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PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 22, 1997)
279,000 SHARES
[LOGO]
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS A COMMON STOCK
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This Prospectus Supplement and the attached Prospectus relate to the sale of
279,000 shares of the Class A Common Stock, par value $.01 per share (the "Class
A Common Stock"), of Apartment Investment and Management Company ("AIMCO") to an
institutional investor at a purchase price of $33.125 per share, for an
aggregate purchase price of $9,241,875. The net proceeds to AIMCO, after
deducting estimated offering expenses of $240,000, will be approximately
$9,000,000.
The Class A Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "AIV." On September 9, 1997, the last reported sale
price of the Class A Common Stock on the NYSE was $33.00 per share.
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PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE S-3 OF THIS PROSPECTUS SUPPLEMENT.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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It is expected that delivery of the shares will be effected on or about
September 12, 1997 through the facilities of The Depository Trust Company.
The date of this Prospectus Supplement is September 9, 1997
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THE COMPANY
Apartment Investment and Management Company, a Maryland corporation ("AIMCO"
and, together with its subsidiaries and other controlled entities, the
"Company"), is the second largest owner and manager of multifamily apartment
properties in the United States, based on apartment unit data compiled by the
National Multi Housing Council, with 185,959 apartment units owned or under
management. As of June 30, 1997, (after giving effect to its acquisition in July
1997 of the 208-unit Sawgrass Apartments) the Company owned or controlled a
total of 27,264 units in 108 apartment properties (the "Owned Properties"), had
an equity interest in 88,690 units in 537 apartment properties (the "Equity
Properties"), and managed 70,005 units in 386 apartment communities for third
parties and affiliates (the "Managed Properties," and, together with the Owned
Properties and the Equity Properties, the "AIMCO Properties"). The AIMCO
Properties are located in 40 states, the District of Columbia and Puerto Rico.
AIMCO has elected to be taxed as a real estate investment trust (a "REIT") for
Federal income tax purposes. The Company conducts substantially all of its
operations through AIMCO Properties, L.P., a Delaware limited partnership (the
"Operating Partnership"), and its subsidiaries. As of August 31, 1997, the
Company held approximately an 88% interest in the Operating Partnership.
On April 21, 1997, AIMCO entered into an Agreement and Plan of Merger (the
"Merger Agreement") with NHP Incorporated, a Delaware corporation ("NHP"), and
AIMCO/NHP Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of AIMCO ("Merger Sub"). Pursuant to the Merger Agreement, Merger Sub
will be merged with and into NHP, with NHP becoming a wholly owned subsidiary of
the Company (the "Merger"). The consummation of the Merger is subject to a
number of contingencies, including, in some cases, obtaining approvals of
governmental authorities, shareholders of AIMCO and NHP, and other third
parties. Accordingly, there can be no assurance that the Merger will be
completed. (See "Risk Factors--Risks Related to the NHP Acquisition.") In May
1997, AIMCO/NHP Holdings, Inc., a Delaware corporation and an unconsolidated
subsidiary of the Company ("ANHI"), acquired 6,496,073 shares of common stock,
par value $.01 per share (the "NHP Common Stock"), of NHP (the "NHP Stock
Purchase"), from Demeter Holdings Corporation, a Massachusetts corporation
("Demeter"), Capricorn Investors, L.P., a Delaware limited partnership
("Capricorn"), and certain partners of Capricorn (collectively with Capricorn,
the "Capricorn Sellers"). ANHI subsequently transferred 3,717,000 of NHP Common
Stock to AIMCO. The shares held by AIMCO and ANHI represented 50.3% of the
outstanding shares of NHP Common Stock as of August 31, 1997. (See "NHP
Acquisition.") NHP provides a broad array of real estate services nationwide
including property management and asset management, as well as a group of
related services including equity investments, purchasing, risk management and
home health care. According to the National Multi Housing Council, as of January
1, 1997, NHP was the nation's second largest property manager of multifamily
properties, based on the number of units managed.
On June 3, 1997, the Company acquired NHP Partners, Inc., a Delaware
corporation ("NHP Partners, Inc."), and NHP Partners Two Limited Partnership, a
Delaware limited partnership ("NHP Partners Two" and, together with NHP
Partners, Inc. and their subsidiaries, the "NHP Real Estate Companies") (the
"NHP Real Estate Acquisition"). The NHP Real Estate Companies hold interests in
partnerships that own approximately 534 conventional and affordable multifamily
apartment properties, which contain approximately 87,659 units, as well as a
captive insurance subsidiary and certain related assets. A majority of the
properties in which the NHP Real Estate Companies own interests (the "NHP
Properties") are managed by NHP.
In the ordinary course of the Company's business, AIMCO is engaged in
discussions and negotiations with property owners regarding the purchase of
apartment properties or interests in apartment properties. AIMCO or the
Operating Partnership frequently enters into letters of intent, which may be
binding or nonbinding, and contracts with respect to the purchase of real
property which are subject to certain conditions and which permit AIMCO or the
Operating Partnership, as the case may be, to terminate the contract in its sole
and absolute discretion if it is not satisfied with the results of its due
diligence investigation of the properties under contract. AIMCO believes that
such contracts essentially result in the creation of an option on the property
subject to the contract and give AIMCO greater flexibility in seeking to acquire
properties. As of July 31, 1997 AIMCO or the Operating Partnership had under
letter of intent or contract an aggregate of 16 multi-family apartment
properties with a maximum aggregate purchase price of $272 million, which, in
some cases, may be paid in the form of
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assumption of existing debt. All such contracts are subject to termination by
AIMCO or the Operating Partnership as described above. Due diligence with
respect to these properties is generally not completed and there is no assurance
that any transaction will occur or that they will occur on the terms currently
contemplated.
In addition, on August 22, 1997, the Operating Partnership entered into a
Purchase and Sale Agreement and Joint Escrow Instructions with the sellers named
therein to acquire a portfolio of multi-family residential apartment properties
for an aggregate purchase price of $260 million in cash, less the amount of any
debt of the sellers that the Operating Partnership elects to assume. The
obligation of the Operating Partnership to purchase such properties is subject
to a number of conditions and, the Operating Partnership has the right, at any
time on or before October 6, 1997, to terminate the agreement if it determines
in its sole and absolute discretion that all or any portion of the property is
not acceptable to it. The Operating Partnership's due diligence investigation of
the properties is at a very preliminary stage and there is no assurance that any
transaction will occur or that it will be completed on the terms currently
contemplated. The Company's management cannot forecast the outcome of the due
diligence in process and, therefore, may not reflect pending acquisitions of
properties in its financial statements, including any pro forma financial
statements.
ChaseMellon Shareholder Services L.L.C. serves as transfer agent and
registrar of the Class A Common Stock. AIMCO's headquarters are located at 1873
South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone
number is (303) 757-8101.
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RISK FACTORS
An investment in shares of Class A Common Stock involves various risks. In
addition to general investment risks and those factors set forth elsewhere in
this Prospectus Supplement and in the accompanying Prospectus or incorporated
therein by reference, potential investors should consider, among other things,
the following factors.
RISKS ASSOCIATED WITH THE NHP ACQUISITION
The NHP Stock Purchase, the Merger and the NHP Real Estate Acquisition
(collectively, the "NHP Acquisition") constitute the largest transaction ever
undertaken by the Company, involving an aggregate purchase price in excess of
$380 million. In addition to the risks typically associated with acquisitions
generally (see "--Risks Relating to AIMCO's and NHP's Businesses--Acquisition
and Development Risks"), the NHP Acquisition involves the following risks and
uncertainties:
POSSIBLE CONFLICTS OF INTEREST. Following consummation of the Merger and a
planned restructuring of the assets and operations of NHP (the "NHP
Reorganization"), the operations of NHP will be conducted by ANHI and/or other
unconsolidated subsidiaries of AIMCO (together with ANHI, the "Unconsolidated
Subsidiaries"). In addition, upon completion of a reorganization of AIMCO's
interests in the NHP Real Estate Companies (the "NHP Real Estate
Reorganization"), the vast majority of the assets of the NHP Real Estate
Companies will be owned by a limited partnership (the "Unconsolidated
Partnership") in which AIMCO's Operating Partnership will hold a 99% limited
partner interest and certain directors and officers of AIMCO will, directly or
indirectly, hold a 1% general partner interest. Since it is expected that
certain individuals who are officers and/or directors of AIMCO will acquire an
equity interest in the Unconsolidated Subsidiaries and the Unconsolidated
Partnership, such officers and/or directors may have interests in the NHP
Acquisition that differ from those of the AIMCO stockholders.
RISKS OF AIMCO'S INABILITY TO EFFECT CERTAIN BUSINESS COMBINATIONS AND OTHER
TRANSACTIONS. As a result of the NHP Stock Purchase, AIMCO is an "interested
stockholder" of NHP for the purpose of Section 203 of the Delaware General
Corporation Law (the "DGCL"). Accordingly, if the Merger Agreement is not
adopted and authorized at a special meeting of NHP stockholders by the required
vote, AIMCO may not, prior to February 13, 2000, enter into any "business
combination" transaction with NHP, unless the transaction is approved by holders
of at least 66 2/3% of the outstanding shares of NHP Common Stock, excluding
shares deemed to be owned by AIMCO or its affiliates. For these purposes, a
"business combination" includes any merger or consolidation of NHP or its
subsidiaries with AIMCO or its affiliates; any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets of NHP or its subsidiaries to
AIMCO with a value of 10% or more of the total assets of NHP; transfers or
issuances of stock of NHP or its subsidiaries to AIMCO; and certain other
transactions that may provide financial benefits to AIMCO.
If the Merger is not approved, the prohibition on business combinations
contained in Section 203 may prevent AIMCO from taking a variety of actions that
may be necessary to optimize AIMCO's corporate structure for operating reasons,
tax reasons and for purposes of complying with the REIT rules following the NHP
Stock Purchase and the NHP Real Estate Acquisition. Such actions may include,
for example, certain aspects of the NHP Reorganization, a liquidation of NHP, a
merger of NHP with another AIMCO subsidiary, a transfer of assets from NHP or
its subsidiaries to AIMCO or its subsidiaries or guarantees by NHP or its
subsidiaries of loans made to AIMCO or its subsidiaries. The inability of AIMCO
to engage in such transactions could have an adverse effect on AIMCO's results
of operations and its ability to realize the potential benefits of the NHP
Acquisition.
RISKS ASSOCIATED WITH INTEGRATING NHP. The integration of NHP's business
with AIMCO's may place a significant burden on AIMCO's management. Such
integration is subject to risks commonly encountered in making such
acquisitions, including, among others, loss of key personnel of NHP, the
difficulty associated with assimilating the personnel and operations of NHP, the
disruption of AIMCO's ongoing business and acquisition strategy, the difficulty
in maintaining uniform standards, controls, procedures and policies, and the
impairment
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of AIMCO's reputation. No assurance can be given that the anticipated benefits
from the Merger will be realized or that AIMCO will be able to integrate the two
businesses successfully. Failure of AIMCO to integrate the two businesses
successfully could have a material adverse effect on AIMCO's results of
operations.
RISK OF TERMINATION OF OXFORD CONTRACTS. Pursuant to contracts between
certain entities and individuals associated with Oxford Realty Financial Group,
Inc. and Oxford Holdings Corporation (collectively "Oxford") and certain
subsidiaries of NHP, NHP manages a portfolio of properties controlled by Oxford.
Such contracts have terms of one year, provide for automatic renewal for
successive one year periods and provide for management fees ranging from 3.25%
to 9% of each property's rental revenue. In connection with AIMCO's acquisition
of NHP, Oxford has indicated it believes it has the right to terminate such
contracts. AIMCO and NHP believe these assertions are without merit. Although
AIMCO and NHP intend to vigorously oppose any attempt by Oxford to terminate the
Oxford management contracts, there can be no assurance that Oxford will not
prevail in any such attempt. NHP received $12.9 million of management fees from
management of the Oxford Properties in 1996 and $6.5 million in the first six
months of 1997. The Stock Purchase Agreement (as defined below) provides that
Demeter and Capricorn will indemnify AIMCO against certain losses in excess of
$1 million, including claims made by Oxford under the Oxford management
contracts, as long as AIMCO satisfies certain conditions. This indemnification
obligation is subject to a number of exceptions and qualifications. Termination
of the Oxford management contracts could have a material adverse effect on NHP's
results of operations.
RISKS RELATING TO AIMCO'S AND NHP'S BUSINESSES
An investment in Class A Common Stock will involve various risks associated
with AIMCO's and NHP's businesses. In addition to general investment risks and
those factors set forth elsewhere in this Prospectus Supplement, potential
investors should consider, among other things, the following risk factors
related to an investment in AIMCO:
SIGNIFICANT INDEBTEDNESS; REFINANCING RISKS. AIMCO and its subsidiaries,
and partnerships in which a subsidiary of AIMCO is a general partner, have
significant amounts of debt outstanding and, accordingly, are subject to the
risks normally associated with debt financing, including the risk that its cash
flow from operations will be insufficient to make required payments of principal
and interest, the risk that existing indebtedness, including secured
indebtedness, may not be refinanced or that the terms of any refinancing will
not be as favorable as the terms of existing indebtedness. As of June 30, 1997,
97% of AIMCO's Owned Properties were encumbered by debt, and AIMCO had
outstanding $644.5 million of indebtedness, $611.5 million of which was secured
by Owned Properties and other assets of AIMCO, including $70.9 million of
outstanding borrowings under AIMCO's credit facility (the "Credit Facility")
with Bank of America National Trust and Savings Association ("Bank of America")
and $33.0 million of outstanding unsecured borrowings (which have been repaid).
The Credit Facility restricts AIMCO's ability to effect certain mergers,
business consolidations and asset sales, impose minimum net worth requirements,
and require AIMCO to maintain a debt-to-gross-asset-value ratio of no more than
0.6 to 1, an interest coverage ratio of at least 2.0 to 1 and a debt service
coverage ratio of at least 1.8 to 1. Additionally, the Credit Facility limits
AIMCO from distributing more than 80% of funds from operations to AIMCO
stockholders. Failure by AIMCO to make payments exceeding $2.0 million under any
other debt agreement (except intra-company agreements), failure to perform or
observe covenants or conditions under an intra-company subordination agreement
entered into in connection with the Credit Facility and events of default
resulting in acceleration under AIMCO's other credit agreements, among other
events, are considered defaults under the Credit Facility. None of AIMCO's debt
is subject to cross-collateralization provisions. AIMCO's Amended and Restated
Articles of Incorporation (the "AIMCO Charter") does not limit the amount of
indebtedness which may be incurred by AIMCO and its subsidiaries. At June 30,
1997, ANHI had outstanding indebtedness totaling $214.7 million, consisting of
$72.6 million of indebtedness outstanding under ANHI's credit facility (the
"ANHI Credit Facility") with Bank of America and Smith Barney Mortgage Capital
Group, Inc. (which has been repaid), $71.1 million of unsecured indebtedness
under NHP's credit facility and $71.0 million of indebtedness secured by real
estate wholly owned by NHP. If AIMCO or NHP do not have sufficient
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funds to repay their indebtedness at maturity, it may be necessary to refinance
such indebtedness through additional debt financing, private or public offerings
of debt securities or additional equity offerings. If, at the time of any such
refinancing, prevailing interest rates or other factors result in higher
interest rates on refinancings, increases in interest expense could adversely
affect cash flow. If AIMCO or NHP is unable to refinance its indebtedness on
acceptable terms, it might be forced to dispose of properties or other assets on
disadvantageous terms, potentially resulting in losses and adverse effects on
cash flow from operating activities. If AIMCO is unable to make required
payments of principal and interest on indebtedness secured by Owned Properties,
such properties could be foreclosed upon by the lender with a consequent loss of
income and asset value to AIMCO. In addition, if the Merger is not completed,
requirements of the Code with respect to AIMCO's continued qualification as a
REIT may limit AIMCO's flexibility in refinancing certain indebtedness.
RISK OF RISING INTEREST RATES. Certain of AIMCO's and NHP's borrowings,
including the Credit Facility, bear interest at a variable rate. In addition, as
of June 30, 1997, AIMCO had approximately $122.9 million of other indebtedness
that bears interest at a variable rate. As of June 30, 1997, approximately 80.9%
of AIMCO's total indebtedness was subject to fixed interest rates and 19.1% was
subject to variable interest rates. Although, as described below, AIMCO has
certain hedging arrangements in place, increases in interest rates could
increase AIMCO's interest expense and adversely affect cash flow. As of June 30,
1997, NHP had approximately $65.0 million of variable rate indebtedness,
representing 45.7% of NHP's outstanding indebtedness. No hedging arrangements
are in place with respect to NHP's variable rate indebtedness, although NHP has
purchased a nominal interest rate cap agreement protecting it from interest rate
fluctuations above 13.25%. Increases in interest rates would increase NHP's
interest expense and adversely affect NHP's cash flow.
RISKS RELATED TO INTEREST RATE HEDGING ARRANGEMENTS. AIMCO from time to
time enters into one or more interest rate swap agreements as a hedge against
increases in short term interest rates on a portion of AIMCO's indebtedness that
bears interest at a variable rate. Although these agreements, which effectively
fix the interest rate on a portion of AIMCO's indebtedness that is subject to a
variable rate, provide AIMCO with some protection against rising interest rates,
these agreements also reduce the benefits to AIMCO when interest rates decline.
In March 1997, AIMCO entered into an interest rate swap agreement (the "Swap")
with a major investment banking company having a notional principal amount of
$100 million, in anticipation of refinancing certain indebtedness that bears
interest at a variable rate. The Swap matures on September 25, 1997 and fixes
the twelve year treasury rate at 6.94%. Based on the fair value of the Swap at
June 30, 1997, the Company has a potential loss of approximately $3.4 million,
which is expected to be amortized over the life of the refinancing. There can be
no assurance that the debt will be refinanced or that AIMCO will be able to
enter into another hedging arrangement to replace the Swap.
Interest rate swap agreements and other interest rate hedging arrangements,
including the Swap, may expose AIMCO to certain risks. Interest rate movements
during the term of interest rate swaps or other hedging arrangements may result
in a gain or loss on AIMCO's investment in the swap or other hedging
arrangement. In addition, if a hedging arrangement is not indexed to the same
rate as the indebtedness that is hedged, AIMCO may be exposed to losses to the
extent that the rate governing the indebtedness and the rate governing the
hedging arrangement change independently of each other. Finally, nonperformance
by the other party to the hedging arrangement may result in credit risks to
AIMCO. In order to minimize counterparty credit risk, AIMCO's policy is to enter
into hedging arrangements only with large financial institutions that maintain
an investment grade credit rating.
RISKS RELATED TO INVESTMENT IN AND MANAGEMENT OF REAL ESTATE.
GENERAL. Real property investments are subject to varying degrees of risk.
