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Air Communities Update 06/07/23

AIR Communities Announces two Joint Ventures with a Value of $1.2 Billion; Proceeds to be used to Reduce Indebtedness and Fund Accretive Acquisitions

Apartment Income REIT Corp. (NYSE: AIRC) (“AIR”) has announced joint ventures, with two of the world’s largest real estate investors, to recapitalize 11 properties valued at an aggregate of $1.2 billion based on a trailing twelve-month NOI cap rate of 5.6%. AIR will receive $600 million in proceeds (cash and debt relief), as well as asset and property management fees expected to contribute $2.5 million in annual margin. Upon completion of the transactions, AIR total indebtedness to ebitda will be less than 6:1, providing capacity for accretive acquisitions.

In the first joint venture, AIR will own a 53% interest in the partnership and a global institutional investor will own 47%. The portfolio is comprised of ten properties in AIR’s Same Store portfolio, with 3,093 apartment homes with monthly revenue averaging $2,457, located in Philadelphia, Denver, San Diego, South Florida, and Washington DC.

In the second joint venture, AIR will own a 30% interest in the partnership and a global asset manager will own 70%, of Huntington Gateway, a 443-unit property located in Alexandria, Virginia.

In both ventures, AIR will continue to be responsible for property management and asset management, earning fees and enjoying the opportunity to earn success-based promotes.

Each partner has also committed to investing alongside AIR in future acquisitions, one focusing on core opportunities and the second focusing on value-add opportunities.

Terry Considine, AIR Chief Executive Officer, comments: “I thank AIR’s new partners for their investments and confidence in AIR. It is a compliment to the entire AIR team that two of the world’s largest and most respected real estate investors recognize the excellence of AIR’s property management and AIR’s ability to source accretive transactions. We see great opportunity in today’s markets to make investments accretive to FFO while maintaining total indebtedness to ebitda at less than 6:1.”

Paul Beldin, Chief Financial Officer of AIR, comments: “AIR’s total indebtedness to ebitda was temporarily elevated at the end of our first quarter due to the January 2023 acquisition of Southgate Towers. These transactions reduce total indebtedness to within our targeted range and were contemplated in AIR’s full year FFO guidance. They are therefore neutral to expectations for the year.”

The joint venture transactions are subject to customary closing conditions and are expected to close during the second quarter, with the exception of two properties which require regulatory approvals, expected before year-end.

Citigroup is the exclusive financial advisor to AIR on the joint venture with the global institutional investor.

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