<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1997
REGISTRATION NO. 333-36537
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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>
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COPY TO:
THOMAS C. JANSON, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
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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/
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE
TITLE OF SHARES AMOUNT TO BE PER OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED UNIT (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Class A Common Stock, par value
$.01 per share............... 780,346(2) $35.9375 $28,043,685 $8,499
</TABLE>
(1) Calculated pursuant to Rule 457(c) of the rules and regulations under the
Securities Act of 1933, as amended, based on the average of the high and low
prices on October 24, 1997.
(2) Plus such additional number of shares of Class A Common Stock as may be
issued pursuant to antidilution adjustment provisions in exchange for
Partnership Common Units of AIMCO Properties, L.P.
--------------------
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.
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<PAGE>
PROSPECTUS
780,346 SHARES
[LOGO]
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS A COMMON STOCK
-------------
This Prospectus relates to the offer and sale from time to time by certain
selling stockholders (collectively, the "Selling Stockholders") of up to 780,346
shares of Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), of Apartment Investment and Management Company, a Maryland corporation
("AIMCO"), as described herein under "Selling Stockholders." AIMCO will not
receive any proceeds from the sale of such shares of Class A Common Stock.
The Class A Common Stock is listed and traded on the New York Stock Exchange
(the "NYSE") under the symbol "AIV." On October 24, 1997, the last reported sale
price of the Class A Common Stock on the NYSE was $35.25 per share.
The Selling Stockholders may sell the Class A Common Stock offered hereby
from time to time on the NYSE or such other national securities exchange or
automated interdealer quotation system on which shares of Class A Common Stock
are then listed, through negotiated transactions or otherwise at market prices
prevailing at the time of the sale or at negotiated prices. See "Plan of
Distribution."
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN FACTORS RELEVANT TO
AN INVESTMENT IN THE CLASS A COMMON STOCK.
------------------
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.
The date of this Prospectus is October 28, 1997
<PAGE>
AVAILABLE INFORMATION
AIMCO 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 AIMCO 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.
AIMCO 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 Class A Common Stock 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 AIMCO 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) Amendment No. 2 to Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, filed March 10, 1997;
(iii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997 (and Amendments No. 1 and 2 thereto filed August 19,
1997 and October 6, 1997, respectively);
(iv) Current Reports on Form 8-K dated December 19, 1996, February 19,
1997, April 16, 1997 (and Amendments No. 1, 2 and 3 thereto filed April 30,
1997, October 6, 1997, and October 22, 1997, respectively), May 5, 1997,
June 3, 1997 (and Amendments No. 1, 2, 3, 4 and 5 thereto filed June 27,
1997, August 14, 1997, September 5, 1997, October 6, 1997, and October 22,
1997, respectively), August 26, 1997, September 19, 1997, and October 15,
1997 (and Amendment No. 1 thereto filed October 22, 1997); and
(v) 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 AIMCO 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.
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
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<PAGE>
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 AIMCO 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................................................................. 2
Incorporation of Certain Documents by Reference....................................... 2
Table of Contents..................................................................... 3
The Company........................................................................... 4
Risk Factors.......................................................................... 6
Use of Proceeds....................................................................... 18
Selling Stockholders.................................................................. 18
Plan of Distribution.................................................................. 20
Federal Income Tax Considerations..................................................... 21
Legal Matters......................................................................... 30
Experts............................................................................... 30
</TABLE>
3
<PAGE>
THE COMPANY
GENERAL
Apartment Investment and Management Company ("AIMCO" and, together with its
majority-owned subsidiaries and 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 as of January 1, 1997, with 186,993 apartment units owned or
under management as of September 30, 1997. As of September 30, 1997, the Company
owned or controlled a total of 28,773 units in 109 apartment properties (the
"Owned Properties"), had an equity interest in 87,182 units in 526 apartment
properties (the "Equity Properties"), and managed 71,038 units in 394 apartment
properties (the "Managed Properties," and, together with the Owned Properties
and the Equity Properties, the "AIMCO Properties"). In addition to the Managed
Properties, the Company manages all of the Owned Properties and a majority of
the Equity Properties. The AIMCO Properties are located in 42 states, the
District of Columbia and Puerto Rico. The Company conducts its operations
primarily through AIMCO Properties, L.P., a Delaware limited partnership (the
"Operating Partnership"), and its subsidiaries. As of September 30, 1997, AIMCO
held approximately an 85% interest in the Operating Partnership. AIMCO has
elected to be taxed as a real estate investment trust (a "REIT") for Federal
income tax purposes.