The yields available from equity investments in real estate depend on the amount
of income generated and expenses incurred. AIMCO's income from its Owned
Properties and Equity Properties may be adversely affected by the general
economic climate, local conditions such as oversupply of apartments or a
reduction in demand for apartments in the area, the attractiveness of the
properties to tenants, competition from other available apartments, the ability
of AIMCO to provide adequate maintenance and insurance, and increases in
operating costs (including real estate
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taxes). AIMCO's income from its Owned Properties and Equity Properties would
also be adversely affected if a significant number of tenants were unable to
meet their rent payment obligations when due or if apartments could not be
rented on favorable terms. Certain significant expenditures associated with real
property investments (such as debt service, real estate taxes and maintenance
costs) generally are not reduced when circumstances cause a reduction in income
from the investments. In addition, income from properties and real estate values
are also affected by such factors as applicable laws, including tax laws,
interest rate levels and the availability of financing. If AIMCO's Owned
Properties and Equity Properties do not generate income sufficient to meet
operating expenses, including debt service and capital expenditures, AIMCO's
income and its ability to make distributions to holders of Class A Common Stock
will be adversely affected. Many of the factors that could adversely affect
AIMCO's income from its Owned Properties and Equity Properties could also
adversely affect AIMCO's income from its Managed Properties by reducing gross
receipts for such properties.
ILLIQUIDITY OF REAL ESTATE. Investments in real estate or partnerships
which own real estate may be illiquid. As a result, AIMCO may be unable to vary
its portfolio promptly in response to changes in economic or other conditions.
In addition, the Code limits the ability of AIMCO, as a REIT, to sell properties
held for fewer than four years.
ACQUISITION AND DEVELOPMENT RISKS. AIMCO has engaged in, and intends to
continue to engage in, the selective acquisition, development and expansion of
multifamily apartment properties. AIMCO has entered into agreements to acquire
certain properties and is currently considering the acquisition of several
additional properties. No assurance can be given that any of these possible
acquisitions will be completed or, if completed, that they will be accretive on
a per share basis. In addition to general investment risks associated with any
new investment, acquisitions entail risks that such investments will fail to
perform in accordance with expectations, including projected occupancy and
rental rates, management fees and the costs of property improvements. Risks
associated with redevelopment and expansion of properties include the risks that
development opportunities may be abandoned; that construction costs of a
property may exceed original estimates, possibly making the property
uneconomical; that occupancy rates and rents at a newly completed property may
not be sufficient to make the property profitable; that construction and
permanent financing may not be available on favorable terms; and that
construction and lease-up may not be completed on schedule, resulting in
increased debt service expense and construction costs. Development activities
are also subject to risks relating to any inability to obtain, or delays in
obtaining, necessary zoning, land-use, building, occupancy, and other
governmental permits and authorizations. See "--Risks Associated with the NHP
Acquisition."
AIMCO also has engaged in, and intends to continue to engage in the
selective acquisition of, or investment in, companies that own or manage
multifamily apartment properties or own general or limited partnership or other
interests therein. Risks associated with AIMCO's past and future acquisitions of
general partnership interests include the risks that the general partner will be
liable for breaches of fiduciary duty to the limited partners of such
partnership and that the assets of the general partner may be subject to claims
by creditors of the partnership if the partnership becomes insolvent. See
"--Risks Relating to English Litigation."
OPERATING RISKS. The AIMCO Properties and the properties managed by NHP are
subject to operating risks common to multifamily apartment properties in
general. These risks may adversely affect AIMCO's and NHP's cash flow from
operations. For example, increases in unemployment in the areas in which the
AIMCO Properties or the properties managed by NHP are located may adversely
affect multifamily apartment occupancy or rental rates and it may not be
possible to offset increases in operating costs due to inflation and other
factors by increased rents. Local rental market characteristics also limit the
extent to which rents may be increased without decreasing occupancy rates.
COMPETITION. There are numerous housing alternatives that compete with the
AIMCO Properties and the properties managed by NHP in attracting residents. Such
properties compete directly with other multifamily rental apartments and single
family homes that are available for rent in the markets in which such properties
are located. Such properties also compete for residents with new and existing
homes and condominiums. The ability of AIMCO and NHP to lease apartment units
and the level of rents charged is determined in large part by the
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number of competitive properties in the local market. Numerous real estate
companies compete with AIMCO in each of its market areas in acquiring,
developing and managing multifamily apartment properties and seeking tenants to
occupy their properties and AIMCO's market share is small in each of its market
areas. In addition, numerous property management companies compete with AIMCO
and NHP in the markets where the Managed Properties and the properties managed
by NHP are located.
CHANGE IN LAWS. Changes in laws increasing the potential liability for
environmental conditions existing on properties or increasing the restrictions
on discharges or other conditions, as well as changes in laws affecting
development, construction and safety requirements, may result in significant
unanticipated expenditures, which would adversely affect AIMCO's and NHP's cash
flow from operating activities. In addition, future enactment of rent control or
rent stabilization laws or other laws regulating multifamily housing may reduce,
or limit the ability of AIMCO to increase, rental revenue or increase operating
costs in particular markets.
POSSIBLE ENVIRONMENTAL LIABILITIES. Under Federal, state and local
environmental laws and regulations, a current or previous owner or operator of
real property may be required to investigate and clean up a release of hazardous
substances at such property, and may, under such laws and common law, be held
liable for property damage and other costs incurred by third parties in
connection with such releases. The liability under certain of these laws has
been interpreted to be joint and several unless the harm is divisible or there
is a reasonable basis for allocation of responsibility. The failure to remediate
the property properly may also adversely affect the owner's ability to sell or
rent the property or to borrow using the property as collateral. In connection
with its ownership, operation or management of the AIMCO Properties or the
properties managed by NHP, AIMCO or NHP, as the case may be, could be
potentially liable for environmental liabilities or costs associated with its
properties or properties it may in the future acquire or manage.
Certain Federal, state and local laws and regulations govern the removal,
encapsulation or disturbance of asbestos-containing materials ("ACMs") when
those materials are in poor condition or in the event of building remodeling,
renovation or demolition, impose certain worker protection and notification
requirements and govern emissions of and exposure to asbestos fibers in the air.
These laws also impose liability for a release of ACMs and may enable third
parties to seek recovery from owners or operators of real properties for
personal injury associated with ACMs. In connection with the ownership,
operation or management of properties, AIMCO or NHP could be potentially liable
for those costs. There are ACMs at certain of the Owned Properties, and there
may be ACMs at certain of the other AIMCO Properties or the properties managed
by NHP. AIMCO has developed and implemented operations and maintenance programs,
as appropriate, that establish operating procedures with respect to the ACMs at
most of the Owned Properties, and intends to develop and implement, as
appropriate, such programs at AIMCO Properties that do not have such programs.
Certain of the Owned Properties are, and some of the other AIMCO Properties
and properties managed by NHP may be, located on or near properties that contain
or have contained underground storage tanks or on which activities have occurred
which could have released hazardous substances into the soil or groundwater.
There can be no assurances that such hazardous substances have not been released
or have not migrated, or in the future will not be released or will not migrate
onto the AIMCO Properties or the properties managed by NHP. Such hazardous
substances have been released at certain Owned Properties and, in at least one
case, have migrated from an off-site location onto AIMCO's property. In
addition, AIMCO's Montecito property in Austin, Texas, is located adjacent to,
and may be partially on, land that was used as a landfill. Low levels of methane
and other landfill gas have been detected at Montecito. The City of Austin (the
"City"), the former landfill operator, has assumed responsibility for conducting
all investigation and remedial activities to date associated with the methane
and other landfill gas. The remediation of the landfill gas is now substantially
complete, and the Texas Natural Resources Conservation Commission has
preliminarily approved the methane gas remediation efforts. Final approval of
the site and the remediation process is contingent upon the results of continued
methane gas monitors to confirm the effectiveness of the remediation efforts.
Should further actionable levels of methane gas be detected, a proposed
contingency plan of passive methane gas venting may be implemented by the City.
The City has also conducted testing on AIMCO's Montecito property to determine
whether, and to what extent, groundwater has been impacted. Based on test
reports received to date by AIMCO, the groundwater does not
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appear to be contaminated at actionable levels. AIMCO has not incurred and does
not expect to incur liability for the landfill investigation and remediation;
however, AIMCO will install sixteen monitors under the building slabs, in
connection with raising four of its buildings in order to install stabilizing
piers thereunder, at an estimated total cost of approximately $400,000 and
relocate some of its tenants. The City will be responsible for monitoring the
conditions at the Montecito property.
All of the Owned Properties were subject to Phase I or similar environmental
audits by independent environmental consultants. The audits did not reveal, nor
is AIMCO aware of, any environmental liability relating to such properties that
AIMCO believes would have material adverse effect on AIMCO's business, assets or
results of operations. However, such audits involve a number of judgments and it
is possible that such audits did not reveal all environmental liabilities or
that there are material environmental liabilities of which AIMCO is unaware.
RESTRICTIONS IMPOSED BY LAWS BENEFITING DISABLED PERSONS. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all places of public
accommodation are required to meet certain Federal requirements related to
access and use by disabled persons. These requirements became effective in 1992.
A number of additional Federal, state and local laws exist which also may
require modifications to the Owned Properties, or restrict certain further
renovations thereof, with respect to access thereto by disabled persons. For
example, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment
properties first occupied after March 13, 1990 to be accessible to the
handicapped. Noncompliance with the ADA or the FHAA could result in the
imposition of fines or an award of damages to private litigants and also could
result in an order to correct any non-complying feature, which could result in
substantial capital expenditures. Although management of AIMCO believes that the
Owned Properties are substantially in compliance with present requirements, if
the Owned Properties are not in compliance, AIMCO is likely to incur additional
costs to comply with the ADA and FHAA.
RISKS RELATING TO ENGLISH LITIGATION. In November 1996, AIMCO acquired (the
"English Acquisition") certain partnership interests, real estate and related
assets owned by J.W. English, a Houston, Texas-based real estate syndicator and
developer, and certain affiliated entities (collectively, the "J.W. English
Companies"). In the English Acquisition, AIMCO purchased of all of the general
and limited partnership interests in 22 limited partnerships which act as the
general partner to 31 limited partnerships (the "English Partnerships") that own
22 multifamily apartment properties and other assets and interests related to
the J.W. English Companies, and assumed management of the properties owned by
the English Partnerships. AIMCO made separate tender offers (the "English Tender
Offers") to the limited partners of 25 of the English Partnerships (the "Tender
Offer English Partnerships").
In November 1996, purported limited partners of certain of the Tender Offer
English Partnerships filed a purported class action lawsuit against AIMCO and
J.W. English in the U.S. District Court for the Northern District of California
(the "Federal Action"), alleging, among other things, that AIMCO conspired with
J.W. English to breach his fiduciary duty to the plaintiffs, and that the
offering materials used by AIMCO in connection with the English Tender Offers
contained misleading statements or omissions. The plaintiffs in the Federal
Action have filed a motion to voluntarily dismiss the Federal Action, without
prejudice, in favor of another purported class action. In May 1997, limited
partners of certain of the Tender Offer English Partnerships and six additional
English Partnerships filed two complaints in Superior Court of the State of
California (the "California Actions") against AIMCO and the J.W. English
Companies, alleging, among other things, that the consideration AIMCO offered in
the English Tender Offers was inadequate and designed to benefit the J.W.
English Companies at the expense of the limited partners, that certain
misrepresentations and omissions were made in connection with the English Tender
Offers, that AIMCO receives excessive fees in connection with its management of
the properties owned by the English Partnerships, that AIMCO continues to refuse
to liquidate the English Partnerships and that the English Acquisition violated
the partnership agreements governing the English Partnerships and constituted a
breach of fiduciary duty.
In addition to unspecified compensation and exemplary damages, the
complaints in the California Actions seek an accounting, a constructive trust on
the assets and monies acquired by the English defendants in
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connection with the English Acquisition, a court order removing AIMCO from
management of the English Partnerships and/or ordering disposition of the
properties and attorneys fees, expert fees and other costs. AIMCO intends to
vigorously defend itself in connection with these actions. AIMCO believes it is
entitled to indemnity from the J.W. English Companies, subject to certain
exceptions. Failure by AIMCO to prevail in the California Actions or to receive
indemnification could have a material adverse effect on AIMCO's results of
operations.
On August 4, 1997 AIMCO filed demurrers to both complaints in the California
Actions. Hearing on the demurrers is scheduled for October 17, 1997.
RISK OF LOSS OF REVENUE DUE TO TERMINATION OR OTHER LOSS OF PROPERTY
MANAGEMENT AGREEMENTS. Both AIMCO and NHP are dependent upon revenue received
for services performed under property management agreements relating to
properties owned by third parties. For the year ended December 31, 1996, AIMCO
and NHP derived approximately 7.1% and 26.8%, respectively, of their gross
revenues from management of properties owned by third parties, excluding, in the
case of NHP, reimbursements from property owners for on-site personnel and
general and administrative costs. Risks associated with the management of
properties owned by third parties include risks that management contracts will
be terminated by the property owner or will be lost in connection with a sale of
the property, contracts may not be renewed upon expiration or may not be renewed
on terms consistent with current terms, and rental revenues upon which
management fees are based will decline as a result of general real estate market
conditions or other factors and result in decreases in management fees. If
significant numbers of contracts are terminated or are not renewed, net income
from fee management operations could be adversely affected. Contracts with
unaffiliated third parties are for terms ranging from 30 days to 5 years, with
most contracts being terminable within one year or less. In general, management
contracts may be terminated or otherwise lost as a result a number of factors,
many of which are beyond the control of AIMCO or NHP, including: (i) disposition
of the property by the owner in the ordinary course or as a result of financial
distress of the property owner; (ii) the general partner's fiduciary duty to
other partners in the case of a partnership's owning the property; (iii) willful
misconduct, gross negligence or other conduct constituting grounds for
termination under such contracts; or (iv) termination by HUD or state housing
finance agencies, generally at their discretion, with respect to certain
affordable properties.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. As of July 31, 1997,
NHP's management portfolio included 60,312 affordable (44.9% of all units
managed by NHP) units in 473 properties (64.8% of all properties managed by
NHP). In addition, the NHP Real Estate Companies own interests in 54,310
affordable units (a substantial majority of which are managed by NHP). A
substantial portion of the affordable properties, and some conventional
properties in which the NHP Real Estate Companies own interests, were built or
acquired by the owners with the assistance of programs administered by HUD that
provide mortgage insurance, favorable financing terms, or rental assistance
payments to the owners. As a condition to the receipt of assistance under these
and other HUD programs, the properties must comply with various HUD
requirements, which typically include limits on rents to amounts approved by
HUD. HUD approval is required before NHP or AIMCO may be appointed as manager of
additional HUD-assisted properties. There can be no assurance that HUD approval
will be received with respect to any particular action for which it is required.
In addition, under its regulations, HUD has the authority to suspend or deny
participation in HUD programs within a geographic region or nationwide where a
manager has committed criminal acts or evidenced a pattern of consistently
violating its contractual and regulatory responsibilities to HUD. HUD has
recently increased its enforcement activity and, in connection with this
increase in activity, HUD has issued limited denials of participation to NHP as
a result of physical inspections and mortgage defaults at four properties
managed by NHP. The limited denials of participation, unless lifted, suspend
AIMCO's and NHP's ability to manage or acquire additional HUD-assisted
properties in Florida (until April 4, 1998), western Missouri and Kansas (until
June 5, 1998) and eastern Missouri (until June 24, 1998). NHP is in the process
of requesting that HUD lift the denials of participation, but HUD has so far
refused to do so, and NHP cannot determine whether HUD will reverse that
decision with respect to any of the affected regions. If HUD were to disapprove
NHP or AIMCO as property manager for one or more affordable properties, NHP's or
AIMCO's ability to obtain property management revenues from new affordable
properties would be impaired. In addition to the effects of HUD regulation on
NHP or AIMCO as a manager of
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affordable properties, the business of NHP or AIMCO may be indirectly affected
by regulations generally applicable to the entities owning affordable
properties. In particular, HUD limits the rents that may be charged on certain
HUD-assisted properties to approved amounts and, if permitted rents on a
property are insufficient to cover costs, a sale of the property may become
necessary which would result in a loss of management fee revenue. As of July 31,
1997, and in addition to the 425 HUD-assisted properties, NHP manages 48
properties that receive assistance from agencies other than HUD or are subject
to regulation by agencies other than HUD.
RISKS RELATING TO UNCERTAINTY REGARDING STATUS OF FEDERAL SUBSIDIES. NHP
manages approximately 43,800 units (including approximately 32,800 units
included in the NHP Properties) that are subsidized under Section 8 of the
United States Housing Act of 1937, as amended ("Section 8"). These subsidies are
generally provided pursuant to project-based contracts with the owners of the
properties or, with respect to a limited number of units managed by NHP,
pursuant to vouchers received by tenants. For the past several years, various
proposals have been advanced by HUD, Congress and others proposing the
restructuring of Section 8. Three such proposals are now pending before
Congress. These proposals generally seek to lower subsidized rents to market
levels, thereby reducing rent subsidies, and to lower required debt service
costs as needed to ensure financial viability at the reduced rents and rent
subsidies, but vary greatly as to how that result is to be achieved. Some
proposals include a phase-out of project-based subsidies on a
property-by-property basis upon expiration of a property's Housing Assistance
Payments Contract ("HAP Contract"), with a conversion to a tenant-based subsidy.
Under a tenant-based system, rent vouchers would be issued to qualified tenants
who then could elect to reside at a property of their choice, provided the
tenant has the financial ability to pay the difference between the selected
property's monthly rent and the value of the voucher, which would be established
based on HUD's regulated fair market rent for that geographic area. Congress has
not yet accepted any of these restructuring proposals. With respect to HAP
Contracts expiring on or before September 30, 1997, Congress has elected to
renew expiring HAP Contracts for one year terms, generally at existing rents.
Congress is now considering what action to take with respect to HAP Contracts
expiring October 1, 1997 through September 30, 1998. There can be no assurance
that the proposed changes would not significantly affect NHP's management
portfolio and the NHP Properties. Furthermore, there can be no assurance that
changes in Federal subsidies will not be more restrictive than those currently
proposed or that other changes in policy will not occur. Any such changes could
have a material adverse effect on NHP's property management revenues and the NHP
Properties.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS. Although each of Terry Considine,
Peter K. Kompaniez and Steven D. Ira, officers and/or directors of AIMCO, has
entered into an employment agreement with AIMCO, the loss of any of their
services could have an adverse effect on the operations of AIMCO.
POSSIBLE CONFLICT OF INTERESTS; TRANSACTIONS WITH AFFILIATES. AIMCO
presently manages the Managed Properties through Property Asset Management
Services, Inc. ("PAMS Inc.") and Property Asset Management Services, L.P. ("PAMS
LP," and together with PAMS Inc., the "Management Subsidiaries"). In order to
satisfy certain REIT requirements, the ownership of PAMS Inc. consists of the
Operating Partnership holding non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO holding all of
the voting common stock that represents a 5% economic interest. In addition,
PAMS LP provides property management services with respect to certain Managed
Properties in which certain officers and/or directors of AIMCO have separate
ownership interests. The fees for these services have been negotiated on an
individual basis and typically range from 3% to 6% of gross receipts for the
particular property. Although these arrangements were not negotiated on an
arm's-length basis, AIMCO believes, based on comparisons to the fees charged by
other real estate companies and by PAMS LP with respect to unaffiliated Managed
Properties in comparable locations, that the terms of such arrangements are fair
to AIMCO.
