SecProbe.io

CORRESP
1
filename1.htm

corresp

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

June 2, 2009

Correspondence Filing Via Edgar

United States Securities and Exchange Commission

Division of Corporation Finance

Mail Stop 4561

450 Fifth Street, NW

Washington, D.C. 20549

    Attn:

    Cicely LaMothe

    Wilson K. Lee

    Re:

    Apartment Investment and Management Company

    File No. 001-13232

    Form 10-K for the year ended December 31, 2008

Ladies & Gentlemen:

     This letter responds to the comments of the staff of the Securities and Exchange Commission
(the “Staff”) addressed to David Robertson and Paul Beldin on behalf of Apartment Investment and
Management Company (the “Company”), in a letter dated May 11, 2009. The Company’s response to the
Staff’s comments are set forth below and are numbered to correspond to the numbering of the Staff’s
comment in the Staff’s letter.

*    *    *    *    *

Financial Statements and Notes

Consolidated Statements of Income, page F-4

    1.

    Comment: We have considered your response to comment 1. Given that the impaired operating
real estate is classified as held and used as of December 31, 2008, consistent with paragraph
25 of SFAS 144, presentation of the impairment losses as a part of operating income appears
appropriate. In addition, the provisions related to real estate held and used also apply to
real estate development assets. Reference is made to paragraph 24 of SFAS 67. Given that
these amounts are material, please revise your filing accordingly to reclass the provision for
impairment losses for operating real estate and real estate development assets within
operating income and consider the requirements to file an Item 4.02 8-K.

United States Securities and Exchange Commission

June 2, 2009

Page 2 of 5

Response: In addition to the considerations described in the Company’s response letter dated April
15, 2009, the Company would like to provide additional background regarding its business operations
that factored into its decision to classify impairment losses on real estate development assets
outside of operating income.

The Company was formed to engage in the acquisition, ownership, management and redevelopment of
apartment properties. At December 31, 2008, the Company owned an interest in or managed
approximately 1,000 real estate properties, with an ownership
interest in approximately 600 of these
properties. While redevelopment of properties has been a major activity for the Company, ground up
development has been limited to a handful of situations where development was required due to a
natural disaster, structural defects, or in two circumstances, a management determination to pursue
such an undertaking. The Company does not view the development projects as part of its core operating assets.

Redevelopment includes the enhancement of a property’s interior and exterior spaces, but typically
does not include the construction of new rentable units from the ground-up, as would be typical in
a development project. The Company believes redevelopment provides the opportunity to generate
comparable rents to newly developed properties with lower financial risk. These routine
redevelopment projects are completed in phases such that only portions of the property are
temporarily taken out of operations and the majority of the property continues to contribute to
operating income. Conversely, the real estate development assets at issue have not generated any
significant operating income since 2005.

Another differentiating factor between the real estate development assets and the operating real
estate is the allocation of the properties’ value between land and building. The majority of the
net book values of the real estate development assets prior to the impairments was attributable to
the underlying land; accordingly the impairments recognized were primarily of land value that would
not have been subject to depreciation in future periods.

Given the
FASB’s view in paragraph B54 of SFAS 144 that impairments are analogous to the acceleration of
depreciation or amortization related to long-lived assets that would otherwise have been reflected
in operating income, the Company does not believe the classification of a non-operating, primarily
non-depreciable real estate development asset impairment outside of operating income was
inconsistent with FASB’s intent.

Despite the considerations above, the Company acknowledges the guidance provided in SFAS 144
paragraph 25 and SFAS 67 paragraph 24.

Even if the Staff disagrees with the Company’s presentation of the impairment losses, the Company
does not believe that an amendment to its Annual Report on Form 10-K for the fiscal year ended December 31, 2008 or
a filing under Item 4.02 of Form 8-K are required. Both are
predicated on a conclusion that the classification difference is material. As noted below, although
the real estate development impairment losses are quantitatively significant, the Company does not
believe the classification difference is material to an investor when both quantitative and
qualitative factors are considered.

United States Securities and Exchange Commission

June 2, 2009

Page 3 of 5

SAB Topic 1M references the FASB’s explanation of materiality in Statement of Concepts No. 2 as
follows: “in light of the surrounding circumstances, the magnitude of the item is such that it is
probable that the judgment of a reasonable person relying upon the report would have been changed
or influenced by the inclusion or correction of the item.” Furthermore, the SEC Advisory Committee
on Improvements to Financial Reporting indicated in its final report that “consideration should be
given to both qualitative and quantitative factors that would be important to the reasonable
investor, although we acknowledge that there will probably be more times when qualitative
considerations will result in a small error being considered material than they will result in a
large error being considered not to be material. Therefore, we recommend that the existing
materiality guidance be enhanced to clarify that the total mix of information available to
investors should be the main focus of a materiality judgment and that qualitative factors are
relevant in analyzing the materiality of all errors. We view this recommendation as a modest
clarification of the existing guidance to conform practice to the standard established by the
Supreme Court and not a major revision to the concepts and principles embodied in existing SEC
staff guidance in SAB Topic 1M.”