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.
THE NHP ACQUISITION
Pursuant to a Stock Purchase Agreement, dated as of April 16, 1997 (the
"Stock Purchase Agreement"), AIMCO and its unconsolidated subsidiary, AIMCO/NHP
Holdings, Inc., a Delaware corporation ("ANHI"), have acquired an aggregate of
6,930,122 shares of common stock, par value $.01 per share ("NHP Common Stock"),
of NHP Incorporated, a Delaware corporation ("NHP"), representing approximately
53.4% of the shares of NHP Common Stock outstanding as of September 30, 1997
(the "NHP Stock Purchase"). NHP provides a broad array of real estate services
nationwide including property management and asset management. NHP also conducts
mortgage banking services through The WMF Group, Ltd., a Delaware corporation
and a wholly owned subsidiary of NHP ("WMF"). As of September 30, 1997, NHP's
management portfolio (which is included in the AIMCO Properties) included 732
properties containing 79,208 conventional units and 55,102 "affordable" units
(units benefiting from some form of interest rate or rental subsidy or otherwise
subject to governmental programs aimed at providing low and moderate income
housing) located in 38 states, the District of Columbia and Puerto Rico. Among
the properties it manages, NHP owns 12 properties containing 2,905 apartment
units.
In June 1997, the Company acquired a group of companies (the "NHP Real
Estate Companies") previously owned by NHP that hold interests in partnerships
that own 534 conventional and affordable multifamily apartment properties (the
"NHP Properties") containing 87,659 units, a captive insurance subsidiary and
certain related assets (the "NHP Real Estate Acquisition"). The NHP Properties
are included in the AIMCO Properties described above. 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 agreement (the "Master Property Management Agreement").
The Company is currently engaged in a reorganization (the "NHP Real Estate
Reorganization") of its interests in the NHP Real Estate Companies, which will
result in the vast majority of the assets of the NHP Real Estate Companies being
owned by a limited partnership (the "Unconsolidated Partnership") in which the
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.
AIMCO is seeking to acquire the remaining outstanding shares of NHP Common
Stock pursuant to a proposed merger (the "NHP Merger") of AIMCO/NHP Acquisition
Corp., a Delaware corporation and a wholly
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<PAGE>
owned subsidiary of AIMCO ("Merger Sub"), with and into NHP, with NHP being the
surviving corporation after the Merger and becoming a wholly owned subsidiary of
AIMCO. The NHP Merger is subject to a number of conditions, including the
approval of the stockholders of both NHP and AIMCO. Accordingly, there can be no
assurance that the proposed NHP Merger will be completed. If completed, the NHP
Merger is subject to a number of risks. See "Risk Factors -- Risks Associated
with the NHP Acquisition."
As soon as practicable following the NHP Merger, AIMCO will reorganize the
assets and operations of NHP (the "NHP Reorganization"), which will result in
NHP's operations primarily being conducted through ANHI and/or one or more other
unconsolidated subsidiaries of AIMCO (together with ANHI, the "Unconsolidated
Subsidiaries").
Pursuant to rights distributed to NHP stockholders in May 1997, subject to
certain conditions, on the earlier of the effective time of the NHP Merger or
December 1, 1997, all of the outstanding shares of WMF common stock will be
distributed to NHP stockholders (the "WMF Spin-Off"). Shares of WMF common stock
issued to AIMCO and ANHI in the WMF Spin-Off will be transferred to the sellers
of NHP Common Stock under the Stock Purchase Agreement.