In order to satisfy certain requirements of the Code with respect to AIMCO's
continued qualification as a REIT, ANHI, which is the holder of 2,779,073 shares
of NHP Common Stock, representing approximately 21.5% of the shares outstanding
as of August 31, 1997, has an ownership structure that is similar to that of
PAMS Inc. described above, with Messrs. Considine and Kompaniez holding all the
voting common stock which represents a 5% economic interest in ANHI. At the time
ANHI acquired 6,496,073 shares of NHP Common Stock in the NHP Stock Purchase,
Messrs. Considine and Kompaniez acquired their interest in ANHI for
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promissory notes payable to ANHI in an aggregate amount of $3.2 million. In
August 1997 ANHI sold 3,717,000 shares of NHP Common Stock to AIMCO for $74.3
million. Messrs. Considine and Kompaniez continue to hold a 5% controlling
interest in ANHI, which continues to own 2,779,073 shares of NHP Common Stock.
In addition, AIMCO will use $40.0 million in net proceeds from an offering (the
"August 26 Offering") of AIMCO Common Stock to purchase approximately 2,000,000
shares of NHP Common Stock from ANHI. ANHI intends to distribute $38.0 million
of the proceeds from such sale to AIMCO and $2.0 million of such proceeds to
Messrs. Considine and Kompaniez. Messrs. Considine and Kompaniez intend to use
such proceeds to repay in part their outstanding promissory notes payable to
ANHI. Upon completion of the NHP Real Estate Reorganization, the vast majority
of the assets of the NHP Real Estate Companies will be owned by the
Unconsolidated Partnership, in which certain officers and/or directors of AIMCO
will have controlling ownership interests. Upon consummation of the Merger and
the NHP Reorganization, the operations of NHP will be conducted by ANHI and/or
other Unconsolidated Subsidiaries, in which certain officers and/or directors of
AIMCO will have controlling ownership interests. As a result of the ownership
interest held by certain officers and/or directors of AIMCO in PAMS Inc., the
Unconsolidated Partnership, ANHI and the other Unconsolidated Subsidiaries,
certain conflicts of interest may arise with respect to such persons in
transactions involving such entities or the assets held by such entities. For
example, in order to acquire an interest in such entities, such persons are
required to contribute assets to such entities in exchange therefor. Although
AIMCO believes that such contributions, and any additional contributions that
have been made to maintain a particular percentage interest, have been made on
terms that were fair to AIMCO and such entities, such transactions were not made
at arms'-length, AIMCO in some instances did not obtain independent valuations
of such entities and there can be no assurance that contributions by such
individuals to such entities were made in amounts which reflected the market
value of the associated economic interest. In addition, because AIMCO does not
have voting control over PAMS Inc., the Unconsolidated Partnership, ANHI or the
other Unconsolidated Subsidiaries, AIMCO may not be able to cause such entities
to take actions that would be in the interest of AIMCO and its stockholders or
prevent other actions that are not in the interest of AIMCO and its
stockholders.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. Qualification as a
REIT involves the application of highly technical and complex provisions of the
Code, for which there are only limited judicial or administrative
interpretations, and the determination of various factual matters and
circumstances not entirely within AIMCO's control. For example, in order to
qualify as a REIT, at least 95% of AIMCO's gross income in any year must be
derived from qualifying sources and AIMCO must make distributions to
stockholders aggregating annually at least 95% of its REIT taxable income
(excluding net capital gains). Although AIMCO believes that it has operated
since July 29, 1994, the date of its initial public offering, in a manner so as
to qualify as a REIT, no assurance can be given that AIMCO is or will remain so
qualified. See "Certain Federal Income Tax Considerations." Although AIMCO is
not aware of any pending tax legislation that would adversely affect AIMCO's
ability to operate as a REIT, no assurance can be given that new legislation,
regulations, administrative interpretations or court decisions will not change
the tax laws with respect to qualification as a REIT or the Federal income tax
consequences of such qualification.
In August 1997, AIMCO received an opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, tax counsel to AIMCO, concerning the qualification of AIMCO as a REIT.
In rendering this opinion, Skadden, Arps, Slate, Meagher & Flom LLP relied on
certain assumptions and representations by AIMCO (including the value of the
Management Subsidiaries and ANHI and of the Operating Partnership's ownership
interests therein and other items regarding AIMCO's ability to meet the various
requirements for qualification as a REIT) and on opinions of local counsel with
respect to matters of local law. The opinion is expressed based upon facts,
representations and assumptions as of its date, and Skadden, Arps, Slate,
Meagher & Flom LLP has no obligation to advise the holders of Class A Common
Stock of any subsequent change in the matters stated, represented or assumed or
any subsequent change in applicable law. No assurance can be given that AIMCO
will meet these requirements in the future, and a legal opinion is not binding
on the Internal Revenue Service (the "IRS").
AIMCO believes that the partnerships and limited liability companies in
which AIMCO has ownership interests (the "Subsidiary Partnerships") are properly
treated as partnerships for Federal income tax purposes. If
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the IRS were to challenge successfully the tax status of any of the Subsidiary
Partnerships as partnerships for Federal income tax purposes, such Subsidiary
Partnerships would be treated as associations taxable as corporations. As a
consequence, the character of AIMCO's assets and items of gross income would
change and thereby preclude AIMCO from qualifying as a REIT. In addition, the
imposition of a corporate tax on the Subsidiary Partnerships would reduce the
amounts that the Subsidiary Partnerships could distribute to the Operating
Partnership and AIMCO, and that AIMCO could then distribute to the holders of
AIMCO Common Stock. See "Certain Federal Income Tax Considerations."
If in any taxable year AIMCO fails to qualify as a REIT, AIMCO would not be
allowed a deduction for dividends to stockholders in computing taxable income
and would be subject to Federal income tax on its taxable income at corporate
rates. As a result of the additional tax liability, AIMCO might need to borrow
funds or liquidate certain investments on terms that may be disadvantageous to
AIMCO in order to pay the applicable tax and AIMCO would not be compelled to
make distributions under the Code. Unless entitled to relief under certain
statutory provisions, AIMCO would also be disqualified from treatment as a REIT
for the four taxable years following the year during which qualification is
lost. Although AIMCO currently intends to operate in a manner designed to
qualify as a REIT, it is possible that future economic, market, legal, tax or
other considerations may cause AIMCO to fail to qualify as a REIT or may cause
the Board of Directors of AIMCO to revoke the REIT election. See "--Significant
Indebtedness; Refinancing Risks", "--Real Estate Risks" and "Certain Federal
Income Tax Considerations" in the accompanying Prospectus.
Certain requirements for REIT qualification may in the future limit AIMCO's
ability to conduct or increase the property management and asset management
operations of the Management Subsidiaries, ANHI and NHP following the Merger
without jeopardizing AIMCO's qualification as a REIT. See "Certain Federal
Income Tax Considerations" in the accompanying Prospectus.
In addition, if AIMCO fails to qualify as a REIT, the agreement pursuant to
which AIMCO issued its Class B Cumulative Preferred Stock, par value $.01 per
share (the "Class B Preferred Stock"), provides that the original purchaser may
require AIMCO to repurchase such investor's AIMCO Class B Preferred Stock, in
whole or in part, at a price of $105 per share, plus accrued and unpaid
dividends to the date of repurchase. Such investor acquired and currently owns
750,000 shares of Class B Preferred Stock.
SHARES AVAILABLE FOR FUTURE SALE. Consummation of the Merger will increase
the amount of outstanding shares of Class A Common Stock by between
approximately 2.7 million shares and 5.5 million shares (or approximately 10% to
19% after taking into account the shares issued pursuant to this Prospectus
Supplement), excluding any shares issued to ANHI, depending upon the type of
consideration elected by NHP stockholders in the Merger. As a result of the NHP
Stock Purchase, AIMCO issued approximately 2.1 million shares of Class A Common
Stock to Demeter and the Capricorn Sellers, which may be sold pursuant to a
registration statement that AIMCO is required to use its best efforts to cause
to become effective within 10 days after the effective date of the Merger. In
addition, following the Merger, AIMCO and its subsidiaries will have outstanding
options, warrants to purchase Class A Common Stock, limited partner interests in
the Operating Partnership ("OP Units") and other securities convertible into
Class A Common Stock, that, if exercised or converted, as applicable, would
result in the issuance of approximately 7.1 million shares of Class A Common
Stock. All of the shares of Class A Common Stock issued to NHP stockholders as
consideration in the Merger will be immediately available for sale in the public
markets. All of the shares of Class A Common Stock described above will be
available for sale in the public markets from time to time pursuant to
exemptions from registration or upon registration. In addition, since receipt of
consideration in the Merger will cause NHP stockholders to recognize capital
gain or loss, NHP stockholders (particularly those stockholders who elect to
receive entirely Class A Common Stock as consideration in the Merger) may sell
their shares of Class A Common Stock to pay any taxes due upon receipt of the
consideration in the Merger. Sales of substantial amounts of shares of Class A
Common Stock, or the perception that such sales could occur, could adversely
affect the prevailing market prices for the shares of Class A Common Stock. No
prediction can be made, however, as to the effect, if any, of future sales of
such shares, or the availability of such shares for future sale, on the market
price of Class A Common Stock prevailing from time to time.
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NHP ACQUISITION
THE MERGER
On April 21, 1997, AIMCO, Merger Sub and NHP entered into the Merger
Agreement. Pursuant to the Merger Agreement, Merger Sub will be merged with and
into NHP, with NHP being the surviving corporation after the Merger and becoming
a wholly owned subsidiary of AIMCO. Upon consummation of the Merger, each
outstanding share of NHP Common Stock, other than NHP Common Stock held by NHP,
AIMCO or Merger Sub, will be converted into the right to receive (i) 0.74766
shares of Class A Common Stock, or (ii) at the election of the holder, 0.37383
shares of Class A Common Stock and $10.00 in cash. Pursuant to the AIMCO Charter
and subject to certain exceptions specified therein, no person may own, or be
deemed to own, more than 8.7% of the outstanding shares of Class A Common Stock
and Class B Common Stock, par value $.01 per share, of AIMCO. Any person who
would otherwise be entitled to receive shares of Class A Common Stock in the
Merger in excess of such ownership limit ("Excess Shares") will receive instead
an amount in cash equal to the product of such Excess Shares and $26.75. In lieu
of any fractional shares of Class A Common Stock, each holder of NHP Common
Stock who would otherwise be entitled to receive such fractional shares will be
paid cash equal to the product of such fractional shares and $26.75. In
accordance with the Merger Agreement, on May 9, 1997, NHP distributed rights
("Rights") to its stockholders that will entitle them to receive shares of the
WMF Group, Ltd., a Delaware corporation ("WMF"), NHP's commercial mortgage
banking subsidiary, upon the effectiveness of the Merger or on December 1, 1997
if the Merger has not yet occurred. The Merger is conditioned on, among other
things, the approval of the stockholders of AIMCO and NHP (excluding AIMCO) and
certain governmental approvals.
THE NHP STOCK PURCHASE
On May 5, 1997, ANHI acquired 6,496,073 shares of NHP Common Stock,
representing 50.3% of the shares issued and outstanding shares as of August 31,
1997, from Demeter and the Capricorn Sellers. The NHP Stock Purchase was made
pursuant to a Stock Purchase Agreement, dated as of April 16, 1997 (the "Stock
Purchase Agreement"), by and among AIMCO, Demeter and Capricorn. As
consideration for such shares of NHP Common Stock, Demeter received $72.6
million in cash and 1,224,463 shares of Class A Common Stock, and the Capricorn
Sellers received 918,394 shares of Class A Common Stock. On August 26, 1997
AIMCO issued 2.4 million shares of Class A Common Stock to an institutional
investor and used the net proceeds from such sale to purchase 3,717,000 shares
of NHP Common Stock from ANHI. See "Additional Financings." The Stock Purchase
Agreement also provides for AIMCO to acquire up to 434,049 additional shares of
NHP Common Stock (the "Remaining Shares") from Demeter and Capricorn. In
connection with the August 26 Offering, AIMCO has entered into an agreement to
issue to an institutional investor 2,373,418 shares of Class A Common Stock and
intends to use the proceeds to purchase Remaining Shares and 2,000,000 shares of
NHP Common Stock from ANHI. See "Additional Financings." Pursuant to the Stock
Purchase Agreement, Demeter and the Capricorn Sellers are entitled to receive
the shares of WMF common stock to be distributed in respect of the Rights
associated with the shares of NHP Common Stock acquired by ANHI in the NHP Stock
Purchase and any Remaining Shares acquired by AIMCO or its subsidiaries or,
under certain circumstances, in lieu of such shares of WMF common stock, an
additional cash payment of $3.05 for each such share of NHP Common Stock sold by
them.
THE NHP REAL ESTATE ACQUISITION
On June 3, 1997, AIMCO acquired the NHP Real Estate Companies from Demeter,
Capricorn, Phemus Corporation, a Massachusetts corporation and an affiliate of
Demeter ("Phemus"), J. Roderick Heller, III, the President, Chairman and Chief
Executive Officer of NHP, and NHP Partners Two LLC, a Delaware limited liability
company ("NHP Partners Two LLC"). The NHP Real Estate Acquisition was made
pursuant to a Real Estate Acquisition Agreement, dated as of May 22, 1997 (the
"Real Estate Agreement"), by and among AIMCO,
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the Operating Partnership, Demeter, Capricorn, Phemus, Mr. Heller and NHP
Partners Two LLC. As consideration, AIMCO paid $54.8 million in cash and issued
warrants to purchase 399,999 shares of Class A Common Stock at an exercise price
of $36.00 per share (the "Warrants"). The NHP Real Estate Companies own
interests in partnerships that own 534 NHP Properties containing 87,659 units, a
captive insurance subsidiary and certain related assets. Prior to NHP's initial
public offering in August 1995, the NHP Real Estate Companies were owned by NHP.
A substantial majority of the NHP Properties are currently managed by NHP
pursuant to a long-term management agreement. AIMCO is currently engaged in the
NHP Real Estate Reorganization, which will result in the vast majority of the
assets of the NHP Real Estate Companies being owned by the Unconsolidated
Partnership.
OTHER RECENT DEVELOPMENTS
ADDITIONAL FINANCINGS
In August 1997, AIMCO sold 750,000 shares of newly issued Class B Preferred
Stock to an institutional investor for $75 million in cash in a private
transaction. The Class B Preferred Stock pays quarterly dividends equal to
7.125% of the Class B Preferred Stock's $100 per share liquidation preference,
on an annual basis (subject to adjustment), and is convertible into shares of
Class A Common Stock at a conversion ratio of 3.28407 shares of Class A Common
Stock for each share of Class B Preferred Stock (subject to anti-dilution
adjustments). The Class B Preferred Stock is senior to Class A Common Stock as
to dividends and upon liquidation. The proceeds from the sale of the Class B
Preferred Stock were used to repay borrowings outstanding under the Credit
Facility and to provide working capital.
On August 21, 1997 AIMCO sold 2,400,000 shares of Class A Common Stock at a
price of $31.60 per share. AIMCO used substantially all of the net proceeds of
the offering of approximately $74.3 million to purchase 3,717,000 shares of NHP
Common Stock from ANHI. ANHI used the proceeds of its sale of such shares to
repay in full outstanding borrowings under the ANHI Credit Facility.
On August 26, 1997, pursuant to the August 26 Offering, AIMCO agreed to sell
2,373,418 shares of AIMCO Common Stock directly to an institutional investor at
a price of $31.60 per share. AIMCO will use approximately $40.0 million of net
proceeds from the August 26 Offering to purchase 2.0 million shares of NHP
Common Stock from ANHI and will use approximately $7.0 million of net proceeds
to purchase Remaining Shares. AIMCO intends to use the remaining net proceeds
from the August 26 Offering of approximately $26.5 million for general business
purposes, including the repayment of outstanding indebtedness. ANHI intends to
distribute the proceeds from the sale of shares of NHP Common Stock to the
Operating Partnership and Messrs. Considine and Kompaniez. As holders of an
aggregate 5% interest in ANHI, Messrs. Considine and Kompaniez are expected to
receive $2.0 million in proceeds from such sale and to use such proceeds to
repay in part outstanding promissory notes payable by them to ANHI in an
aggregate principal amount of $3.2 million. The loans were incurred by them to
acquire their interest in ANHI. The August 26 Offering is scheduled to close on
or about September 12, 1997, but, in any event, prior to the offering of shares
hereunder.
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THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock Offered Hereby
(the "Offering")................... 279,000 shares
Class A Common Stock to be
Outstanding After the Offering
(1)(2)(3)(4)....................... 28,267,752 shares
Use of Proceeds...................... AIMCO will use the net proceeds from the Offering
(approximately $9.0 million) for general business
purposes, including the repayment of outstanding
indebtedness. See "Use of Proceeds."
New York Stock Exchange Symbol....... "AIV"
</TABLE>
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(1) Excludes (i) an aggregate of 3,344,725 shares of Class A Common Stock which
may be issued in exchange for 3,344,725 outstanding OP Units which may be
tendered for redemption; (ii) 325,000 shares of Class A Common Stock
issuable upon conversion of 325,000 shares of Class B Common Stock if
certain performance standards are met; (iii) 956,208 shares of Class A
Common Stock issuable upon exercise of outstanding options and warrants; and
(iv) 2,463,053 shares of Class A Common Stock which may be issued upon
conversion of 750,000 shares of Class B Preferred Stock.
(2) Does not give effect to the issuance of up to 5,466,977 shares of Class A
Common Stock in connection with the Merger (other than shares issuable to
ANHI). See "NHP Acquisition".
(3) Assumes the issuance of 2,373,418 shares of Class A Common Stock pursuant to
the August 26 Offering.
(4) Assumes the issuance of 61,364 shares of Class A Common Stock in connection
with the purchase of the Remaining Shares.
USE OF PROCEEDS
AIMCO intends to use the net proceeds from the Offering of approximately
$9.0 million for general business purposes, including the repayment of
outstanding indebtedness.