The Company does not believe the judgment of a reasonable person relying on its financial
statements would be changed or influenced by the inclusion of the impairment losses in operating
income versus non-operating income. This conclusion is based on factors outlined in Staff
Accounting Bulletin No. 99 and included consideration of the following:

    Ø

    The classification of impairment losses outside of operating income has no effect on
the reported loss from continuing operations or net income amounts reported in the
Company’s statement of income for the year ended December 31, 2008. Furthermore, such
classification does not affect the related amounts attributable to common stockholders
on a gross or per share basis.

    Ø

    The nature and amounts of the impairment losses are disclosed in Note 2 and Note 5
to the consolidated financial statements in Item 8 of the Company’s Annual Report on
Form 10-K as well as within Management’s Discussion and Analysis of Financial Condition
and Results of Operations in Item 7 of the Annual Report on Form 10-K.

    Ø

    Investor questions and inquiries received by the Company’s Investor Relations
department historically have focused on income from continuing operations, net income
and Funds from Operations, or FFO. None of these metrics are affected by the
classification of impairment losses.

    Ø

    Investors were aware of the nature and the amounts of the impairments on real estate
development assets for approximately one month prior to the filing of the Annual Report
on Form 10-K. The Company announced these impairment losses through a press release
issued on January 28, 2009 and filed a Form 8-K including those disclosures on the same
day.

    Ø

    In the current economic environment, real estate company analysts and investors are
placing a heavy emphasis on liquidity. The sharp declines in market value for some real
estate companies have been exacerbated based on perceptions about their liquidity and
ability to repay or refinance debt maturities in the near term. The classification of
the impairment losses has no effect on the Company’s liquidity nor does it impact debt
covenant compliance ratios or any other regulatory or contractual requirements.

United States Securities and Exchange Commission

June 2, 2009

Page 4 of 5

    Ø

    The classification of impairment losses outside of operating income was not an
intentional act by the Company’s management to mislead investors. As noted above, the
Company believed inclusion in operating income of impairment losses on real estate
development assets that do not generate appreciable operating income or expense would
make it more difficult for the Company’s investors to understand the Company’s core
business of acquiring, operating, managing and redeveloping apartment properties.

    Ø

    The classification of these impairment losses does not hide a failure to meet
analysts’ consensus expectations for the Company. The Company did not meet fourth
quarter or full year 2008 earnings or FFO targets in part based on these impairments.
The Company clearly communicated the nature and amounts of the impairments both in its
earnings release as well as through disclosure in its Annual Report on Form 10-K.

    Ø

    The classification of these impairment losses does not mask a change in earnings or
other trends. As noted above, operating income as presented in the Company’s
consolidated statements of income is not a performance measure on which investors or
analysts focus.

    Ø

    The classification of the impairment losses does not affect the measurement of
performance for purposes of determining management’s incentive based compensation.

    Ø

    The classification of these impairment losses does not change a loss into income or
vice versa for any annual period or separately reported quarterly period, with the
exception of the fourth quarter 2008, for which the classification of the impairment
losses in operating income would have resulted in operating income changing from income
to a loss. However, as noted in the third consideration bullet above, operating income
has not been an area of focus by the Company’s investors.

    Ø

    The classification of the impairment losses does not conceal or otherwise relate to
an unlawful transaction.

    Ø

    The classification of these impairment losses does not affect reported segment
operating results as the Company does not include impairment losses in its measure of
segment operating performance.

In light of the qualitative considerations above, the Company does not believe the classification
of the impairment losses is material to a reasonable investor. Based on this view, the Company
does not believe its financial statements are materially misstated and therefore believes a revised
filing is unnecessary.

Notwithstanding the foregoing, if the Staff continues to believe that impairment losses for the
Company’s three real estate development assets should be classified within operating income, the
Company hereby confirms that in future filings it will adjust its presentation of impairment losses
to classify these amounts within operating income.

     As requested by the Staff, the Company acknowledges that: (a) the Company is responsible for
the adequacy and accuracy of the disclosure in its filings; (b) Staff comments or changes to
disclosure in response to Staff comments do not foreclose the Commission from taking any action
with respect to the filings; and (c) the Company may not assert Staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal securities laws of the
United States.

United States Securities and Exchange Commission

June 2, 2009

Page 5 of 5

     If you have further questions regarding the information provided, please contact David
Robertson, President, Chief Investment Officer and Chief Financial Officer, at (303) 691-4311
(phone) or (303) 300-3276 (facsimile) or me at (303) 691-4554 (phone) or (720) 493-6549
(facsimile).

Sincerely,

/s/ Paul Beldin

Paul Beldin

Chief Accounting Officer

    Cc:

    Amy B. Freed, Hogan & Hartson LLP

Lisa R. Cohn, Aimco

David Robertson, Aimco