5
<PAGE>
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, or
incorporated by reference, in this Prospectus, potential investors should
consider, among other things, the following factors:
RISKS ASSOCIATED WITH THE NHP ACQUISITION
The NHP Stock Purchase, the NHP Merger and the NHP Real Estate Acquisition
(collectively, the "NHP Acquisition") constitute the largest acquisition ever
undertaken by the Company, involving an aggregate purchase price in excess of
$450 million. In addition to the risks typically associated with acquisitions
generally (see "--Risks of Acquisition and Development Activities"), the NHP
Acquisition involves the following risks and uncertainties:
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 NHP 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 a material 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 AND OTHER ACQUIRED BUSINESSES. 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 of AIMCO's reputation. No assurance can be given that the
anticipated benefits from the NHP 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. Substantial growth in AIMCO's portfolio as a result of
recent and possible future acquisitions of businesses may involve similar
burdens and risks.
RISK OF TERMINATION OF OXFORD CONTRACTS. Pursuant to contracts among
certain entities and individuals associated with Oxford Realty Financial Group,
Inc. and Oxford Holdings Corporation (collectively "Oxford") and NHP, NHP
manages a portfolio of properties (the "Oxford Properties") controlled by
Oxford. The management contracts for individual properties (the "Oxford
Management Contracts") have terms of one year and provide for management fees
ranging from 3.25% to 9% of each property's rental revenue. Unless 30 days'
notice of non-renewal is provided by Oxford to NHP, the Oxford Management
Contracts automatically renew for additional one year periods. Such contracts
are terminable for failure by NHP to meet certain financial
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<PAGE>
performance standards with respect to the management of individual properties,
and for cause in certain circumstances, including material breaches of NHP's
obligations under contracts. However, NHP possesses voting rights with respect
to certain Oxford entities that NHP believes prevent Oxford from terminating or
failing to renew the Oxford Management Contracts without NHP's consent, except
in the event of a sale of the managed Oxford Property. In connection with the
NHP Acquisition, Oxford has indicated that it believes it has the right not to
renew the Oxford Management Contracts without NHP's consent. AIMCO and NHP
believe these assertions are without merit. Although AIMCO and NHP intend to
vigorously oppose any attempt by Oxford to terminate or not to renew 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 provides that the sellers thereunder will indemnify AIMCO
against certain losses in excess of $3 million arising from the termination,
cancellation or non-renewal of any property management contract, including
losses related to the Oxford Management Contracts. 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.
POSSIBLE CONFLICT OF INTERESTS; TRANSACTIONS WITH AFFILIATES.
The Company presently manages the Managed Properties through Property Asset
Management Services, L.P., a Delaware limited partnership ("PAMS LP"), Property
Asset Management Services, Inc., a Delaware corporation ("PAMS Inc." and,
together with PAMS LP, the "Management Subsidiaries") and NHP. 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 the Company holding,
directly or indirectly, all of the voting common stock, representing 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 the Company 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 arms'-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 the Company.
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 779,073 shares
of NHP Common Stock, representing approximately 6.0% of the shares outstanding
as of August 31, 1997, has an ownership structure that is similar to that of
PAMS Inc. described above. 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 a controlling interest (with a 1% economic
interest). Following consummation of the NHP 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 a
controlling interest (with an economic interest of between 1% and 5%). 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
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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.
SIGNIFICANT INDEBTEDNESS; REFINANCING RISKS.