S-16
<PAGE>
PLAN OF DISTRIBUTION
AIMCO will sell the Class A Common Stock offered hereby directly to an
institutional investor. The Offering made hereunder is conditioned upon
consummation of the August 26 Offering. No underwriting fees or commissions will
be paid in connection with the sale. The Company has agreed to pay Smith Barney
Inc. a financial advisory fee of approximately $184,838. AIMCO may from time to
time sell Class A Common Stock directly to other persons and may engage in other
financing transactions, including public offerings and private placements of
equity securities.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
TAXATION OF FOREIGN SHAREHOLDERS
The following discussion of recently enacted legislation, affecting the
ownership and disposition of the Class A Common Stock by a Non-U.S. Holder (as
defined below), supplements the discussion set forth in the accompanying
Prospectus under the heading "Certain Federal Income Tax Considerations." A
"Non-U.S. Holder" is any person other than (i) a citizen or resident of the
United States, (ii) a corporation or partnership created or organized in the
United States or under the laws of the United States or any state thereof, (iii)
an estate whose income is includable in gross income for U.S. Federal income tax
purposes regardless of its source, or (iv) a trust the income of which is
includible in gross income for U.S. Federal income tax purposes, regardless of
its source or, for tax years beginning after December 31, 1996 (and, if a
trustee so elects, for tax years after August 20, 1996), a trust if a United
States court is able to exercise primary supervision over the administration of
such trust and one or more United States fiduciaries have the authority to
control all substantial decisions of such trust. This discussion is based on
current law and is for general information only.
Unless the Class A Common Stock constitutes a United States real property
interest ("USRPI") within the meaning of the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"), distributions by AIMCO which are not dividends out
of the current and accumulated earnings and profits of AIMCO will not be subject
to U.S. income or withholding tax. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of the
current and accumulated earnings and profits, the distribution will be subject
to withholding tax at the rate applicable to dividends. A Non-U.S. Holder may
seek a refund of such amounts from the IRS if it is subsequently determined that
such distribution was, in fact, in excess of current and accumulated earnings
and profits of the Company.
Notwithstanding the discussion in the preceding paragraph, if the Class A
Common Stock constitutes a USRPI, under recently enacted legislation which
became effective in August 1996, such distribution will be subject to 10 percent
withholding and may also be subject to tax under FIRPTA. The Class A Common
Stock will not constitute a USRPI so long as AIMCO is a "domestically controlled
REIT." AIMCO believes that it currently is a domestically controlled REIT.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Recently proposed United States Treasury Department regulations (the
"Proposed Regulations") could affect the procedures to be followed by holders of
Class A Common Stock in complying with United States Federal withholding, backup
withholding and information reporting rules. The Proposed Regulations are not
currently effective but, if finalized in their current form, would be effective
for payments made after December 31, 1997. Holders are urged to consult their
tax advisors regarding the tax consequences, if any, of the Proposed
Regulations, on the purchase, ownership and sale of the Class A Common Stock.
RECENT LEGISLATION APPLICABLE TO REITS
The Taxpayer Relief Act of 1997 enacted on August 5, 1997 (the "Act") made
various changes to the Code, including to the provisions that govern the Federal
income tax treatment of REITs. These changes to the REIT provisions are
generally effective for taxable years beginning after the date of the enactment
of the Act. For most REITs, including AIMCO, these changes to the REIT
provisions are therefore not effective until taxable years beginning on January
1, 1998. The discussion of the Federal income tax treatment of a REIT in the
Prospectus
S-17
<PAGE>
under the heading "Certain Federal Income Tax Considerations" does not reflect
the changes made by the Act to the REIT provisions of the Code.
The Act makes a number of changes relating to the qualification and taxation
of REITs including the following. First, a REIT will be able to provide certain
services directly without disqualifying all of the rent from the property where
the services are provided if the payment for such services does not exceed 1% of
the gross income from the property. Second, a REIT's wholly-owned subsidiary
will be treated as a "qualified REIT subsidiary" even where the REIT had not
always owned such corporation. Third, the Act repeals the requirement that a
REIT must derive less than 30% of its gross income from the sale of stock or
securities held for less than one year, real property held less than four years,
and property sold or disposed of in a "prohibited transaction." Finally, a REIT
will be able to elect to retain and pay income tax on net long-term capital
gains. REIT shareholders would include in income their share of the long-term
capital gains retained by the REIT and would receive a credit for their share of
the taxes paid by the REIT.
As a result of other changes made by the Act to the Code, capital gains of
individuals derived in respect of capital assets held for at least one year are
eligible for reduced rates of taxation depending upon the holding period of such
capital assets. Each prospective investor should consult his own tax advisor
regarding the tax consequences to him of the changes made by the Act.
LEGAL MATTERS
Certain legal matters will be passed upon for AIMCO by Skadden, Arps, Slate,
Meagher & Flom LLP, Los Angeles, California. Skadden, Arps, Slate, Meagher &
Flom LLP will rely on Piper & Marbury L.L.P., Baltimore, Maryland as to certain
matters of Maryland law.
S-18
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
REGISTRATION NO. 333-26415
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 84-1259577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
--------------------------
<TABLE>
<S> <C>
1873 SOUTH BELLAIRE STREET, 17TH FLOOR TERRY CONSIDINE
DENVER, COLORADO 80222 CHAIRMAN OF THE BOARD OF DIRECTORS
(303)757-8101 1873 SOUTH BELLAIRE STREET, 17TH FLOOR
(Address, including zip code, and DENVER, COLORADO 80222
telephone number, including area code, (303)757-8101
of registrant's principal executive (Name, address, including zip code,
offices) and telephone number, including area
code, of agent for service)
</TABLE>
--------------------------
COPY TO:
THOMAS C. JANSON, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If the Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
$1,000,000,000
DEBT SECURITIES
PREFERRED STOCK
CLASS A COMMON STOCK
WARRANTS
Apartment Investment and Management Company (the "Company") may offer from
time to time (i) senior, senior subordinated or subordinated debt securities
(the "Debt Securities") consisting of debentures, notes and/or other unsecured
evidences of indebtedness, (ii) shares of preferred stock, par value $.01 per
share (the "Preferred Stock"), (iii) shares of Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), and (iv) warrants to purchase Debt
Securities, Preferred Stock or Class A Common Stock, as shall be designated by
the Company at the time of the offering (the "Warrants"). The Debt Securities,
the Preferred Stock, the Class A Common Stock and the Warrants are collectively
referred to as the "Securities" and will have an aggregate initial offering
price of up to $1,000,000,000. The Securities may be offered separately or
together (in any combination) and as separate series, in any case, in amounts,
at prices and on terms to be determined at the time of sale.
The form in which the Securities are to be issued, and the terms of such
Securities, including without limitation, their specific designation, aggregate
principal amount or aggregate initial offering price, maturity, if any, rate and
times of payment of interest or dividends, if any, redemption, conversion,
exchange and sinking fund terms, if any, voting or other rights, if any,
exercise price and detachability, if any, and other specific terms will be set
forth in a Prospectus Supplement (the "Prospectus Supplement"), together with
the terms of offering of such Securities. If so specified in the applicable
Prospectus Supplement, Debt Securities of a series may be issued in whole or in
part in the form of one or more temporary or permanent global securities. The
Prospectus Supplement will also contain information, as applicable, about
certain material United States Federal income tax considerations relating to the
particular Securities offered thereby. The Prospectus Supplement will also
contain information, where applicable, as to any listing on a national
securities exchange of the Securities covered by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the Securities, their names,
and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the
information set forth, in the applicable Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of such
Securities.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" SET FORTH IN THE APPLICABLE PROSPECTUS SUPPLEMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
May 22, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY OR BY ANY PROSPECTUS SUPPLEMENT OR OTHER SECURITIES OF THE
COMPANY. SUCH TRANSACTIONS MAY BE EFFECTED THROUGH THE NEW YORK STOCK EXCHANGE
OR OTHERWISE. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION"
INCLUDED ELSEWHERE HEREIN AND IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; 7
World Trade Center, 13th Floor, New York, New York 10048; and Citicorp Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained at prescribed rates from the Public Reference Room of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
can also be inspected at the New York Stock Exchange, 20 Broad Street, New York,
New York 10005. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities offered hereby. As permitted
by the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. Such additional information is available for inspection
and copying at the offices of the Commission. Statements contained in this
Prospectus, in any Prospectus Supplement or in any document incorporated by
reference herein or therein as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to, or incorporated by reference in, the Registration Statement, each
such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Company with the Commission
pursuant to the Exchange Act (File No. 1-13232), are incorporated herein by
reference:
(i) Annual Report on Form 10-K for the year ended December 31, 1996;
(ii) Quarterly Report on Form 10-Q/A for the quarter ended September 30,
1996;
(iii) Current Reports on Form 8-K dated December 19, 1996, February 19,
1997, April 16, 1997 and May 5, 1997 (and all amendments thereto); and
(iv) the description of the Class A Common Stock which is contained in a
Registration Statement on Form 8-A (File No. 1-13232) filed July 19, 1994,
including any amendment or reports filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing such documents.
2
<PAGE>
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document that is or is deemed to be incorporated by reference herein modifies or
supersedes such previous statement. Any statement so modified or superseded
shall not be deemed to constitute a part of this Prospectus, except as so
modified or superseded.
Copies of all documents which are incorporated herein by reference (other
than the exhibits to such documents, unless such exhibits are specifically
incorporated by reference herein), will be provided without charge to any person
to whom this Prospectus has been delivered, upon request. Requests for such
copies should be directed to Apartment Investment and Management Company, 1873
South Bellaire Street, 17th Floor, Denver, Colorado 80222, Attention: Corporate
Secretary, telephone number (303) 757-8101.
------------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus or
any Prospectus Supplement and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or any underwriter or agent. This Prospectus and any Prospectus Supplement do
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction where, or to any person to whom,
it is unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus or any Prospectus Supplement nor any sale made hereunder or
thereunder shall, under any circumstances, create any implication that the
information herein or therein is correct as of any time subsequent to their
respective dates.
3
<PAGE>
THE COMPANY
Apartment Investment and Management Company, a Maryland corporation
(together with its subsidiaries and other controlled entities, the "Company"),
is a self-administered and self-managed real estate investment trust (a "REIT")
engaged in the ownership, acquisition, development, expansion and management of
multifamily apartment properties. AIMCO Properties, L.P., a Delaware limited
partnership (the "Operating Partnership"), and its subsidiaries conduct
substantially all of the operations of the Company. As of March 31, 1997, the
Company held approximately an 86.0% interest in the Operating Partnership.
Through its controlling interests in the Operating Partnership and other limited
partnerships and limited liability companies (collectively, the "Subsidiary
Partnerships"), the Company owns or controls multifamily apartment properties
(the "Owned Properties") and manages other multifamily apartment properties (the
"Managed Properties").
As of March 31, 1997, the Company had 94 Owned Properties containing 23,764
units and 131 Managed Properties, including 17,731 apartment units managed for
third parties and affiliates. The Company's third-party property and asset
management business is principally conducted by Property Asset Management
Services, L.P., a Delaware limited partnership ("PAMS LP"). The Operating
Partnership owns a 1% interest in, and is the general partner of, PAMS LP. The
sole limited partner of PAMS LP is Property Asset Management Services, Inc., a
Delaware corporation ("PAMS Inc." and, together with PAMS LP, the "Management
Subsidiaries"), which owns a 99% interest in PAMS LP.
The Owned Properties are located in the Sunbelt regions of the United
States. The distribution of the Owned Properties reflects the Company's focus on
growth markets and its belief that geographic diversification will help to
insulate the portfolio from regional and economic fluctuations. The Company also
seeks to create concentrations of properties within each of its markets in order
to achieve economies of scale in management and operation.
In April 1997, the Company entered into agreements to acquire NHP
Incorporated, a Delaware corporation ("NHP"). NHP provides a broad array of real
estate services nationwide including property management, and asset management,
as well as a group of related services including equity investments, purchasing,
risk management and home health care. According to 1995 year-end data published
by the National Multi Housing Council and April 1994 data published by the
United States Department of Housing and Urban Development, NHP is the nation's
second largest property manager of multifamily properties, based on the number
of units managed. As of December 31, 1996, NHP's management portfolio includes
457 affordable properties and 260 conventional properties containing 58,504
affordable units and 74,540 conventional units located in 38 states, the
District of Columbia and Puerto Rico.
The Company is also continuing to negotiate the terms of a definitive
agreement with Demeter Holdings Corporation, a Massachusetts corporation, and
Capricorn Investors, L.P., a Delaware limited partnership, Phemus Corporation, a
Massachusetts corporation and an affiliate of Demeter, and J. Roderick Heller,
III, relating to the acquisition of certain entities formerly owned by NHP that
own direct and indirect interests in partnerships that own conventional and
affordable multifamily apartment properties managed primarily by NHP, along with
a captive insurance subsidiary and certain related assets (collectively, the
"NHP Real Estate Companies"). The proposed acquisitions of NHP and the NHP Real
Estate Companies are subject to a number of contingencies, including, in some
cases, obtaining approvals of governmental authorities (including HUD),
shareholders of the Company and NHP, and other third parties. Accordingly, there
can be no assurance that either of such transactions will be completed. If
completed, the NHP Acquisition is subject to a number of risks.
The Company's headquarters are located at 1873 South Bellaire Street, 17th
Floor, Denver, Colorado 80222 and its telephone number is (303) 757-8101.
4
<PAGE>
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
working capital and general corporate purposes, which may include the repayment
of outstanding indebtedness, the financing of future acquisitions (which may
include real properties, interests therein or real estate-related securities)
and the improvement of the Owned Properties. Pending the use thereof, the
Company intends to invest any net proceeds in short-term, interest-bearing
securities. The Company will not receive any proceeds from the registered resale
of any Securities pursuant to this Prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the quarters ended
March 31, 1997 and March 31, 1996 was 1.5:1 and 1.5:1 respectively and for the
years ended December 31, 1996 and December 31, 1995 and the period from January
10, 1994 (the date of formation) to December 31, 1994 was 1.6:1, 2.1:1 and
5.8:1, respectively. Prior to the completion of the initial public offering (the
"Initial Offering"), the ratio of earnings to fixed charges of the AIMCO
Predecessors for the years ended December 31, 1993 and 1992 was 1.2:1 and 1.0:1,
respectively. The earnings of the AIMCO Predecessors for the period from January
1, 1994 to July 28, 1994 were inadequate to cover fixed charges by $1,463,000.
The Company's ratio of earnings to combined fixed charges and preferred
stock dividends for the quarters ended March 31, 1997 and March 31, 1996 was
1.5:1 and 1.5:1 respectively and for the years ended December 31, 1996 and
December 31, 1995 and the period from January 10, 1994 to December 31, 1994 was
1.6:1, 1.5:1 and 2.0:1, respectively. The AIMCO Predecessors did not have any
shares of Preferred Stock outstanding during the period from January 1, 1992
through July 28, 1994.
The ratio of earnings to fixed charges for the Company was computed by
dividing earnings by fixed charges. For this purpose, "earnings" consists of
income before minority interest plus fixed charges (other than any interest
which has been capitalized); and "fixed charges" consists of interest expense
(including amortization of loan costs) and interest which has been capitalized.
The ratio of earnings to combined fixed charges and preferred stock
dividends for the Company was computed by dividing earnings by the total of
fixed charges and preferred stock dividends. For this purpose, "earnings"
consists of income before minority interest plus fixed charges (other than any
interest which has been capitalized); "fixed charges" consists of interest
expense (including amortization of loan costs) and interest which has been
capitalized; and "preferred stock dividends" consists of the amount of pre-tax
earnings that would be required to cover preferred stock dividend requirements.
The ratio of earnings to fixed charges for the AIMCO Predecessors was
computed by dividing earnings by fixed charges. For this purpose, "earnings"
consists of income (loss) before extraordinary items and income taxes plus fixed
charges; and "fixed charges" consists of interest expense (including
amortization of loan costs). No preferred stock was issued by the AIMCO
Predecessors.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
5
<PAGE>
The Debt Securities may be issued, from time to time, in one or more series,
and will constitute either senior Debt Securities ("Senior Debt Securities"),
senior subordinated Debt Securities ("Senior Subordinated Debt Securities") or
subordinated Debt Securities ("Subordinated Debt Securities"). Senior Debt
Securities may be issued under an Indenture (the "Senior Debt Securities
Indenture") to be entered into between the Company and a trustee to be named in
the applicable Prospectus Supplement (the "Senior Debt Securities Trustee"). The
Senior Subordinated Debt Securities may be issued from time to time under an
Indenture (the "Senior Subordinated Debt Securities Indenture") to be entered
into between the Company and a trustee to be named in the applicable Prospectus
Supplement (the "Senior Subordinated Debt Securities Trustee"). The Subordinated
Debt Securities may be issued from time to time under an Indenture (the
"Subordinated Debt Securities Indenture") to be entered into between the Company
and a trustee to be named in the applicable Prospectus Supplement (the
"Subordinated Debt Securities Trustee").
The Senior Debt Securities Indenture, the Senior Subordinated Debt
Securities Indenture, and the Subordinated Debt Securities Indenture are
referred to herein individually as an "Indenture" and, collectively, as the
"Indentures." The Senior Debt Securities Trustee, the Senior Subordinated Debt
Securities Trustee and the Subordinated Debt Securities Trustee are referred to
herein individually as a "Trustee" and collectively as the "Trustees." Forms of
the Indentures are filed as exhibits to the Registration Statement of which this
Prospectus is a part. The Indentures will be subject to and governed by the
Trust Indenture Act of 1939, as amended (the "TIA"). Capitalized terms used in
this section which are not otherwise defined in this Prospectus shall have the
meanings set forth in the Indenture to which they relate. The statements made
under this heading relating to the Debt Securities and the Indentures are
summaries of the anticipated provisions of the Debt Securities and the
Indentures, do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all the provisions of the Indentures and the
Debt Securities, including the definitions therein of certain terms.
The Debt Securities will be direct, unsecured obligations of the Company.
The Indentures do not limit the aggregate principal amount of Debt Securities
that may be issued thereunder and provide that Debt Securities may be issued
thereunder from time to time in one or more series. Under the Indentures, the
Company will have the ability to issue Debt Securities with terms different from
those of Debt Securities previously issued, without the consent of the holders
of previously issued series of Debt Securities, in an aggregate principal amount
determined by the Company.
The applicable Prospectus Supplement or Prospectus Supplements relating to
any Senior Subordinated Debt Securities or Subordinated Debt Securities will set
forth the aggregate amount of outstanding indebtedness, as of the most recent
practicable date, that by the terms of such Debt Securities would be senior to
such Debt Securities and any limitation on the issuance of additional senior
indebtedness.
Debt Securities may be issued and sold at a discount below their principal
amount ("Discount Securities"). Special United States Federal income tax
considerations applicable to Debt Securities issued with original issue
discount, including Discount Securities, will be described in more detail in any
applicable Prospectus Supplement. Even if Debt Securities are not issued at a
discount below their principal amount, such Debt Securities may, for United
States Federal income tax purposes, be deemed to have been issued with "original
issue discount" ("OID") because of certain interest payment characteristics. In
addition, special United States Federal tax considerations or other restrictions
or terms applicable to any Debt Securities offered exclusively to United States
Aliens or denominated in a currency other than United States dollars will be set
forth in a Prospectus Supplement relating thereto.
