less so, by example, in Philadelphia or Washington, D.C. The AIR portfolio is intentionally diversified across markets and submarkets with different and usually offsetting dynamics. Further, the AIR portfolio is diversified by price point with an expectation in a recession that "B" apartments gain even as "A" apartments potentially decline. AIR owns both "A" and "B" properties (52% and 48% of GAV, respectively), and offers apartment units at monthly price points ranging from less than $1,000 to over $20,000. Both property classes have similar rent-to-income coverage (17% in the "A" portfolio and 19% in the "B" portfolio); however, "B" properties are likely to benefit from increased demand from customers made more price sensitive in a recession, while "A" communities benefit from increased demand from customers "trading up" during a time of economic recovery.

Our experience in the recessions of the Great Financial Crisis ("GFC") and the recent pandemic may be instructive. For the full-year 2009, AIR's Same Store Revenue and Same Store NOI declined by 2.5% and 4.2%, respectively. 2010 was flat before returning to Same Store Revenue and Same Store NOI growth of 2.8% and 5.3%, respectively, in 2011. In the pandemic, AIR's Same Store Revenue and Same Store NOI declined by 2.4% and 4.0%, respectively, in 2020, while 2021 produced 1.7% and 1.6% of Same Store Revenue and Same Store NOI growth, respectively.

During the GFC, there was not the same extent of government interference with creditor remedies as was the case during the pandemic, which is still continuing. In the GFC, bad debt increased by 50 basis points before reverting to the then long-term trend in our portfolio of 60 basis points within 17 months. During the pandemic, there was extensive government interference with creditor remedies in many markets, which greatly magnified customer bad debt.

In general, the year-over-year growth rate in Same Store Revenue in a future year can be considered as the sum of (i) the "earn-in" of rents on leases made in the prior year, (ii) the magnitude of loss-to-lease (gain-to-lease), the difference between leases in place at year-end and the higher (lower) rents being paid in the future year, (iii) market rent growth in the future year, and (iv) changes in average daily occupancy or bad debt. In 2023, we estimate Same Store Revenue will begin with an approximately 5% "earn-in", while loss-to-lease, market rent growth, and changes in average daily occupancy or bad debt will be determined by the local economies.

Interest Rates – AIR is only slightly exposed to Fed policies increasing interest rates. We have low leverage, about 25% of our capitalization. It is long-dated with limited refunding risk due to no future maturities in the balance of 2022, and no future maturities in all of 2023 or 2024 pro forma for the completion of refinancing 5% of our total leverage, which is expected before year-end. We have fixed rates and put in place hedges, such that pro forma these refinancings, AIR has only 3% of total leverage subject to repricing in the next 30 months.

Appendix B – AIR Strategic Objectives

We created AIR to be the most efficient and effective way to invest in U.S. multi-family real estate, due to our simplified business model, diversified portfolio of stabilized apartment communities, and low leverage. The Board of Directors has set the following strategic objectives:

Pursue a simple, efficient, and predictable business model with a low-risk premium
Maintain a high quality and diversified portfolio of stabilized multi-family properties
Improve our best-in-class property operations platform to generate above-market organic growth
Maintain an efficient cost structure with G&A less than or equal to 15 basis points of Gross Asset Value
Maintain a flexible, low levered balance sheet with access to public debt markets
Enhance portfolio quality through a disciplined approach to capital allocation, targeting accretive opportunities on a leverage neutral basis
Develop private capital partnerships as a source of equity capital for accretive growth
Continue our commitment to corporate responsibility with transparent and measurable goals

Earnings Conference Call Information

Live Conference Call:	Conference Call Replay:
Friday, November 4, 2022 at 1:00 p.m. ET	Replay available until February 2, 2023
Domestic Dial-In Number: 1-844-200-6205	Domestic Dial-In Number: 1-866-813-9403
International Dial-In Number: 1-929-526-1599	International Dial-In Number: +44-204-525-0658
Passcode: 342431	Passcode: 726049
Live webcast and replay:
investors.aircommunities.com

Supplemental Information

The full text of this Earnings Release and the Supplemental Information referenced in this release is available on AIR's website at investors.aircommunities.com.