The Company has significant amounts of debt outstanding and, accordingly, is
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 the Company's Owned Properties, and 88% of its total
assets, were encumbered by debt, and the Company (excluding ANHI) had total
out-standing indebtedness of $644.5 million, $611.5 million of which was secured
by Owned Properties and other assets, including $70.9 million of outstanding
borrowings under the Credit Facility and $33.0 million of outstanding unsecured
borrowings. The Credit Facility restricts AIMCO's ability to effect certain
mergers, business consolidations and asset sales, imposes minimum net worth
requirements, and requires AIMCO to maintain a ratio of debt to gross asset
value 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 intracompany agreements), failure to
perform or observe covenants or conditions under an intracompany 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. General Motors
Acceptance Corporation has made 35 loans (the "GMAC Loans"), with an aggregate
outstanding principal balance of $217.4 million at June 30, 1997, to 35 property
owning partnerships of the Company, each of which is secured by the underlying
Owned Property of such partnership. Each GMAC Loan is cross-collateralized with
certain other GMAC Loans. Other than the GMAC Loans, none of the Company'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 the ANHI Credit Facility (which
has been repaid), $71.1 million of unsecured indebtedness (including $65.0
million outstanding under NHP's credit facility) and $71.0 million of
indebtedness secured by real estate wholly owned by NHP. If the Company does not
have sufficient funds to repay its 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 the Company 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 the Company 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 the Company.
RISK OF RISING INTEREST RATES.
Certain of the Company's borrowings, including the Credit Facility, bear
interest at a variable rate. In addition, as of June 30, 1997, the Company
(excluding NHP) had approximately $122.9 million of other indebtedness that
bears interest at a variable rate. As of June 30, 1997, approximately 81% of the
Company's total indebtedness (excluding NHP) was subject to fixed interest rates
and 19% was subject to variable interest rates. Although, as described below,
the Company has certain hedging arrangements in place, increases in interest
rates could increase the Company'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
8
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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.
From time to time, the Company enters into agreements to reduce the risks
associated with increases in interest rates. Although these agreements provide
the Company with some protection against rising interest rates, these agreements
also reduce the benefits to the Company when interest rates decline. In March
1997, the Company entered into an interest rate hedging agreement (the "Hedge")
with an investment banking company in anticipation of refinancing certain
indebtedness. The Hedge, which was extended to mature on December 3, 1997, has a
notional amount of $100 million and fixes the interest rate of the anticipated
refinancing at 7.019%. Based on the fair value of the Hedge at September 24,
1997, the Company has an unrealized loss of approximately $7.6 million, which,
when amortized, will result in an effective interest rate of approximately 7.80%
over the life of the refinanced debt. In addition, in September 1997, AIMCO
entered into a second interest rate agreement (the "September Hedge"), with the
same investment banking company, having a notional amount of $75 million, in
anticipation of refinancing certain indebtedness. The September Hedge matures on
December 4, 1997, and fixes the interest rate of the anticipated refinancing at
6.179%. There can be no assurance that the above described indebtedness will be
refinanced or that the Company will be able to enter into other hedging
arrangements to replace the Hedge or the September Hedge.
Interest rate hedging arrangements, including the Hedge and the September
Hedge, may expose the Company to certain risks. Interest rate movements during
the term of interest rate hedging arrangements may result in a gain or loss on
the Company's investment in the hedging arrangement. In addition, if a hedging
arrangement is not indexed to the same rate as the indebtedness that is hedged,
the Company 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 the Company. In order to minimize
counterparty credit risk, the Company'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. The Company'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
reduc-tion in demand for apartments in the area, the attractiveness of the
properties to tenants, competition from other available apartments, the ability
of the Company to provide adequate maintenance and insurance, and increases in
operating costs (including real estate taxes). The Company'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 the Company's Owned Properties and Equity
Properties do not generate income sufficient to meet operating expenses,
including debt service and capital expenditures, the Company's income, and
AIMCO's ability to make distributions to holders of Class A Common Stock, will
be adversely affected. Many of the factors that could adversely affect the
Company's income from its Owned Properties and Equity Properties could also
adversely affect the Company's income from its Managed Properties by reducing
gross receipts for such properties.
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ILLIQUIDITY OF REAL ESTATE. Investments in real estate or partnerships
which own real estate may be illiquid. As a result, the Company 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.