The applicable Prospectus Supplement or Prospectus Supplements will
describe, among other things, the following terms of the Debt Securities offered
thereby (the "Offered Debt Securities"): (i) the title of the Offered Debt
Securities; (ii) any limit on the aggregate principal amount of the Offered Debt
Securities; (iii) whether the Offered Debt Securities may be represented
initially by a
6
<PAGE>
Debt Security in temporary or permanent global form, and if so, the initial
Depositary with respect to such temporary or permanent global Debt Security and
whether and the circumstances under which beneficial owners of interests in any
such temporary or permanent global Debt Security may exchange such interests for
Debt Securities of such series and of like tenor of any authorized form and
denomination; (iv) the price or prices at which the Offered Debt Securities will
be issued; (v) the date or dates on which the principal of the Offered Debt
Securities is payable or the method of determination thereof; (vi) the place or
places where and the manner in which the principal of and premium, if any, and
interest, if any, on such Offered Debt Securities will be payable and the place
or places where such Offered Debt Securities may be presented for transfer and,
if applicable, conversion or exchange; (vii) the rate or rates at which the
Offered Debt Securities will bear interest, or the method of calculating such
rate or rates, if any, and the date or dates from which such interest, if any,
will accrue; (viii) the dates (the "Interest Payment Dates"), if any, on which
any interest on the Offered Debt Securities will be payable, and the regular
record date (the "Regular Record Date") for any interest payable on any Offered
Debt Securities; (ix) the right or obligation, if any, of the Company to redeem
or purchase Debt Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a holder thereof, the conditions, if
any, giving rise to such right or obligation, and the period or periods within
which, and the price or prices at which and the terms and conditions upon which
Debt Securities of the series shall be redeemed or purchased, in whole or part,
and any provisions for the remarketing of such Debt Securities; (x) whether such
Offered Debt Securities are convertible or exchangeable into other debt or
equity securities of the Company, and, if so, the terms and conditions upon
which such conversion or exchange will be effected including the initial
conversion or exchange price or rate and any adjustments thereto, the conversion
or exchange period and other conversion or exchange provisions; (xi) any terms
applicable to such Offered Debt Securities issued at original issue discount
below their stated principal amount, including the issue price thereof and the
rate or rates at which such original issue discount will accrue; (xii) if other
than the principal amount thereof, the portion of the principal amount of the
Offered Debt Securities which will be payable upon declaration or acceleration
of the maturity thereof pursuant to an Event of Default; (xiii) any deletions
from, modifications of or additions to the Events of Default or covenants of the
Company with respect to such Offered Debt Securities, whether or not such Events
of Default or covenants are consistent with the Events of Default or covenants
set forth herein; (xiv) any special United States Federal income tax
considerations applicable to the Offered Debt Securities; and (xv) any other
terms of the Offered Debt Securities not inconsistent with the provisions of the
Indenture. The applicable Prospectus Supplement will also describe the following
terms of any series of Senior Subordinated Debt Securities or Subordinated Debt
Securities offered hereby in respect of which this Prospectus is being
delivered: (a) the rights, if any, to defer payments of interest on the Senior
Subordinated Debt Securities or Subordinated Debt Securities of such series by
extending the interest payment period, and the duration of such extensions, and
(b) the subordination terms of the Senior Subordinated Debt Securities or
Subordinated Debt Securities of such series. The foregoing is not intended to be
an exclusive list of the terms that may be applicable to any Offered Debt
Securities and shall not limit in any respect the ability of the Company to
issue Debt Securities with terms different from or in addition to those
described above or elsewhere in this Prospectus provided that such terms are not
inconsistent with the applicable Indenture. Any such Prospectus Supplement will
also describe any special provisions for the payment of additional amounts with
respect to the Offered Debt Securities.
Since the operations of the Company are currently conducted principally
through subsidiaries, the Company's cash flow and its consequent ability to
service debt, including the Debt Securities, are dependent, in large part, upon
the earnings of its subsidiaries and the distribution of those earnings to the
Company, whether by dividends, loans or otherwise. The payment of dividends and
the making of loans and advances to the Company by its subsidiaries may be
subject to statutory or contractual restrictions, are contingent upon the
earnings of those subsidiaries and are subject to various business
considerations. Any right of the Company to receive assets of any of its
subsidiaries upon their liquidation or reorganization (and the consequent right
of the holders of the Debt Securities to
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participate in those assets) will be effectively subordinated to the claims of
that subsidiary's creditors (including trade creditors), except to the extent
that the Company is itself recognized as a creditor of such subsidiary, in which
case the claims of the Company would still be subordinate to any security
interests in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The Debt Securities of a series may be issued solely as registered Debt
Securities. Debt Securities of a series may be issuable in whole or in part in
the form of one or more global Debt Securities, as described below under "Global
Debt Securities." Unless otherwise indicated in an applicable Prospectus
Supplement, Debt Securities will be issuable in denominations of $1,000 and
integral multiples thereof. Debt Securities of any series will be exchangeable
for other Debt Securities of the same series of any authorized denominations and
of a like aggregate principal amount and tenor.
Debt Securities may be presented for exchange as provided above and, unless
otherwise indicated in an applicable Prospectus Supplement, may be presented for
registration of transfer, at the office or agency of the Company designated as
registrar or co-registrar with respect to such series of Debt Securities,
without service charge and upon payment of any taxes, assessments or other
governmental charges as described in the Indenture. Such transfer or exchange
will be effected on the books of the registrar or any other transfer agent
appointed by the Company upon such registrar or transfer agent, as the case may
be, being satisfied with the documents of title and identity of the person
making the request. The Company intends to initially appoint the Trustee for the
Offered Debt Securities as the registrar for such Offered Debt Securities and
the name of any different or additional registrar designated by the Company with
respect to the Offered Debt Securities will be included in the Prospectus
Supplement relating thereto. If a Prospectus Supplement refers to any transfer
agents (in addition to the registrar) designated by the Company with respect to
any series of Debt Securities, the Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required to maintain a transfer agent in the Borough of Manhattan, The City of
New York. The Company may at any time designate additional transfer agents with
respect to any series of Debt Securities.
In the event of any partial redemption of Debt Securities of any series, the
Company will not be required to (i) issue, register the transfer of or exchange
Debt Securities of that series during a period beginning at the opening of
business 15 days before any selection of Debt Securities of that series to be
redeemed and ending at the close of business on the day of mailing of the
relevant notice of redemption; or (ii) register the transfer of or exchange any
Debt Security, or portion thereof, called for redemption, except the unredeemed
portion of any Debt Security being redeemed in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, and interest, if any, on, Debt Securities will be made at the
office of such paying agent or paying agents as the Company may designate from
time to time, except that, at the option of the Company, payment of principal or
interest may be made by check or by wire transfer to an account maintained by
the payee. Unless otherwise indicated in an applicable Prospectus Supplement,
payment of any installment of interest on Debt Securities will be made to the
person in whose name such Debt Security is registered at the close of business
on the Regular Record Date for such interest.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee for the Offered Debt Securities will be designated as the Company's sole
paying agent for payments with respect to the Offered Debt Securities. Any other
paying agents initially designated by the Company for the Offered Debt
Securities will be named in an applicable Prospectus Supplement. The Company may
at any time designate additional paying agents or rescind the designation of any
paying agent or approve a change in the office through which any paying agent
acts, except that the Company will be required to maintain a paying agent in the
Borough of Manhattan, The City of New York.
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All moneys paid by the Company to a paying agent for the payment of
principal of, or interest, if any, on, any Debt Security which remains unclaimed
at the end of two years after such principal or interest shall have become due
and payable will be repaid to the Company, and the holder of such Debt Security
or any coupon will thereafter look only to the Company for payment thereof.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in global
form. A Debt Security in global form will be deposited with, or on behalf of, a
depositary, which will be identified in the applicable Prospectus Supplement. A
global Debt Security may be issued only in registered form and in either
temporary or permanent form. A Debt Security in global form may not be
transferred except as a whole to the depositary for such Debt Security or to a
nominee or successor of such depositary. If any Debt Securities of a series are
issuable in global form, the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
global Debt Security may exchange such interests for definitive Debt Securities
of such series and of like tenor and principal amount in any authorized form and
denomination, the manner of payment of principal of and interest, if any, on any
such global Debt Security and the specific terms of the depositary arrangement
with respect to any such global Debt Security.
MERGERS AND SALES OF ASSETS
The Company may not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an entirety
to another person, unless, among other things, (i) the resulting, surviving or
transferee person (if other than the Company) is organized and existing under
the laws of the United States, any state thereof or the District of Columbia and
such person expressly assumes all obligations of the Company under the Debt
Securities and the Indenture, and (ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred or be continuing
under the Indenture. Upon the assumption of the Company's obligations by a
person to whom such properties or assets are conveyed, transferred or leased,
subject to certain exceptions, the Company shall be discharged from all
obligations under the Debt Securities and the Indenture.
EVENTS OF DEFAULT
Each Indenture provides that, if an Event of Default specified therein shall
have occurred and be continuing, with respect to each series of the Debt
Securities outstanding thereunder individually, the Trustee or the holders of
not less than 25% in aggregate principal amount of the outstanding Debt
Securities of such series may declare the principal amount (or, if any of the
Debt Securities of such series are Discount Securities, such portion of the
principal amount of such Debt Securities as may be specified by the terms
thereof) of the Debt Securities of such series to be immediately due and
payable. Under certain circumstances, the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of such series may rescind
such a declaration.
Under each Indenture, an Event of Default is defined as, with respect to
each series of Debt Securities outstanding thereunder individually, any of the
following: (i) default in payment of the principal of any Debt Securities of
such series; (ii) default in payment of any interest on any Debt Securities of
such series when due, continuing for 30 days (or 60 days, in the case of Senior
Subordinated Debt Securities or Subordinated Debt Securities); (iii) default by
the Company in compliance with its other agreements in the Debt Securities of
such series or the Indenture relating to the Debt Securities of such series upon
the receipt by the Company of notice of such default given by the Trustee for
such Debt Securities or the holders of at least 25% in aggregate principal
amount of the outstanding Debt Securities of such series and the Company's
failure to cure such default within 60 days after receipt by the Company of such
notice; (iv) certain events of bankruptcy or insolvency; and (v) any other Event
of Default set forth in an applicable Prospectus Supplement with respect to the
Debt Securities of such series.
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The Trustee shall give notice to holders of the Debt Securities of any
continuing default known to the Trustee within 90 days after the occurrence
thereof; PROVIDED, that the Trustee may withhold such notice, as to any default
other than a payment default, if it determines in good faith that withholding
the notice is in the interests of the holders.
The holders of a majority in principal amount of the outstanding Debt
Securities of any series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Debt Securities of such
series; PROVIDED that such direction shall not be in conflict with any law or
the Indenture and subject to certain other limitations. Before proceeding to
exercise any right or power under the Indenture at the direction of such
holders, the Trustee shall be entitled to receive from such holders reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
With respect to each series of Debt Securities, no holder will have any right to
pursue any remedy with respect to the Indenture or such Debt Securities, unless
(i) such holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Debt Securities of such series;
(ii) the holders of at least 25% in aggregate principal amount of the
outstanding Debt Securities of such series shall have made a written request to
the Trustee to pursue such remedy; (iii) such holder or holders have offered to
the Trustee reasonable indemnity satisfactory to the Trustee; (iv) the holders
of a majority in aggregate principal amount of the outstanding Debt Securities
of such series have not given the Trustee a direction inconsistent with such
request within 60 days after receipt of such request; and (v) the Trustee shall
have failed to comply with the request within such 60-day period.
Notwithstanding the foregoing, the right of any holder of any Debt
Securities to receive payment of the principal of and interest in respect of
such Debt Securities on the date specified in such Debt Securities as the fixed
date on which an amount equal to the principal of such Debt Securities or an
installment of principal thereof or interest thereon is due and payable (the
"Stated Maturity" or "Stated Maturities") or to institute suit for the
enforcement of any such payments shall not be impaired or adversely affected
without such holder's consent. The holders of at least a majority in aggregate
principal amount of the outstanding Debt Securities of any series may waive an
existing default with respect to such series and its consequences, other than
(i) any default in any payment of the principal of, or interest on, any Debt
Securities of such series or (ii) any default in respect of certain covenants or
provisions in the Indenture which may not be modified without the consent of the
holder of each of the outstanding Debt Securities of such series affected as
described in "Modification and Waiver," below.
Each Indenture provides that the Company shall deliver to the Trustee within
120 days after the end of each fiscal year of the Company an officers'
certificate stating whether or not the signers know of any default that occurred
during such period.
MODIFICATION AND WAIVER
The Company and the Trustee may execute a supplemental indenture without the
consent of the holders of the Debt Securities (i) to add to the covenants,
agreements and obligations of the Company for the benefit of the holders of all
the Debt Securities of any series or to surrender any right or power conferred
in the Indenture upon the Company; (ii) to evidence the succession of another
corporation to the Company and the assumption by it of the obligations of the
Company under the Indenture and the Debt Securities; (iii) to establish the form
or terms of Debt Securities of any series as permitted by the Indenture; (iv) to
provide for the acceptance of appointment under the Indenture of a successor
Trustee with respect to the Debt Securities of one or more series and to add to
or change any provisions of the Indenture as shall be necessary to provide for
or facilitate the administration of the trusts by more than one Trustee; (v) to
cure any ambiguity, defect or inconsistency; (vi) to add to, change or eliminate
any provisions (which addition, change or elimination may apply to one or more
series of Debt Securities), PROVIDED that any such addition, change or
elimination does not (a) apply to any Debt Securities of any series created
prior to the execution of such supplemental indenture that is
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entitled to the benefit of such provision or (b) modify the rights of the holder
of any such Debt Securities with respect to such provision; (vii) to secure the
Debt Securities; or (viii) to make any other change that does not adversely
affect the rights of any holder of Debt Securities.
Each Indenture provides that, with the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding Debt Securities
of the series affected by such supplemental indenture, the Company and the
Trustee may also execute a supplemental indenture to add provisions to, or
change in any manner or eliminate any provisions of, the Indenture with respect
to such series of Debt Securities or modify in any manner the rights of the
holders of the Debt Securities of such series; PROVIDED that no such
supplemental indenture will, without the consent of the holder of each such
outstanding Debt Security affected thereby (i) change the stated maturity of the
principal of, or any installment of principal or interest on, any such Debt
Security or any premium payable upon redemption or repurchase thereof, or reduce
the amount of principal of any Debt Security that is a Discount Security and
that would be due and payable upon declaration of acceleration of maturity
thereof; (ii) reduce the principal amount of, or the rate of interest on, any
such Debt Security; (iii) change the place or currency of payment of principal
or interest, if any, on any such Debt Security; (iv) impair the right to
institute suit for the enforcement of any payment on or with respect to any such
Debt Security; (v) reduce the above-stated percentage of holders of Debt
Securities of any series necessary to modify or amend the Indenture for such
Debt Securities; (vi) modify the foregoing requirements or reduce the percentage
in principal amount of outstanding Debt Securities of any series necessary to
waive any covenant or past default; or (vii) in the case of Senior Subordinated
Debt Securities or Subordinated Debt Securities, amend or modify any of the
provisions of such Indenture relating to subordination of the Debt Securities in
any manner adverse to the holders of such Debt Securities. Holders of not less
than a majority in principal amount of the outstanding Debt Securities of any
series may waive certain past defaults and may waive compliance by the Company
with certain of the restrictive covenants described above with respect to the
Debt Securities of such series.
DISCHARGE AND DEFEASANCE
Unless otherwise indicated in an applicable Prospectus Supplement, each
Indenture provides that the Company may satisfy and discharge obligations
thereunder with respect to the Debt Securities of any series by delivering to
the Trustee for cancellation all outstanding Debt Securities of such series or
depositing with the Trustee, after such outstanding Debt Securities have become
due and payable, cash sufficient to pay at Stated Maturity all of the
outstanding Debt Securities of such series and paying all other sums payable
under the Indenture with respect to such series.
In addition, unless otherwise indicated in an applicable Prospectus
Supplement, each Indenture provides that: the Company (a) shall be discharged
from its obligations in respect of the Debt Securities of such series
("defeasance and discharge"), or (b) may cease to comply with certain
restrictive covenants ("covenant defeasance"), including those described under
"Mergers and Sales of Assets," and any such omission shall not be an Event of
Default with respect to the Debt Securities of such series, in each case, at any
time prior to the Stated Maturity or redemption thereof, when the Company has
irrevocably deposited with the Trustee, in trust, (i) sufficient funds to pay
the principal of and interest to Stated Maturity (or redemption) on, the Debt
Securities of such series, or (ii) such amount of direct obligations of, or
obligations the principal of (and premium, if any) and interest on which are
fully guaranteed by, the government of the United States and which are not
subject to prepayment, redemption or call, as will, together with the
predetermined and certain income to accrue thereon without consideration of any
reinvestment thereof, be sufficient to pay when due the principal of (and
premium, if any) and interest to Stated Maturity (or redemption) on, the Debt
Securities of such series. Upon such defeasance and discharge, the holders of
the Debt Securities of such series shall no longer be entitled to the benefits
of the Indenture, except for the purposes of registration of transfer and
exchange of the Debt Securities of such series and replacement of lost, stolen
or mutilated Debt Securities and shall look only to such deposited funds or
obligations for payment.
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THE TRUSTEES
The Senior Debt Securities Trustee, the Senior Subordinated Debt Securities
Trustee and the Subordinated Debt Securities Trustee will be named in the
applicable Prospectus Supplement. Each Trustee will be permitted to engage in
other transactions with the Company and each of its subsidiaries; HOWEVER, if a
Trustee acquires any conflicting interest, it must eliminate such conflict or
resign.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Company may issue, from time to time, shares of one or more series or
classes of Preferred Stock. The following description sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The particular terms of any series of Preferred Stock and the
extent, if any, to which such general provisions may apply to the series of
Preferred Stock so offered will be described in the Prospectus Supplement
relating to such Preferred Stock. The following summary of certain provisions of
the Preferred Stock do not purport to be complete and is subject to, and is
qualified in its entirety by express reference to, the provisions of the
Company's Charter (the "Charter") relating to a specific series of the Preferred
Stock, which will be in the form filed as an exhibit to or incorporated by
reference in the Registration Statement of which this Prospectus is a part at or
prior to the time of issuance of such series of Preferred Stock.
Under the Charter, the Company has the authority to issue up to 10,000,000
shares of Preferred Stock. The Board of Directors of the Company is authorized
to issue shares of Preferred Stock, in one or more classes or subclasses, and
may classify or reclassify any unissued shares of Preferred Stock by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of such shares of Preferred Stock
including, but not limited to, ownership restrictions consistent with the
Ownership Limit (defined below) with respect to each class or subclass of
Preferred Stock, and the number of shares constituting each class or subclass,
and to increase or decrease the number of shares of any such class or subclass,
to the extent permitted by the Maryland General Corporation Law (the "MGCL").