Glossary & Reconciliations of Non-GAAP Financial and Operating Measures

Financial and operating measures found in this Earnings Release and the Supplemental Information include certain financial measures used by AIR management that are measures not defined under accounting principles generally accepted in the United States ("GAAP"). Certain AIR terms and Non-GAAP measures are defined in the Glossary in the Supplemental Information and Non-GAAP measures reconciled to the most comparable GAAP measures.

About AIR

AIR is a real estate investment trust focused on the ownership and management of quality apartment communities located in the largest markets in the United States. AIR is one of the country's largest owners and operators of apartments, with 80 communities in 11 states and the District of Columbia. AIR common shares are traded on the New York Stock Exchange under the ticker symbol AIRC, and are included in the S&P 400. For more information about AIR, please visit our website at www.aircommunities.com.

Forward-looking Statements

This Earnings Release and Supplemental Information contain forward-looking statements within the meaning of the Federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of 2022 and 2023 results, including but not limited to: NAREIT FFO, Pro forma FFO and selected components thereof; expectations regarding consumer demand, growth in revenue and strength of other performance metrics and models; expectations regarding acquisitions as well as sales and joint ventures and the use of proceeds thereof; and AIR liquidity and leverage metrics. We caution investors not to place undue reliance on any such forward-looking statements.

These forward-looking statements are based on management's current expectations, estimates and assumptions and subject to risks and uncertainties, that could cause actual results to differ materially from such forward-looking statements, including, but not limited to: the effects of the COVID-19 pandemic on AIR's business and on the global and U.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; 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, 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; 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 AIR. Other risks and uncertainties are described in filings by AIR with the Securities and Exchange Commission ("SEC"), including the section entitled "Risk Factors" in Item 1A of AIR's Annual Report on Form 10-K for the year ended December 31, 2021, and subsequent filings with the 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.

These forward-looking statements reflect management's judgment as of this date, and we assume no obligation to revise or update them to reflect future events or circumstances. This earnings release does not constitute an offer of securities for sale.

Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
REVENUES
Rental and other property revenues (1)	$	198,413		$	190,082		$	558,686		$	541,533
Other revenues		2,458			1,695			7,163			4,990
Total revenues		200,871			191,777			565,849			546,523

OPERATING EXPENSES
Property operating expenses (1)		71,250			73,925			198,273			203,300
Depreciation and amortization		90,445			81,121			253,650			232,192
General and administrative expenses (2)		7,663			5,875			19,593			15,510
Other expenses, net		4,941			3,816			5,883			9,207
Total operating expenses		174,299			164,737			477,399			460,209
Interest income (3)		9,613			13,432			48,746			45,088
Interest expense		(32,656	)		(30,530	)		(80,790	)		(100,212	)
Loss on extinguishment of debt		—			(6,673	)		(23,636	)		(44,833	)
Gain on dispositions of real estate and derecognition of leased properties		—			7,127			587,609			94,512
Loss from unconsolidated real estate partnerships		(87	)		—			(2,974	)		—
Income before income tax (expense) benefit		3,442			10,396			617,405			80,869
Income tax (expense) benefit		(46	)		275			(966	)		(770	)
Net income		3,396			10,671			616,439			80,099

Noncontrolling interests:
Net loss attributable to noncontrolling interests in consolidated real estate partnerships		102			785			285			3,417
Net income attributable to preferred noncontrolling interests in AIR OP		(1,602	)		(1,603	)		(4,807	)		(4,810	)
Net income attributable to common noncontrolling interests in AIR OP		(137	)		(475	)		(37,053	)		(3,966	)
Net income attributable to noncontrolling interests		(1,637	)		(1,293	)		(41,575	)		(5,359	)
Net income attributable to AIR		1,759			9,378			574,864			74,740
Net income attributable to AIR preferred stockholders		(43	)		(43	)		(128	)		(136	)
Net income attributable to participating securities		44			(46	)		(373	)		(149	)
Net income attributable to AIR common stockholders	$	1,760		$	9,289		$	574,363		$	74,455


Net income attributable to AIR common stockholders per share – basic	$	0.01		$	0.06		$	3.69		$	0.49
Net income attributable to AIR common stockholders per share – diluted	$	0.01		$	0.06		$	3.68		$	0.48


Weighted-average common shares outstanding – basic		153,811			156,646			155,488			153,289
Weighted-average common shares outstanding – diluted		154,057			157,042			157,440			153,650

(1)		Rental and other property revenues for the three and nine months ended September 30, 2022, are inclusive of $8.3 million and $33.4 million, respectively, of revenues related to sold properties. Rental and other property revenues for the three and nine months ended September 30, 2021, are inclusive of $29.8 million and $87.1 million, respectively, of revenues related to sold properties. Property operating expenses for the three and nine months ended September 30, 2022, are inclusive of $2.7 million and $11.3 million, respectively, of expenses related to sold properties. Property operating expenses for the three and nine months ended September 30, 2021, are inclusive of $9.1 million and $27.9 million, respectively, of expenses related to sold properties.