OPERATING RISKS. The AIMCO Properties are subject to operating risks common
to multifamily apartment properties in general. These risks may adversely affect
the Company's cash flow from operations. For example, increases in unemployment
in the areas in which the AIMCO Properties 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 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 the Company to lease apartment units and the level of rents charged
is determined in large part by the number of competitive properties in the local
market. Numerous real estate companies compete with the Company in each of its
market areas in acquiring, developing and managing multifamily apartment
properties and seeking tenants to occupy their properties and the Company's
market share is small in each of its market areas. In addition, numerous
property management companies compete with the Company in the markets where the
Managed Properties 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 the Company'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 the Company 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, the Company
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, the Company 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. 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.
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Certain of the Owned Properties, and some of the other AIMCO Properties, are
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. Such
hazardous substances have been released at certain Owned Properties and, in at
least one case, have migrated from an off-site location onto the Company's
property. In addition, the Company'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 (the "TNRCC") 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
the Company's Montecito property to determine whether, and to what extent,
groundwater has been impacted. Based on test reports received to date by the
Company, the groundwater does not appear to be contaminated at actionable
levels. The Company has not incurred and does not expect to incur liability for
the landfill investigation and remediation; however, AIMCO has relocated some of
its tenants and has installed a venting system according to the TNRCC's
specifications under the building slabs, in connection with its present raising
of four of its buildings, in order to install stabilizing piers thereunder, at
an estimated total cost of approximately $573,000, which cost is primarily for
the restabilization. The Company anticipates that the construction in process
will be completed in January 1998. 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
environ-mental audits by independent environmental consultants prior to
acquisition. The audits did not reveal, nor is the Company aware of, any
environmental liability relating to such properties that the Company believes
would have a material adverse effect on the Company'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 the Company is
unaware. In addition, the Managed Properties may not have been, and certain of
the NHP Properties have not been, subject to Phase I or similar environmental
audits by independent environmental consultants. While the Company is not aware
of any environmental liability that it believes would have a material adverse
effect on its business, financial condition or results of operations relating to
either the Managed Properties or the NHP Properties for which audits are not
available, there can be no assurance that material environmental liabilities of
which the Company is unaware do not exist at such properties.
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. Noncom-pliance 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, the Company is likely to incur
additional costs to comply with the ADA and FHAA.
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RISK OF LOSS OF REVENUE DUE TO TERMINATION OR OTHER LOSS OF PROPERTY
MANAGEMENT AGREEMENTS. The Company is 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 of a number of factors, many of which
are beyond the control of the Company, 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 property owner's determination that the
Company's management of the property is unsatisfactory; (iii) willful
misconduct, gross negligence or other conduct by the manager that constitutes
grounds for termination under such contracts; and (iv) with respect to certain
affordable properties, termination of such contracts by the U.S. Department of
Housing and Urban Development ("HUD") or state housing finance agencies,
generally at their discretion.
On July 29, 1997, the NHP Real Estate Companies elected to sell their
interests in 32 multifamily properties (collectively, the "Hall Portfolio") to
other unaffiliated joint venture partners. The sale is subject to the approval
of certain third parties and there is no assurance that the sale will occur. NHP
recognized approximately $1.8 million and $0.9 million in property management
revenues associated with management of the Hall Portfolio for the year ended
December 31, 1996, and the six months ended June 30, 1997, respectively. If the
sale occurs, NHP will no longer provide property management services to the 32
properties which comprise the Hall Portfolio.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. As of September 30,
1997, the Managed Properties included 60,171 affordable units in 474 properties.
In addition, the NHP Real Estate Companies own interests in approximately 50,000
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 the Company 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 to the effects of HUD regulation on the Company as a manager of
affordable properties, the business of the Company 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. 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 September 30, 1997, in
addition to the 422 HUD-assisted properties, the Company managed 52 properties
that receive assistance from agencies other than HUD or are subject to
regulation by agencies other than HUD. The Company estimates that it receives
less than 9% of its revenues from affordable units.