The Board of Directors of the Company shall be authorized to determine for
each series of Preferred Stock, and the Prospectus Supplement shall set forth
with respect to such series: (i) the designation of such shares and the number
of shares that constitute such series, (ii) the dividend rate (or the method of
calculation thereof), if any, on the shares of such series and the priority as
to payment of dividends with respect to other classes or series of capital stock
of the Company, (iii) the dividend periods (or the method of calculation
thereof), (iv) the voting rights of the shares, (v) the liquidation preference
and the priority as to payment of such liquidation preference with respect to
other classes or series of capital stock of the Company and any other rights of
the shares of such series upon any liquidation or winding-up of the Company,
(vi) whether or not and on what terms the shares of such series will be subject
to redemption or repurchase at the option of the Company, (vii) whether and on
what terms the shares of such series will be convertible into or exchangeable
for other debt or equity securities of the Company, (viii) whether the shares of
such series of Preferred Stock will be listed on a securities exchange, (x) any
special United States Federal income tax considerations applicable to such
series, and (ix) the other rights and privileges and any qualifications,
limitations or restrictions of such rights or privileges of such series not
inconsistent with the Charter and the MGCL.
DIVIDENDS
Holders of shares of Preferred Stock shall be entitled to receive, when and
as declared by the applicable Board of Directors out of funds of the Company
legally available therefor, an annual cash dividend payable at such dates and at
such rates, if any, per share per annum as set forth in the applicable
Prospectus Supplement.
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Unless otherwise set forth in the applicable Prospectus Supplement, each
series of Preferred Stock will rank junior as to dividends to any Preferred
Stock that may be issued in the future that is expressly senior as to dividends
to the Preferred Stock. If at any time the Company has failed to pay accrued
dividends on any such senior shares at the time such dividends are payable, the
Company may not pay any dividend on the Preferred Stock or redeem or otherwise
repurchase shares of Preferred Stock until such accumulated but unpaid dividends
on such senior shares have been paid or set aside for payment in full by the
Company.
Unless otherwise set forth in the applicable Prospectus Supplement, no
dividends (other than in common stock or other capital stock ranking junior to
the Preferred Stock of any series as to dividends and upon liquidation) shall be
declared or paid or set aside for payment, nor shall any other distribution be
declared or made upon the common stock, or any other capital stock of the
Company ranking junior to or on a parity with the Preferred Stock of such series
as to dividends, nor shall any common stock or any other capital stock of the
Company ranking junior to or on a parity with the Preferred Stock of such series
as to dividends or upon liquidation be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such stock) by the Company (except
by conversion into or exchange for other capital stock of the Company ranking
junior to the Preferred Stock of such series as to dividends and upon
liquidation) unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for all past dividend periods and the then
current dividend period and (ii) if such series of Preferred Stock does not have
a cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period; PROVIDED, HOWEVER, that any monies theretofore deposited in any sinking
fund with respect to any preferred stock in compliance with the provisions of
such sinking fund may thereafter be applied to the purchase or redemption of
such preferred stock in accordance with the terms of such sinking fund,
regardless of whether at the time of such application full cumulative dividends
upon shares of the Preferred Stock outstanding on the last dividend payment date
shall have been paid or declared and set apart for payment; and provided,
further, that any such junior or parity preferred stock or common stock may be
converted into or exchanged for stock of the Company ranking junior to the
Preferred Stock as to dividends.
The amount of dividends payable for the initial dividend period or any
period shorter than a full dividend period shall be computed on the basis of a
360-day year of twelve 30-day months. Accrued but unpaid dividends will not bear
interest.
CONVERTIBILITY
No series of Preferred Stock will be convertible into, or exchangeable for,
other securities or property except as set forth in the applicable Prospectus
Supplement, which will set forth the terms and conditions upon which such
conversion or exchange may be effected, including the initial conversion or
exchange rate and any adjustments thereto, the conversion or exchange period and
any other conversion or exchange provisions.
REDEMPTION AND SINKING FUND
No series of Preferred Stock will be redeemable or be entitled to receive
the benefit of a sinking fund except as set forth in the applicable Prospectus
Supplement, which will set forth the terms and conditions therof, including the
dates and redemption prices of any such redemption, any conditions thereto, and
any other redemption or sinking fund provisions.
LIQUIDATION RIGHTS
Unless otherwise set forth in the applicable Prospectus Supplement, in the
event of any liquidation, dissolution or winding up of the Company, the holders
of shares of each series of Preferred Stock are entitled to receive out of
assets of the Company available for distribution to stockholders, before any
distribution of assets is made to holders of: (i) any other shares of preferred
stock ranking junior
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to such series of Preferred Stock as to rights upon liquidation, dissolution or
winding up; and (ii) shares of common stock, liquidating distributions per share
in the amount of the liquidation preference specified in the applicable
Prospectus Supplement for such series of Preferred Stock plus any dividends
accrued and accumulated but unpaid to the date of final distribution; but the
holders of each series of Preferred Stock will not be entitled to receive the
liquidating distribution of, plus such dividends on, such shares until the
liquidation preference of any shares of the Company's capital stock ranking
senior to such series of the Preferred Stock as to the rights upon liquidation,
dissolution or winding up shall have been paid (or a sum set aside therefor
sufficient to provide for payment) in full. If upon any liquidation, dissolution
or winding up of the Company, the amounts payable with respect to the Preferred
Stock, and any other Preferred Stock ranking as to any such distribution on a
parity with the Preferred Stock are not paid in full, the holders of the
preferred stock and such other parity preferred stock will share ratably in any
such distribution of assets in proportion to the full respective preferential
amount to which they are entitled. Unless otherwise specified in a Prospectus
Supplement for a series of Preferred Stock, after payment of the full amount of
the liquidating distribution to which they are entitled, the holders of shares
of Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company. Neither a consolidation or merger of the
Company with another corporation nor a sale of securities shall be considered a
liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Holders of Preferred Stock will not have any voting right except as set
forth below or in the applicable Prospectus Supplement or as otherwise from time
to time required by law. Whenever dividends on any applicable series of
Preferred Stock or any other class or series of stock ranking on a parity with
the applicable series of Preferred Stock with respect to the payment of
dividends shall be in arrears for the equivalent of six quarterly dividend
periods, whether or not consecutive, the holders of shares of such series of
Preferred Stock (voting separately as a class with all other series of Preferred
Stock then entitled to such voting rights) will be entitled to vote for the
election of two of the authorized number of directors of the Company at the next
annual meeting of stockholders and at each subsequent meeting until all
dividends accumulated on such series of Preferred Stock shall have been fully
paid or set apart for payment. The term of office of all directors elected by
the holders of such Preferred Stock shall terminate immediately upon the
termination of the right of the holders of such Preferred Stock to vote for
directors. Unless otherwise set forth in the applicable Prospectus Supplement,
holders of shares of Preferred Stock will have one vote for each share held.
So long as any shares of any series of Preferred Stock remain outstanding,
the Company shall not, without the consent of holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, voting
separately as a class with all other series of Preferred Stock of the Company
upon which like voting rights have been conferred and are exercisable, (i) issue
or increase the authorized amount of any class or series of stock ranking prior
to the outstanding Preferred Stock as to dividends or upon liquidation or (ii)
amend, alter or repeal the provisions of the Company's Charter relating to such
series of Preferred Stock, whether by merger, consolidation or otherwise, so as
to materially adversely affect any power, preference or special right of such
series of Preferred Stock or the holders thereof; PROVIDED, HOWEVER, that any
increase in the amount of the authorized common stock or authorized preferred
stock or any increase or decrease in the number of shares of any series of
preferred stock or the creation and issuance of other series of common stock or
preferred stock ranking on a parity with or junior to Preferred Stock as to
dividends and upon liquidation, dissolution or winding up shall not be deemed to
materially adversely affect such powers, preferences or special rights.
MISCELLANEOUS
The holders of Preferred Stock will have no preemptive rights. The Preferred
Stock, upon issuance against full payment of the purchase price therefor, will
be fully paid and nonassessable. Shares of Preferred Stock redeemed or otherwise
reacquired by the Company shall resume the status of authorized and unissued
shares of Preferred Stock undesignated as to series, and shall be available
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for subsequent issuance. There are no restrictions on repurchase or redemption
of the Preferred Stock while there is any arrearage on sinking fund installments
except as may be set forth in an applicable Prospectus Supplement. Payment of
dividends on, and the redemption or repurchase of, any series of Preferred Stock
may be restricted by loan agreements, indentures and other agreements entered
into by the Company. The accompanying Prospectus Supplement will describe any
material contractual restrictions on such dividend payments.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the applicable Prospectus Supplement or the
Charter or as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for each series of Preferred Stock will be
designated in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
GENERAL
The Charter authorizes the issuance of up to 150,000,000 shares of Class A
Common Stock with a par value of $.01 per share. As of March 31, 1997, there
were 17,587,036 shares of Class A Common Stock issued and outstanding.
Subsequent to that date, the Company issued an aggregate of 2,300,000 shares of
Class A Common Stock in separate public offerings. In addition, at such date,
the Company had entered into agreements to acquire NHP which, if completed,
would result in the issuance of up to 7,570,000 additional shares of Class A
Common Stock. In addition, up to 150,000, 500,000 and 500,000 shares of Class A
Common Stock have been reserved for issuance under the Company's 1994 Stock
Option Plan (the "1994 Plan"), the 1996 Stock Award and Incentive Plan (the
"1996 Plan") and the Non-Qualified Employee Stock Option Plan (the
"Non-Qualified Plan"), respectively. The 1997 Stock Award and Incentive Plan
(the "1997 Plan") covers 10% of the shares of the Company's Common Stock
outstanding as of the first day of the fisal year during which any award is made
but in no event more than 20,000,000 shares of Common Stock. The Class A Common
Stock is traded on the NYSE under the symbol "AIV." ChaseMellon Shareholder
Services, L.L.C. serves as transfer agent and registrar of the Class A Common
Stock. In addition, the Charter originally authorized 750,000 shares of Class B
Common Stock with a par value of $.01 per share (the "Class B Common Stock" and,
together with the Class A Common Stock, the "Common Stock"), which number of
authorized shares is subject to automatic reduction by the number of shares of
Class B Common Stock that have been converted into Class A Common Stock. As of
March 31, 1997, 325,000 shares of Class B Common Stock had been so converted,
leaving a total of 425,000 shares of Class B Common Stock authorized. (See "--
Class B Common Stock" below.)
Holders of the Class A Common Stock are entitled to receive dividends, when
and as declared by the Board of Directors, out of funds legally available
therefor. The holders of shares of Class A Common Stock, upon any liquidation,
dissolution or winding-up of the Company, are entitled to receive ratably any
assets remaining after payment in full of all liabilities of the Company and the
liquidation preferences of preferred stock. The shares of Class A Common Stock
possess ordinary voting rights for the election of Directors and in respect of
other corporate matters, each share entitling the holder thereof to one vote.
Holders of shares of Class A Common Stock do not have cumulative voting rights
in the election of Directors, which means that holders of more than 50% of the
shares of Class A Common Stock voting for the election of Directors can elect
all of the Directors if they choose to do so and the holders of the remaining
shares cannot elect any Directors. Holders of shares of Class A Common Stock do
not have preemptive rights, which means they have no right to acquire any
additional shares of Class A Common Stock that may be issued by the Company at a
subsequent date.
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RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year and the shares of common stock must be beneficially owned by 100 or
more persons during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year (see "Certain Federal Income Tax
Considerations -- Taxation of the Company -- Income Tests"). Because the Board
of Directors believes that it is essential for the Company to continue to
qualify as a REIT, the Board of Directors has adopted, and the shareholders have
approved, provisions of the Company's Charter restricting the acquisition of
shares of Common Stock.
Subject to certain exceptions specified in the Company's Charter, no holder
may own, or be deemed to own by virtue of various attribution and constructive
ownership provisions of the Code and Rule 13d-3 under the Exchange Act, more
than 8.7% (or 15% in the case of certain pension trusts described in the Code,
investment companies registered under the Investment Company Act of 1940 and Mr.
Considine) of the outstanding shares of Common Stock (the "Ownership Limit").
The Board of Directors may waive the Ownership Limit if evidence satisfactory to
the Board of Directors and the Company's tax counsel is presented that such
ownership will not then or in the future jeopardize the Company's status as a
REIT. However, in no event may such holder's direct or indirect ownership of
Common Stock exceed 9.8% of the total outstanding shares of Common Stock. As a
condition of such waiver, the Board of Directors may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of the Company. The foregoing restrictions on
transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of the Company to attempt
to qualify, or to continue to qualify, as a REIT and a resolution terminating
the Company's status as a REIT and amending the Company's Charter to remove the
foregoing restrictions is duly adopted by the Board of Directors and a majority
of the Company's shareholders. If shares of Common Stock in excess of the
Ownership Limit, or shares of Common Stock which would cause the REIT to be
beneficially owned by less than 100 persons, or which would result in the
Company being "closely held," within the meaning of Section 856(h) of the Code,
or which would otherwise result in the Company failing to qualify as a REIT, are
issued or transferred to any person, such issuance or transfer shall be null and
void to the intended transferee, and the intended transferee would acquire no
rights to the stock. Shares of Common Stock transferred in excess of the
Ownership Limit or other applicable limitations will automatically be
transferred to a trust for the exclusive benefit of one or more qualifying
charitable organizations to be designated by the Company. Shares transferred to
such trust will remain outstanding, and the trustee of the trust will have all
voting and dividend rights pertaining to such shares. The trustee of such trust
may transfer such shares to a person whose ownership of such shares does not
violate the Ownership Limit or other applicable limitation. Upon a sale of such
shares by the trustee, the interest of the charitable beneficiary will
terminate, and the sales proceeds would be paid, first, to the original intended
transferee, to the extent of the lesser of (a) such transferee's original
purchase price (or the original market value of such shares if purportedly
acquired by gift or devise) and (b) the price received by the trustee, and,
second, any remainder to the charitable beneficiary. In addition, shares of
stock held in such trust are purchasable by the Company for a 90-day period at a
price equal to the lesser of the price paid for the stock by the original
intended transferee (or the original market value of such shares if purportedly
acquired by gift or devise) and the market price for the stock on the date that
the Company determines to purchase the stock. The 90-day period commences on the
date of the violation transfer or the date that the Board of Directors
determines in good faith that a violative transfer has occurred, whichever is
later. All certificates representing shares of Common Stock bear a legend
referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code and Rule 13d-3 under the Exchange Act, more than a specified percentage
of the outstanding shares of Common Stock must file an affidavit with the
Company containing the information specified in the Company's Charter within 30
days after January 1 of each year. In addition, each stockholder shall upon
demand
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be required to disclose to the Company in writing such information with respect
to the direct, indirect and constructive ownership of shares as the Board of
Directors deems necessary to comply with the provisions of the Code applicable
to a REIT or to comply with the requirements of any taxing authority or
governmental agency.
The ownership limitations may have the effect of precluding acquisition of
control of the Company by certain third parties unless the Board of Directors
determines that maintenance of REIT status is no longer in the best interests of
the Company.
CLASS B COMMON STOCK
The Class B Common Stock does not have voting or dividend rights and, unless
converted into Class A Common Stock, as described below, is subject to
repurchase by the Company as described below. As of December 31 of each of the
years 1994 through 1998 (each, a "Year-End Testing Date"), a number of the
shares of Class B Common Stock outstanding as of such date (the "Eligible Class
B Shares") become eligible for automatic conversion (subject to the Ownership
Limit) into an equal number of shares of Class A Common Stock (subject to
adjustment upon the occurrence of certain events in respect of the Class A
Common Stock, including stock dividends, subdivisions, combinations and
reclassifications). Once converted or forfeited, the Class B Common Stock may
not be reissued by the Company.
The Eligible Class B Shares convert to Class A Common Stock if (i) the
Company's Funds from Operations Per Share (as defined below) reaches certain
annual and cumulative growth targets and (ii) the average market price for a
share of Class A Common Stock for a 90-calendar day period beginning on any day
on or after the October 1 immediately preceding the relevant Year-End Testing
Date equals or exceeds a specified target price. "Funds from Operations Per
Share" or "FFO Per Share" means, for any period, (i) net income (loss), computed
in accordance with generally accepted accounting principles, excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures, less any preferred stock dividend payments, divided by (ii) the sum of
(a) the number of shares of the Class A Common Stock outstanding on the last day
of such period (excluding any shares of the Class A Common Stock into which
shares of the Class B Common Stock shall have been converted as a result of the
conversion of shares of the Class B Common Stock on the last day of such period)
and (b) the number of shares of the Class A Common Stock issuable to acquire
units of limited partnership that (x) may be tendered for redemption in any
limited partnership in which the Company serves as general partner and (y) are
outstanding on the last day of such period.
Set forth below for each of the remaining Year-End Testing Dates is (i) the
number of shares of Class B Common Stock that become Eligible Class B Shares as
of such date, (ii) the annual FFO Per Share growth target (as a percentage
increase in FFO Per Share from the prior year), (iii) the cumulative FFO Per
Share growth target (in FFO Per Share) and (iv) the average market price target:
<TABLE>
<CAPTION>
ELIGIBLE CLASS CUMULATIVE FFO
YEAR-END TESTING B ANNUAL FFO PER PER SHARE AVERAGE MARKET
DATE SHARES (1) SHARE GROWTH TARGET GROWTH TARGET PRICE TARGET
- ----------------------------------------- --------------- ----------------------- --------------- --------------
<S> <C> <C> <C> <C>
December 31, 1997........................ 162,500 8.5% $ 2.544 $ 24.307
December 31, 1998........................ 162,500 8.5% $ 2.760 $ 26.373
</TABLE>
- ------------------------
(1) Assumes that only the shares of Class B Common Stock outstanding as of
December 31, 1996 remain outstanding until converted into shares of Class A
Common Stock.
If the annual growth target is not met for a particular Year-End Testing
Date, the Eligible Class B Shares for that date may be converted as of a
subsequent Year-End Testing Date if all of the targets are met for that
subsequent Year-End Testing Date. Any Class B Common Stock that has not been
converted into Class A Common Stock following December 31, 1998 will be subject
to repurchase by the Company at a price of $0.10 per share. Class B Common Stock
is also subject to automatic conversion upon the occurrence of certain events,
including a change of control (as defined in the
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Company's Charter). The Board of Directors may increase the number of shares
which are eligible for conversion as of any Year-End Testing Date and may, under
certain circumstances, accelerate the conversion of outstanding Class B Common
Stock at such time and in such amount as it may determine appropriate.
BUSINESS COMBINATIONS
Under the MGCL certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10% or more of the voting power
of the corporation's shares or an affiliate of the corporation who, at any time
within the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the then-outstanding voting stock of
the corporation (an "Interested Stockholder") or an affiliate thereof are
prohibited for five years after the most recent date on which the Interested
Stockholder became an Interested Stockholder. Thereafter, any such business
combination must be recommended by the board of directors of the corporation and
approved by the affirmative vote of at least (a) 80% of the votes entitled to be
cast by holders of outstanding voting shares of the corporation, voting together
as a single voting group, and (b) two-thirds of the votes entitled to be cast by
holders of outstanding voting shares of the corporation other than shares held
by the Interested Stockholder with whom the business combination is to be
effected, unless, among other conditions, the corporation's shareholders receive
a minimum price (as defined in the MGCL) for their shares and the consideration
is received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. The business combination statute could have the
effect of discouraging offers to acquire the Company and of increasing the
difficulty of consummating any such offer. These provisions of the MGCL do not
apply, however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror or by officers or directors who
are employees of the corporation. "Control shares" are voting shares of stock
that, if aggregated with all other shares of stock previously acquired by that
person, would entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power: (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority,
or (iii) a majority or more of all voting power. Control shares do not include
shares the acquiring person is then entitled to vote as a result of having
previously obtained stockholder approval.