		Rental and other property revenues for the three and nine months ended September 30, 2021, are inclusive of $7.5 million and $21.8 million, respectively, of revenues related to the third-party share of properties included in the Washington, D.C. joint venture. Property operating expenses for the three and nine months ended September 30, 2021, are inclusive of $1.8 million and $5.5 million, respectively, of expenses related to the third-party share of properties included in the Washington, D.C. joint venture.

(2)		In setting our G&A benchmark of 15 bps of Gross Asset Value, we consider asset management fees earned in our joint ventures as a reduction of general and administrative expenses. In accordance with GAAP, general and administrative expenses are shown gross of these asset management fees. The California joint venture is consolidated on our balance sheet and accordingly fees earned in this venture are included in the determination of net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships. The Washington D.C. area joint venture is not consolidated on our balance sheet and accordingly fees earned in this venture are included in loss from unconsolidated real estate partnerships.

(3)		Interest income for the three and nine months ended September 30, 2022 includes $0.4 million and $13.8 million, respectively, of income associated with our note receivable from Aimco, and $4.4 million and $17.3 million, respectively, of interest income associated with leased properties. In addition, interest income for the three and nine months ended September 30, 2022, includes $4.5 million and $17.4 million, respectively, of prepayment penalty associated with the note repayment from Aimco.

		Interest income for the three and nine months ended September 30, 2021, includes $6.9 million and $20.8 million, respectively, of income associated with our note receivable from Aimco, and $6.5 million and $19.4 million, respectively, of interest income associated with leased properties.

Consolidated Balance Sheets
(in thousands) (unaudited)
	September 30,			December 31,
	2022			2021
Assets
Real estate	$	8,038,570		$	6,885,081
Accumulated depreciation		(2,370,792	)		(2,284,793	)
Net real estate		5,667,778			4,600,288
Cash and cash equivalents		87,732			67,320
Restricted cash		26,914			25,441
Note receivable from Aimco		—			534,127
Leased real estate assets		—			466,355
Goodwill		32,286			32,286
Other assets (1)		779,205			568,051
Assets held for sale		128,538			146,492
Total Assets	$	6,722,453		$	6,440,360

Liabilities and Equity
Non-recourse property debt	$	2,028,658		$	2,305,756
Debt issue costs		(9,241	)		(11,017	)
Non-recourse property debt, net		2,019,417			2,294,739
Term loans, net		796,334			1,144,547
Revolving credit facility borrowings		479,000			304,000
Unsecured notes payable, net		397,417			—
Accrued liabilities and other (1)		758,441			592,774
Liabilities related to assets held for sale		472			85,775
Total Liabilities		4,451,081			4,421,835

Preferred noncontrolling interests in AIR OP		79,330			79,370

Equity:
Perpetual preferred stock		2,000			2,129
Class A Common Stock		1,530			1,570
Additional paid-in capital		3,583,111			3,763,105
Accumulated other comprehensive income		45,948			—
Distributions in excess of earnings		(1,589,409	)		(1,953,779	)
Total AIR equity		2,043,180			1,813,025
Noncontrolling interests in consolidated real estate partnerships		(76,200	)		(70,883	)
Common noncontrolling interests in AIR OP		225,062			197,013
Total Equity		2,192,042			1,939,155
Total Liabilities and Equity	$	6,722,453		$	6,440,360

(1)

Other assets includes the Parkmerced mezzanine investment and the fair value of an associated interest rate swap option, and accrued liabilities and other includes the offsetting liabilities, both of which equal $451 million. The benefits and risks of ownership of both the Parkmerced mezzanine investment and the interest rate swap option have been transferred to Aimco, but legal transfer has not occurred.

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AIR Reports Third Quarter 2022 Results Ahead of Plan; Operating Fundamentals Across All Markets Remain Strong, On Track For Full Year Record Same Store NOI Growth