RISKS RELATED TO HUD ENFORCEMENT AND LIMITED DENIALS. 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 issued limited denials
of participation to NHP as a result
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of physical inspections and mortgage defaults at four properties owned by the
NHP Real Estate Companies (two of which properties are managed by NHP). The
limited denials of participation, unless lifted, suspend the Company'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). In 1996, NHP obtained approximately $1.4 million in
management revenues from affordable properties in the affected regions. The
Company is in the process of requesting that HUD lift the denials of
participation, but HUD has so far refused to do so, and the Company cannot
determine whether HUD will reverse that decision with respect to any of the
affected regions. Because the limited denials of participation are prospective,
existing HUD agreements are not affected, so the limited denials are not
expected to result in the loss of management service revenue from or otherwise
to affect properties that the Company currently manages in the subject regions.
If HUD were to disapprove the Company as property manager for one or more
affordable properties, the Company's ability to obtain property management
revenues from new affordable properties may be impaired.
HUD monitors the performance of properties with HUD-insured mortgage loans.
HUD also monitors compliance with applicable regulations, and takes performance
and compliance into account in approving management of HUD-assisted properties.
In this regard, 29 HUD-assisted properties owned or managed by NHP Real Estate
Companies or NHP have defaulted on non-recourse HUD-insured mortgage loans.
Eight of these 29 properties are currently managed by NHP. An additional six
properties owned or managed by the NHP Real Estate Companies or NHP have
received unsatisfactory performance ratings. As a result of the defaults and
unsatisfactory ratings, a national HUD office must review any field office
approval of the Company to act as property manager for a HUD-assisted property.
The national HUD office has consistently approved NHP's applications to manage
new properties, and the Company has received HUD clearance to acquire its
interests in NHP and the NHP Real Estate Companies. The Company believes that
it, including NHP, enjoys a good working relationship with HUD and that the
national office will continue to apply the clearance process to large management
portfolios such as the Company's, including NHP's, with discretion and
flexibility. While there can be no assurance, the Company believes that the
unsatisfactory reviews and the mortgage defaults will not have a material impact
on its results of operations or financial condition.
In October 1997, NHP received a subpoena from the Inspector General of HUD
requesting documents relating to any arrangement whereby NHP or any of its
affiliates provides or has provided compensation to owners of HUD multifamily
projects in exchange for or in connection with management of a HUD project. NHP
believes that other owners and managers of HUD projects have received similar
subpoenas. Documents relating to certain of NHP's acquisitions of management
rights for HUD projects, including its acquisition of management rights from
Oxford, may be responsive to the subpoena. NHP intends to comply with the
subpoena and believes that its operations are in compliance, in all material
respects, with all laws, rules and regulations relating to HUD-assisted or
HUD-insured properties. Although the Inspector General has not initiated any
action against NHP or the Company or, to NHP's or the Company's knowledge, any
owner of a HUD property managed by NHP or the Company, if any such action is
taken in the future, it could ultimately affect existing arrangements with
respect to HUD projects or otherwise have a material adverse effect on the
results of operations of the Company.
RISKS RELATING TO UNCERTAINTY REGARDING STATUS OF FEDERAL SUBSIDIES. The
Company manages approximately 44,000 units (including approximately 37,900 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 the Company,
pursuant to vouchers received by tenants. A substantial number of the Section 8
subsidies are scheduled to expire prior to 2005, unless renewed. For the past
several years, various proposals have been advanced by HUD, Congress and others
proposing the restructuring of Section 8. Four 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
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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 the Company'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 the Company's property management revenues and the NHP
Properties.
RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES.