A "control share acquisition" means the acquisition of control shares,
subject to certain exceptions. A person who has made or proposes to make a
control share acquisition, upon satisfaction of certain conditions (including an
undertaking to pay expenses), may compel the corporation's board of directors to
call a special meeting of shareholders, to be held within 50 days of demand, to
consider the voting rights of the shares. If no request for a meeting is made,
the corporation may itself present the question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an "acquiring person statement" as required by the statute,
then, subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares (except those for which voting rights have
previously been approved) for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or of any meeting
of shareholders at which the voting rights of such shares were considered and
not approved. If voting rights for control shares are approved at a shareholders
meeting and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other shareholders may exercise appraisal rights. The fair
value of the shares as
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<PAGE>
determined for purposes of the appraisal rights may not be less than the highest
price per share paid in the control share acquisition, and certain limitations
and restrictions otherwise applicable to the exercise of dissenters' rights do
not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the corporation's
articles of incorporation or bylaws prior to the control share acquisition. The
control share acquisition statute could have the effect of discouraging offers
to acquire the Company and of increasing the difficulty of consummating any such
offer.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue, together with other Securities or separately,
warrants for the purchase of Debt Securities, Preferred Stock or Class A Common
Stock (the "Warrants"). The Warrants may be issued under a Warrant Agreement
(each, a "Warrant Agreement") to be entered into between the Company and a bank
or trust company, as warrant agent (the "Warrant Agent"), as set forth in the
applicable Prospectus Supplement relating to any or all Warrants in respect of
which this Prospectus is being delivered. The Warrant Agent will act solely as
an agent of the Company in connection with the Warrants of a particular series
and will not assume any obligation or relationship of agency or trust for or
with any holders or beneficial owners of Warrants. The Warrant Agreement for
each Warrant, including the forms of certificates representing the Warrants
("Warrant Certificates"), will be filed as an exhibit to, or incorporated by
reference in, the Registration Statement of which this Prospectus forms a part
at or prior to the time of the issuance of such Warrants.
The following description sets forth certain general terms and provisions of
the Warrants to which any Prospectus Supplement may relate. The particular terms
of the Warrants to which any Prospectus Supplement may relate and the extent, if
any, to which such general provisions may apply to the Warrants so offered will
be described in the applicable Prospectus Supplement. Capitalized terms used in
this section which are not otherwise defined in this Prospectus shall have the
meanings set forth in the Warrant Agreement and Warrant Certificate. The
following summary of certain provisions of the Warrants, Warrant Agreement and
Warrant Certificate does not purport to be complete and is subject to, and is
qualified in its entirety by express reference to, all the provisions of the
Warrant Agreement and Warrant Certificate, including the definitions therein of
certain terms.
Reference is made to the applicable Prospectus Supplement for the terms of
Warrants in respect of which this Prospectus is being delivered, the Warrant
Agreement relating to such Warrants and the Warrant Certificates representing
such Warrants, including the following: (i) the designation, aggregate principal
amount and terms of the Debt Securities or the designation and terms of the
Preferred Stock, if any, purchasable upon exercise of such Warrants; (ii) the
procedures and conditions relating to the exercise of such Warrants; (iii) the
designation and terms of any related Securities with which such Warrants are
issued and the number of such Warrants issued with each such Security; (iv) the
date, if any, on and after which such Warrants and the related Securities will
be separately transferable; (v) the offering price of the Warrants, if any; (vi)
the principal amount of Debt Securities or the number of shares of Preferred
Stock or Common Stock purchasable upon exercise of each Warrant and the price at
which such principal amount of Debt Securities or shares of Preferred Stock or
Class A Common Stock may be purchased upon such exercise, or the method of
determining such number and price; (vii) the date on which the right to exercise
such Warrants shall commence and the date on which such right shall expire;
(viii) a discussion of United States Federal income tax considerations
applicable to the ownership or exercise of such Warrants; (ix) whether the
Warrants represented by the Warrant Certificates will be issued in registered or
bearer form, and, if registered, where they may be transferred and registered;
(x) call provisions of such Warrants, if any; and (xi) any other terms of the
Warrants.
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<PAGE>
Warrant Certificates will be exchangeable for new Warrant Certificates of
different denominations and Warrants may be exercised at the corporate trust
office of the Warrant Agent or any other office indicated in the applicable
Prospectus Supplement. Prior to the exercise of their Warrants, holders of
Warrants will not have any of the rights of holders of the Securities
purchasable upon such exercise and will not be entitled to payments of principal
of (or premium, if any) or interest, if any, on the Debt Securities purchasable
upon such exercise or to any dividend payments or voting rights that holders of
the Preferred Stock or Common Stock purchasable upon such exercise may be
entitled to.
Each Warrant will entitle the holder to purchase for cash such principal
amount of Debt Securities, or such number of shares of Preferred Stock or Class
A Common Stock, at such exercise price as shall, in each case, be set forth in,
or be determinable as set forth in, the applicable Prospectus Supplement
relating to the Warrants offered thereby. Unless otherwise specified in the
applicable Prospectus Supplement, Warrants may be exercised at any time up to
5:00 p.m. New York City time on the expiration date set forth in the applicable
Prospectus Supplement. After 5:00 p.m. New York City time on the expiration
date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the applicable Prospectus
Supplement relating to the Warrants. Upon receipt of payment and the Warrant
Certificate properly completed and duly executed at the corporate trust office
of the Warrant Agent on any other office indicated in the applicable Prospectus
Supplement, the Company will, as soon as practicable, forward the Securities
purchasable upon such exercise. If less than all of the Warrants represented by
such Warrant Certificate are exercised, a new Warrant Certificate will be issued
for the remaining amount of Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents or dealers. Any such underwriter, agent or dealer involved in the
offer and sale of the Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to the prevailing market prices at the time of
sale or at negotiated prices. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Securities
upon the terms and conditions set forth in the applicable Prospectus Supplement.
In connection with the sale of Securities, underwriters may be deemed to have
received compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Securities for
whom they may act as agent. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions (which may be changed from time to time) from the
underwriters and/or commissions from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters under the Securities Act, and any discounts and commissions
received by them and any profit realized by them on resale of the Securities may
be deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act.
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<PAGE>
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to such
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Securities sold pursuant to
Contracts shall not be less nor more than, the respective amounts stated in the
applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but will, in all cases, be subject to the
approval of the Company. The terms and conditions of any Contracts will be set
forth in any Prospectus Supplement relating to the Securities being offered.
Agents and underwriters will have no responsibility in respect of the delivery
or performance of Contracts.
Until the distribution of the Securities offered pursuant to any Prospectus
Supplement is completed, the Commission's rules may limit the ability of any
underwriter participating in such distribution to bid for and purchase the
Securities offered thereby and other securities of the Company. As an exception
to these rules, the underwriters are permitted to engage in certain transactions
that stabilize or maintain the price of such securities. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of such securities. If any such underwriter creates a short position
in such securities in connection with the offering, such underwriter may reduce
such short position by purchasing securities.
In general, bids for or purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might otherwise be in the absence of such bids or
purchases.
Neither the Company nor any underwriter participating in any distribution
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
offered Securities or other securities of the Company. In addition, neither the
Company nor any such underwriter makes any representation that such underwriter
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
Certain of the underwriters, if any, and their affiliates may be customers
of, engage in transactions with and perform services for the Company in the
ordinary course of business.
The Securities may or may not be listed on a national securities exchange.
No assurances can be given that there will be a market for any of the
Securities.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material Federal income tax considerations
regarding an investment in Securities of the Company is based on current law, is
for general information only and is not tax advice. This discussion does not
purport to deal with all aspects of taxation that may be relevant to particular
investors in light of their personal investment or tax circumstances, or, except
to the extent discussed under the headings "Taxation of Tax-Exempt Stockholders"
and "Taxation of Non-U.S. Stockholders," to certain types of investors
(including insurance companies, tax-exempt organizations, financial institutions
or broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) that are subject to special treatment under the
Federal income tax laws.
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EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF THE SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REAL
ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN INCOME AND
OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
GENERAL. The REIT provisions of the Code are highly technical and complex.
The following sets forth the material aspects of the provisions of the Code that
govern the Federal income tax treatment of a REIT and its stockholders. This
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all of which are subject to change which may apply
retroactively.
The Company has elected to be taxed as a REIT under the Code commencing with
its taxable year ending December 31, 1994, and the Company intends to continue
to operate in such a manner. In the opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, commencing with the Company's taxable year ending December 31, 1994,
the Company was organized in conformity with the requirements for qualification
as a REIT, and its proposed method of operation and its actual method of
operation since formation, will enable it to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized that
this opinion is based and conditioned upon certain assumptions and
representations made by the Company as to factual matters (including
representations of the Company concerning its business and properties as set
forth in this Prospectus). The opinion is expressed as of its date and Skadden,
Arps, Slate, Meagher & Flom LLP has no obligation to advise holders of
Securities of any subsequent change in the matters stated, represented or
assumed or any subsequent change in the applicable law. Moreover, such
qualification and taxation as a REIT depends upon the Company's ability to meet,
through actual annual operating results, distribution levels and diversity of
stock ownership, the various qualification tests imposed under the Code as
discussed below, the results of which will not be reviewed by Skadden, Arps,
Slate, Meagher & Flom LLP. Accordingly, no assurance can be given that the
actual results of the Company's operation for any one taxable year will satisfy
such requirements. See "-- Failure to Qualify." An opinion of counsel is not
binding on the Internal Revenue Service (the "Service"), and no assurance can be
given that the Service will not challenge the Company's eligibility for taxation
as a REIT.
If the Company qualifies for taxation as a REIT, it generally will not be
subject to Federal corporate income tax on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (at the corporate and stockholder levels) that generally results from
investment in a corporation. However, the Company will be subject to Federal
income tax as follows: First, the Company will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. Second, under certain circumstances, the Company may be subject
to the "alternative minimum tax" on its items of tax preference. Third, if the
Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business other than foreclosure property),
such income will be subject to a 100% tax. Fourth, if the Company should fail to
satisfy the 75% gross income test or the 95% gross income test (as discussed
below), but has nonetheless maintained its qualification as a REIT because
certain other requirements have been met, it will be subject to a 100% tax on an
amount equal to (a) the gross income attributable to the greater of the amount
by which the Company fails the 75% or 95% test multiplied by (b) a fraction
intended to reflect the Company's profitability. Fifth, if the Company should
fail to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed taxable income from prior
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periods, the Company would be subjected to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. In addition, the
Company could also be subject to tax in certain situations and on certain
transactions not presently contemplated.
REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association (1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation, but for the special Code provisions applicable to REITs;
(4) that is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (5) the beneficial ownership of which is held by
100 or more persons; (6) in which, during the last half of each taxable year,
not more than 50% in value of the outstanding stock is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities); and (7) which meets certain other tests described below
(including with respect to the nature of its income and assets). The Code
provides that conditions (1) through (4) must be met during the entire taxable
year, and that condition (5) must be met during at least 335 days of a taxable
year of 12 months, or during a proportionate part of a taxable year of less than
12 months. The Company's Charter provides for restrictions regarding transfer of
its shares, which provisions are intended to assist the Company in continuing to
satisfy the share ownership requirements described in conditions (5) and (6)
above. Such transfer restrictions are described in "Description of Common Stock
- -- Restrictions on Transfer."
To monitor the Company's compliance with the share ownership requirements,
the Company is required to maintain records regarding the actual ownership of
its shares. To do so, the Company must demand written statements each year from
the record holders of certain percentages of its stock in which the record
holders are to disclose the actual owners of the shares (I.E., the persons
required to include in gross income the REIT dividends). A list of those persons
failing or refusing to comply with this demand must be maintained as part of the
Company's records. A stockholder who fails or refuses to comply with the demand
must submit a statement with its tax return disclosing the actual ownership of
the shares and certain other information.
In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. The Company satisfies this requirement.
OWNERSHIP OF PARTNERSHIP INTERESTS. In the case of a REIT that is a partner
in a partnership, regulations provide that the REIT is deemed to own its
proportionate share of the partnership's assets and to earn its proportionate
share of the partnership's income. In addition, the assets and gross income of
the partnership retain the same character in the hands of the REIT for purposes
of the gross income and asset tests applicable to REITs as described below.
Thus, the Company's proportionate share of the assets, liabilities and items of
income of the Subsidiary Partnerships will be treated as assets, liabilities and
items of income of the Company for purposes of applying the REIT requirements
described herein. A summary of the rules governing the Federal income taxation
of partnerships and their partners is provided below in "Tax Aspects of the
Company's Investments in Partnerships."
INCOME TESTS. In order to maintain qualification as a REIT, the Company
annually must satisfy three gross income requirements. First, at least 75% of
the Company's gross income (excluding gross income from "prohibited
transactions," i.e., certain sales of property held primarily for sale to
customers in the ordinary course of business) for each taxable year must be
derived directly or indirectly from investments relating to real property or
mortgages on real property (including "rents from real property" and, in certain
circumstances, interest) or from certain types of temporary investments. Second,
at least 95% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such real
property investments, and from other dividends, interest and gain from the sale
or disposition of stock or securities (or from any combination of the
foregoing). Third, short-term gain from the sale or other disposition of stock
or securities, gain from certain sales of property held primarily for sale, and
gain on the sale or other
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disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must, in the
aggregate, represent less than 30% of the Company's gross income for each
taxable year.
Rents received by the Company through the Subsidiary Partnerships will
qualify as "rents from real property" in satisfying the gross income
requirements described above, only if several conditions are met. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Moreover, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" from which the REIT derives no revenue.
However, the Company (or its affiliates) are permitted to, and do directly
perform services that are "usually or customarily rendered" in connection with
the rental of space for occupancy only and are not otherwise considered rendered
to the occupant of the property.
The Management Subsidiaries will receive management fees and other income. A
portion of such fees and other income will accrue to the Company through the
Operating Partnership's interest in PAMS LP. Such fee and other income generally
will not qualify under the 95% gross income test. The Company also expects to
receive distributions indirectly from the Management Subsidiaries through PAMS
Inc. that will be classified as dividend income to the extent of the earnings
and profits of PAMS Inc. Such distributions will qualify under the 95% gross
income test but not under the 75% gross income test.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests (though not the 30% gross income test) for any taxable year, it may
nevertheless qualify as a REIT for such year if it is entitled to relief under
certain provisions of the Code. These relief provisions will be generally
available if the Company's failure to meet such tests was due to reasonable
cause and not due to willful neglect, the Company attaches a schedule of the
sources of its income to its return, and any incorrect information on the
schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances the Company would be entitled to
the benefit of these relief provisions. If these relief provisions are
inapplicable to a particular set of circumstances involving the Company, the
Company will not qualify as a REIT. As discussed above in "-- General," even
where these relief provisions apply, a tax is imposed with respect to the excess
net income.
ASSET TESTS. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by real
estate assets (including its allocable share of real estate assets held by the
Subsidiary Partnerships), stock or debt instruments held for not more than one
year purchased with the proceeds of a stock offering or long-term (at least five
years) debt offering of the Company, cash, cash items and government securities.
Second, not more than 25% of the Company's total assets may be represented by
securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class, the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the Company's total assets, and
the Company may not own more than 10% of any one issuer's outstanding voting
securities.
The Company indirectly owns interests in the Management Subsidiaries. As set
forth above, the ownership of more than 10% of the voting securities of any one
issuer by a REIT is prohibited by the asset tests. The Company believes that its
indirect ownership interest in PAMS Inc. qualifies under these rules. Skadden,
Arps, Slate, Meagher & Flom LLP, in rendering its opinion as to the
qualification of the Company as a REIT, has relied on representations of the
Company as to the value of the Operating Partnership's total assets and the
value of the Operating Partnership's interest in PAMS Inc. No independent
appraisals have been obtained to support the Company's conclusions as to the
values of the Operating Partnership's interest in PAMS Inc., and this value is
subject to change in
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the future. Accordingly, there can be no assurance that the Service will not
contend that the Operating Partnership's ownership interests in the PAMS Inc.
disqualifies the Company from treatment as a REIT.
The Company's indirect interests in the Operating Partnership and other
Subsidiary Partnerships are held through wholly owned corporate subsidiaries of
the Company organized and operated as "qualified REIT subsidiaries" within the
meaning of the Code. Qualified REIT subsidiaries are not treated as separate
entities from their parent REIT for Federal income tax purposes. Instead, all
assets, liabilities and items of income, deduction and credit of each qualified
REIT subsidiary are treated as assets, liabilities and items of the Company.
Each qualified REIT subsidiary therefore will not be subject to federal
corporate income taxation, although it may be subject to state or local
taxation. In addition, the Company's ownership of the voting stock of each
qualified REIT subsidiary does not violate the general restriction against
ownership of more than 10% of the voting securities of any issuer.
ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its shareholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends paid
deduction and the Company's net capital gain) and (ii) 95% of the net income
(after tax), if any, from foreclosure property, minus (B) the sum of certain
items of noncash income. Such distributions must be paid in the taxable year to
which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such year and if paid with or before the
first regular dividend payment after such declaration. To the extent that the
Company does not distribute all of its net capital gain or distributes at least
95%, but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax thereon at the capital gains or ordinary corporate tax rates, as
the case may be. Furthermore, if the Company should fail to distribute during
each calendar year at least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. The Company believes that it has made, and intends to
make, timely distributions sufficient to satisfy this annual distribution
requirement.
It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to
timing differences between (i) the actual receipt of income (including receipt
of distributions from the Operating Partnership) and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of such
expenses in arriving at taxable income of the Company. In the event that such
timing differences occur, in order to meet the 95% distribution requirement, the
Company may find it necessary to arrange for short-term, or possibly long-term,
borrowings or to pay dividends in the form of taxable distributions of property.
Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends; however, the Company
will be required to pay interest based on the amount of any deduction taken for
deficiency dividends.
FAILURE TO QUALIFY. If the Company fails to qualify for taxation as a REIT
in any taxable year, and the relief provisions do not apply, the Company will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to stockholders in any year in
which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income, and, subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends received deduction.
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Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances the Company would be entitled to such
statutory relief.
TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS
GENERAL. Substantially all of the Company's investments are held indirectly
through the Operating Partnership. In general, partnerships are "pass-through"
entities that are not subject to Federal income tax. Rather, partners are
allocated their proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. The Company will include in its income its proportionate share of
the foregoing partnership items for purposes of the various REIT income tests
and in the computation of its REIT taxable income. Moreover, for purposes of the
REIT asset tests, the Company will include its proportionate share of assets
held by the Partnerships. See "-- Taxation of the Company -- Ownership of
Partnership Interests."