The Company has engaged in, and intends to continue to engage in, the
selective acquisition, development and expansion of multifamily apartment
properties. In the ordinary course of business, the Company engages in
discus-sions and negotiations regarding the acquisition of apartment properties
or interests in apartment properties. The Company frequently enters into
contracts and nonbinding letters of intent with respect to the purchase of
properties. These contracts are typically subject to certain conditions and
permit the Company 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. The Company believes that such contracts essentially result in
the creation of an option on the subject properties and give the Company greater
flexibility in seeking to acquire properties. As of September 30, 1997, the
Company had under contract or letter of intent an aggregate of 26 multi-family
apartment properties with a maximum aggregate purchase price of $315 million
(which, in some cases, may be paid in the form of assumption of existing debt)
that are subject to termination by the Company as described above. In addition,
on October 15, 1997, the Company's due diligence period expired with respect to
a portfolio of 35 multifamily residential properties owned by partnerships
affiliated with Winthrop Financial Associates (the ("Winthrop Portfolio"), and
the Company became obligated, subject to certain conditions, to acquire the
Winthrop Portfolio for an aggregate purchase price of approximately $262
million, including transaction costs. 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, along with integration
related risks. 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 also "--Risks Associated with the
NHP Acquisition." The Company 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, including tender offers for limited partnership
interests. Risks associated with the Company's past and future acquisitions of
general partnership interests, and tender offers for outstanding limited
partnership interests, include the risks that the general partner will be
subject to allegations (including legal actions) of, or will be otherwise liable
for, breaches of fiduciary duty to the limited partners of such partnership and
that the assets of
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the general partner may be subject to claims by creditors of the partnership if
the partnership becomes insolvent. See also "--Risks Relating to English
Litigation."
RISKS RELATING TO ENGLISH LITIGATION.
In November 1996, the Company 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, the Company purchased 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. The Company 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 the Company
and J.W. English in the U.S. District Court for the Northern District of
California (the "Federal Action"), alleging, among other things, that the
Compa-ny conspired with J.W. English to breach his fiduciary duty to the
plaintiffs, and that the offering materials used by the Company 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 the
Company and the J.W. English Companies, alleging, among other things, that the
consideration the Company 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 the Company receives excessive fees in
connection with its management of the properties owned by the English
Partnerships, that the Company 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 connection with the
English Acquisition, a court order removing the Company from management of the
English Partnerships and/or ordering disposition of the properties and attorneys
fees, expert fees and other costs. The Company intends to vigorously defend
itself in connection with these actions. The Company believes it is entitled to
indemnity from the J.W. English Companies, subject to certain exceptions.
Failure by the Company to prevail in the California Actions or to receive
indem-nification could have a material adverse effect on the Company's financial
condition and results of operations. On August 4, 1997, the Company filed
demurrers to both complaints in the California Actions. Hearing on the demurrers
is scheduled for November 7, 1997.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS.
Although each of Terry Considine, Peter K. Kompaniez and Steven D. Ira,
officers and/or directors of the Company, has entered into an employment
agreement with the Company, the loss of any of their services could have an
adverse effect on the operations of the Company.
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
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make distributions to stock-holders 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 September 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, ANHI and the other Unconsolidated Subsidiaries,
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 the Company has ownership interests (the "Subsidiary Partnerships") are
properly treated as partnerships for Federal income tax purposes. If 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
Class A 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, the Company might need to
borrow funds or liquidate certain investments on terms that may be
disadvantageous to the Company 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," "--Risks Related to Investment
in and Management of Real Estate" and "Certain Federal Income Tax
Considerations."
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 NHP Merger
without jeopardizing AIMCO's qualification as a REIT. See "Certain Federal
Income Tax Considerations."
In addition, if AIMCO fails to qualify as a REIT, the agreement pursuant to
which AIMCO issued its Class B Preferred Stock provides that the original
purchaser may require AIMCO to repurchase such investor's 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.
16
<PAGE>
OWNERSHIP LIMIT.
In order for AIMCO to maintain its qualification as a REIT, not more than
50% of the value of its outstanding stock may be owned, directly or
con-structively, by five or fewer individuals or entities (as set forth in the
Code). The AIMCO Charter prohibits direct or constructive ownership of shares of
Class A Common Stock representing more than 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Mr. Considine) of the
combined total of outstanding shares of AIMCO's Class A Common Stock or Class B
Common Stock by any person (the "Ownership Limit"). The constructive ownership
rules are complex and may cause shares of AIMCO's Class A Common Stock and Class
B Common Stock owned directly or constructively by a group of related
individuals or entities to be constructively owned by one individual or entity.