ENTITY CLASSIFICATION. The Company's direct and indirect investment in
partnerships involves special tax considerations, including the possibility of a
challenge by the Service of the status of any of the Partnerships as a
partnership (as opposed to an association taxable as a corporation) for Federal
income tax purposes. If any of these entities were treated as an association for
Federal income tax purposes, it would be taxable as a corporation and therefore
subject to an entity-level tax on its income. In such a situation, the character
of the Company's assets and items of gross income would change and could
preclude the Company from satisfying the asset tests and the income tests (see
"-- Taxation of the Company -- Asset Tests" and "-- Taxation of the Company --
Income Tests"), and in turn could prevent the Company from qualifying as a REIT.
See "-- Taxation of the Company -- Failure to Qualify" above for a discussion of
the effect of the Company's failure to meet such tests for a taxable year. In
addition, any change in the status of any of the Subsidiary Partnerships for tax
purposes might be treated as a taxable event, in which case the Company might
incur a tax liability without any related cash distributions.
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, which opinion is
based upon certain assumptions and representations by the Company and on
opinions of local counsel with respect to matters of local law, each of the
Subsidiary Partnerships will be treated as a partnership for federal income tax
purposes. The opinion is expressed as of its date and Skadden, Arps, Slate,
Meagher & Flom LLP has no obligation to advise holders of Securities of any
subsequent change in the matters stated, represented or assumed or any
subsequent change in the applicable law. An opinion of counsel, however, is not
binding on the Service, and no assurance can be given that the Service will not
challenge the status of these entities as partnerships for Federal income tax
purposes.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. Pursuant to the Code and
the regulations thereunder, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated in a manner such
that the contributing partner is charged with, or benefits from, respectively,
the unrealized gain or unrealized loss associated with the property at the time
of the contribution. The amount of such unrealized gain or unrealized loss is
generally equal to the difference between the fair market value of contributed
property at the time of contribution, and the adjusted tax basis of such
property at the time of contribution (a "Book-Tax Difference"). Such allocations
are solely for Federal income tax purposes and do not affect the book capital
accounts or other economic or legal arrangements among the partners. The
Operating Partnership was formed by way of contributions of appreciated property
(including certain of the Owned Properties). Consequently, allocations must be
made in a manner consistent with these requirements. Where a partner contributes
cash to a partnership that holds appreciated property, the Treasury regulations
provide for a similar allocation of such items to the other partners. These
rules apply to the contribution by the Company to the Operating Partnership of
the cash proceeds received in any offerings of its stock.
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In general, certain holders of partnership interests in the Operating
Partnership ("OP Units") will be allocated lower amounts of depreciation
deductions for tax purposes and increased taxable income and gain on sale by the
Operating Partnership or the Property Partnerships of the contributed Owned
Properties. This will tend to eliminate the Book-Tax Difference over the life of
these partnerships. However, the special allocations do not always entirely
rectify the Book-Tax Difference on an annual basis or with respect to a specific
taxable transaction such as a sale. Thus, the carryover basis of the contributed
Owned Properties in the hands of the Partnerships may cause the Company to be
allocated lower depreciation and other deductions, and possibly greater amounts
of taxable income in the event of a sale of such contributed assets in excess of
the economic or book income allocated to it as a result of such sale. This may
cause the Company to recognize taxable income in excess of cash proceeds, which
might adversely affect the Company's ability to comply with the REIT
distribution requirements. See "-- Taxation of the Company -- Annual
Distribution Requirements."
With respect to any property purchased or to be purchased by any of the
Partnerships (other than through the issuance of OP Units) subsequent to the
formation of the Company, such property will initially have a tax basis equal to
its fair market value and the special allocation provisions described above will
not apply.
SALE OF THE PROPERTIES. The Company's share of any gain realized by the
Operating Partnership or a Property Partnership on the sale of any property held
as inventory or primarily for sale to customers in the ordinary course of
business will be treated as income from a prohibited transaction that is subject
to a 100% penalty tax. See "-- Requirements for Qualification -- Income Tests."
Under existing law, whether property is held as inventory or primarily for sale
to customers in the ordinary course of a partnership's trade or business is a
question of fact that depends on all the facts and circumstances with respect to
the particular transaction. The Operating Partnership and the Property
Partnerships intend to hold the Owned Properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating the Owned Properties (and other apartment properties) and
to make such occasional sales of the Owned Properties, including peripheral
land, as are consistent with the Company's investment objectives.
TAXATION OF MANAGEMENT SUBSIDIARIES
A portion of the amounts to be used to fund distributions to stockholders is
expected to come from the Management Subsidiaries, through dividends paid on the
non-voting preferred stock of PAMS Inc. held by the Operating Partnership,
distributions paid to the Operating Partnership as the general partner of PAMS
LP and interest paid by PAMS Inc. on certain installment notes held by the
Operating Partnership. PAMS Inc. will not qualify as a REIT and will pay
Federal, state and local income taxes on their taxable income at normal
corporate rates. The Management Subsidiaries intend to claim annual deductions
for interest and amortization. No assurance can be given that the Service will
not challenge such deductions. Any Federal, state or local income taxes that
PAMS Inc. is required to pay will reduce the Company's cash flow from operating
activities and its ability to make payments to holders of its securities.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
GENERAL. As long as the Company qualifies as a REIT, distributions made to
the Company's taxable domestic stockholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by them as ordinary income and will not be eligible for the
dividends received deduction for corporations. Distributions that are designated
as capital gain dividends will be taxed as long-term capital gains (to the
extent that they do not exceed the Company's actual net capital gain for the
taxable year) without regard to the period for which the stockholder has held
its stock. However, corporate shareholders may be required to treat up to 20% of
certain capital gain dividends as ordinary income.
Distributions in excess of current and accumulated earnings and profits will
not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's shares, but rather will reduce the adjusted
basis of such shares. To the extent that such distributions exceed the
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adjusted basis of a stockholder's shares, they will be included in income as
long-term capital gain (or short-term capital gain if the shares have been held
for one year or less) provided that the shares are a capital asset in the hands
of the stockholder. In addition, any dividend declared by the Company in
October, November or December of any year and payable to a stockholder of record
on a specified date in any such month shall be treated as both paid by the
Company and received by the stockholder on December 31 of such year, provided
that the dividend is actually paid by the Company during January of the
following calendar year. Stockholders may not include in their individual income
tax returns any net operating losses or capital losses of the Company.
In general, any loss upon a sale or exchange of shares by a stockholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such stockholder as
long-term capital gain.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Based upon a published ruling by the Service, distributions by the Company
to a stockholder that is a tax-exempt entity will not constitute "unrelated
business taxable income" ("UBTI"), provided that the tax-exempt entity has not
financed the acquisition of its shares with "acquisition indebtedness" within
the meaning of the Code and the shares are not otherwise used in an unrelated
trade or business of the tax-exempt entity.
Notwithstanding the preceding paragraph, however, a portion of the dividends
paid by the Company may be treated as UBTI to certain domestic private pension
trusts if the Company is treated as a "pension-held REIT." The Company believes
that it is not, and does not expect to become, a "pension-held REIT." If the
Company were to become a pension-held REIT, these rules generally would only
apply to certain pension trusts that hold more than 10% of the Company's stock.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. federal income and
estate tax consequences of the ownership and disposition of the Company's stock
applicable to Non-U.S. Holders of such stock. A "Non-U.S. Holder" is any person
other than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, or (iii) an estate or trust whose income
is includable in gross income for U.S. Federal income tax purposes regardless of
its source. The discussion is based on current law and is for general
information only. The discussion addresses only certain and not all aspects of
U.S. Federal income and estate taxation.
ORDINARY DIVIDENDS. The portion of dividends received by Non-U.S. Holders
payable out of the Company's earnings and profits which are not attributable to
capital gains of the Company and which are not effec-tively connected with a
U.S. trade or business of the Non-U.S. Holder will be subject to U.S.
withholding tax at the rate of 30% (unless reduced by treaty). In general,
Non-U.S. Holders will not be considered engaged in a U.S. trade or business
solely as a result of their ownership of stock of the Company. In cases where
the dividend income from a Non-U.S. Holder's investment in stock of the Company
is (or is treated as) effectively connected with the Non-U.S. Holder's conduct
of a U.S. trade or business, the Non-U.S. Holder generally will be subject to
U.S. tax at graduated rates, in the same manner as U.S. stockholders are taxed
with respect to such dividends (and may also be subject to the 30% branch
profits tax in the case of a Non-U.S. Holder that is a foreign corporation).
NON-DIVIDEND DISTRIBUTION. Unless the Class A Common Stock constitutes a
United States Real Property Interest (a "USRPI"), distributions by the Company
which are not dividends out of the earnings and profits of the Company will not
be subject to U.S. income or withholding tax. If it cannot be determined at the
time a distribution is made whether or not such distribution will be in excess
of current and accumulated earnings and profits, the distribution will be
subject to withholding at the rate applicable to dividends. However, the
Non-U.S. Holder may seek a refund of such amounts from the IRS if it is
subsequently determined that such distribution was, in fact, in excess of
current and
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accumulated earnings and profits of the Company. If the Class A Common Stock
constitutes a USRPI, such distributions will be subject to 10% withholding and
taxed pursuant to the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA") at a rate of 35% to the extent such distributions exceed a
stockholder's basis in his or her Class A Common Stock.
CAPITAL GAIN DIVIDENDS. Under FIRPTA, a distribution made by AIMCO to a
Non-U.S. Holder, to the extent attributable to gains from dispositions of USRPIs
such as the properties beneficially owned by AIMCO ("USRPI Capital Gains"), will
be considered effectively connected with a U.S. trade or business of the
Non-U.S. Holder and subject to U.S. income tax at the rate applicable to U.S.
individuals or corporations, without regard to whether such distribution is
designated as a capital gain dividend. In addition, AIMCO will be required to
withhold tax equal to 35% of the amount of dividends to the extent such
dividends constitute USRPI Capital Gains. Distributions subject to FIRPTA may
also be subject to a 30% branch profits tax in the hands of a foreign corporate
stockholder that is not entitled to treaty exemption.
DISPOSITION OF STOCK OF THE COMPANY. Unless the Company's stock constitutes
a USRPI, a sale of such stock by a Non-U.S. Holder generally will not be subject
to U.S. taxation under FIRPTA. The stock will not constitute a USRPI if the
Company is a "domestically controlled REIT." A domestically controlled REIT is a
REIT in which, at all times during a specified testing period, less than 50% in
value of its shares is held directly or indirectly by Non-U.S. Holders. The
Company believes that it is, and it expects to continue to be a domestically
controlled REIT, and therefore that the sale of the Company's stock will not be
subject to taxation under FIRPTA. Because the Company's stock will be publicly
traded, however, no assurance can be given the Company will continue to be a
domestically controlled REIT.
If the Company does not constitute a domestically controlled REIT, a
Non-U.S. Holder's sale of stock generally will still not be subject to tax under
FIRPTA as a sale of a USRPI provided that (i) the stock is "regularly traded"
(as defined by applicable Treasury regulations) on an established securities
market (e.g., the NYSE, on which the Company's Class A Common Stock is listed)
and (ii) the selling Non-U.S. Holder held 5% or less of the Company's
out-standing stock at all times during a specified testing period.
If gain on the sale of stock of the Company were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and the pur-chaser of the stock could be required to withhold 10%
of the purchase price and remit such amount to the Service.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Holder in two cases: (i) if the Non-U.S. Holder's
investment in the stock of the Company is effectively connected with a U.S.
trade or business conducted by such Non-U.S. holder, the Non-U.S. Holder will be
subject to the same treatment as a U.S. stockholder with respect to such gain,
or (ii) if the Non-U.S. Holder is a nonresident alien individual who was present
in the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, the nonresident alien individual will be subject to
a 30% tax on the individual's capital gain.
ESTATE TAX. Stock of the Company owned or treated as owned by an individual
who is not a citizen or resident (as specially defined for U.S. Federal estate
tax purposes) of the United States at the time of death will be includable in
the individual's gross estate for U.S. Federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise. Such individual's estate may be
subject to U.S. Federal estate tax on the property includable in the estate for
U.S. Federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Company must report
annually to the Service and to each Non-U.S. Holder the amount of dividends
(including any capital gain dividends) paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements
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apply regardless of whether withholding was reduced or eliminated by an
applicable tax treaty. Copies of these returns may also be made available under
the provisions of a specific treaty or agreement with the tax authorities in the
country in which the Non-U.S. Holder resides.
U.S. backup withholding (which generally is imposed at the rate of 31% on
certain payments to persons that fail to furnish the information required under
the U.S. information reporting requirements) and information reporting will
generally not apply to dividends (including any capital gain dividends) paid on
stock of the Company to a Non-U.S. Holder at an address outside the United
States.
The payment of the proceeds from the disposition of stock of the Company to
or through a U.S. office of a broker will be subject to information reporting
and backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Holder, or otherwise establishes an
exemption. The payment of the proceeds from the disposition of stock to or
through a non-U.S. office of a non-U.S. broker generally will not be subject to
backup withholding and information reporting.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States Federal income tax liability, provided that the
required information is furnished to the Service.
These information reporting and backup withholding rules are under review by
the U.S. Treasury and their application to the Securities could be changed by
future regulations. On April 15, 1996, the Service issued proposed Treasury
Regulations concerning the withholding of tax and reporting for certain amounts
paid to non-resident individuals and foreign corporations. The proposed Treasury
Regulations, if adopted in their present form, would be effective for payments
made after December 31, 1997. Prospective purchasers should consult their tax
advisors concerning the potential adoption of such proposed Treasury Regulations
and the potential effect on their ownership of Securities.
OTHER TAX CONSEQUENCES
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX
CONSEQUENCES. Prospective investors in the Securities should recognize that the
present Federal income tax treatment of an investment in the Operating
Partnership or the Company may be modified by legislative, judicial or
administrative action at any time, and that any such action may affect
investments and commitments previously made. The rules dealing with Federal
income taxation are constantly under review by persons involved in the
legislative process and by the Service and the U.S. Treasury Department,
resulting in revisions of regulations and revised interpretations of established
concepts as well as statutory changes. Revisions in Federal tax laws and
interpretations thereof could adversely affect the tax consequences of an
investment in the Operating Partnership or the Company. For example, a recent
Federal budget proposal contains language which, if enacted in its present form,
would result in the immediate taxation of all gain inherent in a corporation's
assets upon an election by the corporation to become a REIT, and thus would
effectively preclude the Company from re-electing REIT status following a
termination of its REIT qualification.
STATE AND LOCAL TAXES. The Company and its shareholders may be subject to
state or local taxation in various state or local jurisdictions, including those
in which it or they transact business or reside. The state and local tax
treatment of the Company and its shareholders may not conform to the federal
income tax consequences discussed above. Consequently, prospective shareholders
should consult their own tax advisors regarding the effect of state and local
tax laws on an investment in the Company.
LEGAL MATTERS
Certain tax matters will be passed upon for the Company by Skadden, Arps,
Slate, Meagher & Flom LLP, Los Angeles, California. The validity of the
Securities offered hereby will be passed upon for
30
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the Company by Piper & Marbury L.L.P., Baltimore, Maryland. Certain matters as
to Maryland law will be passed upon for the Company by Piper & Marbury L.L.P.
Certain matters as to Florida law will be passed upon for the Company by
Shumaker, Loop & Kendrick, Tampa, Florida.
EXPERTS
The consolidated financial statements of Apartment Investment and Management
Company and the combined financial statements of The AIMCO Predecessors included
in Apartment Investment and Management Company's Annual Report on Form 10-K for
the year ended December 31, 1996 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated and combined financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of NHP Incorporated for the years
ended December 31, 1996, 1995 and 1994 included in the Company's Current Report
on Form 8-K dated April 16, 1997, have been audited by Arthur Andersen LLP,
independent public accountants, as set forth in their report thereon included
therein and incorporated by reference herein. Such consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
As noted in their report, Arthur Andersen LLP did not audit the 1994
financial statements of certain real estate partnerships whose operating results
are included in "income (loss) from discontinued real estate operations, net of
income taxes" in the 1994 consolidated financial statements. The financial
statements of these real estate partnerships were audited by other auditors,
whose reports are filed as exhibits to the Company's Current Report on Form 8-K,
dated April 16, 1997, and Arthur Andersen LLP's opinion, insofar as it relates
to the amounts included in the consolidated financial statements for these real
estate partnerships, is based solely on the reports of those auditors included
therein and incorporated herein by reference. The auditors on whose reports
Arthur Andersen LLP relied are: Anders, Minkler & Diehl LLP; Dauby O'Connor &
Zaleski, LLC; Deloitte & Touche LLP; Edwards Leap & Sauer; George A. Hieronymous
& Company, LLC; Goldenberg Rosenthal Friedlander, LLP; Hansen, Hunter & Kibbee,
P.C.; J.H. Cohn LLP; J.A. Plumer & Co., P.A.; Marks Shron & Company, LLP;
Reznick Fedder & Silverman; and Russell Thompson Butler & Houston.
The Historical Summary of Gross Income and Direct Operating Expenses of
Villa Ladera Apartments for the year ended December 31, 1995 included in the
Company's Current Report on Form 8-K, dated December 19, 1996, has been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such Historical Summary
is incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
Any financial statements and schedules hereafter filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act and
incorporated by reference in this Prospectus that have been examined and are the
subject of a report by independent accountants will be so incorporated herein by
reference in reliance upon such reports given and upon the authority of such
firms as experts in accounting and auditing to the extent covered by consents
filed with the Commission.
31
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS
SUPPLEMENT. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE PLACEMENT AGENT.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES COVERED BY THIS
PROSPECTUS SUPPLEMENT IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS
SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
The Company................................. S-2
Risk Factors................................ S-4
NHP Acquisition............................. S-14
Other Recent Developments................... S-15
The Offering................................ S-16
Use of Proceeds............................. S-16
Plan of Distribution........................ S-17
Certain Federal Income Tax Considerations... S-17
Legal Matters............................... S-18
PROSPECTUS
Available Information....................... 2
Incorporation of Certain Documents by
Reference................................. 2
The Company................................. 4
Use of Proceeds............................. 5
Ratio of Earnings to Fixed Charges.......... 5
Description of Debt Securities.............. 5
Description of Preferred Stock.............. 12
Description of Common Stock................. 15
Description of Warrants..................... 19
Plan of Distribution........................ 20
Certain Federal Income Tax Considerations... 21
Legal Matters............................... 30
Experts..................................... 31
</TABLE>
279,000 SHARES
APARTMENT
INVESTMENT AND
MANAGEMENT COMPANY
CLASS A COMMON STOCK
PROSPECTUS SUPPLEMENT
SEPTEMBER 9, 1997
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