AIMCO's Board of Directors may permit ownership of up to 9.8% of the combined
total of outstanding shares of AIMCO's Class A Common Stock and Class B Common
Stock by a particular stockholder if it is satisfied, based upon the advice of
tax counsel or other evidence or undertaking acceptable to it, that ownership in
excess of the limit will not jeopardize AIMCO's status as a REIT. A transfer of
shares to a person who, as a result of the transfer, violates the Ownership
Limit may be void under some circumstances or may be transferred to a trust, for
the benefit of one or more qualified charitable organizations designated by
AIMCO, with the intended transferee having only a right to share (to the extent
of the transferee's original purchase price for such shares) in proceeds from
the trust's sale of such shares.
SHARES AVAILABLE FOR FUTURE SALE.
As of September 30, 1997, there are outstanding options and warrants to
purchase Class A Common Stock, and shares of Class B Preferred Stock and Class B
Common Stock convertible into Class A Common Stock, that, if exercised or
converted, would result in the issuance of approximately 3.7 million shares of
Class A Common Stock. In addition, as of September 30, 1997, there were
outstanding 4.7 million OP Units which, upon tender for redemption by the
holders, may be acquired by AIMCO in exchange for an equal number of shares of
Class A Common Stock. Consummation of the NHP Merger will increase the amount of
outstanding shares of Class A Common Stock by between approximately 2.2 million
shares and 4.5 million shares (excluding any shares issued to ANHI), depending
upon the type of consideration elected by NHP stockholders in the NHP Merger,
and will increase the number of shares of Class A Common Stock issuable upon
exercise of options by approximately 0.7 million shares. All of the shares of
Class A Common Stock issued to NHP stockholders as consideration in the NHP
Merger will be immediately available for sale in the public markets, and the
other 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 NHP
Merger may 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 NHP Merger) may sell their shares
of Class A Common Stock to pay any taxes due upon receipt of the consideration
in the NHP 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 price for 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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<PAGE>
USE OF PROCEEDS
The Selling Stockholders will receive all of the net proceeds from the sale
of shares of Class A Common Stock offered hereby. The Company will not receive
any proceeds from the sale of such shares.
SELLING STOCKHOLDERS
This Prospectus relates to periodic offers and sales of up to 780,346 shares
of Class A Common Stock by the selling stockholders named below and their
respective pledgees, donees and other successors in interest (collectively, "the
Selling Stockholders"). The shares of Class A Common Stock that may be offered
and sold by the Selling Stockholders include shares that may be issued in
exchange for Partnership Common Units ("OP Units") of the Operating Partnership.
The holders of OP Units have the right, subject to the terms of the agreement of
limited partnership of the Operating Partnership (the "Limited Partnership
Agreement"), to redeem some or all of their OP Units for cash, subject to
AIMCO's right to acquire any OP Units tendered for redemption in exchange for
shares of AIMCO's Class A Common Stock at an exchange ratio of one share of
Class A Common Stock for each OP Unit (subject to certain specified
adjustments). Pursuant to certain Registration Rights Agreements, AIMCO is
obligated to register under the Securities Act the resale of shares of Class A
Common Stock that may be issued to the Selling Stockholders in exchange for OP
Units. As of the date of this Prospectus, 780,346 OP Units are held by the
Selling Stockholders named below, all of which OP Units may be acquired from
time to time by AIMCO in exchange for 780,346 shares of Class A Common Stock
(subject to adjustment). All of such shares of Class A Common Stock may be
offered pursuant to this Prospectus.
The following table sets forth certain information with respect to the
Selling Stockholders and their beneficial ownership of shares of Class A Common
Stock as of the date hereof. Except as indicated below, none of the Selling
Stockholders holds any position, office or has had any other material
relationship with the Company, or any of its predecessors or affiliates, during
the past three years.
<TABLE>
<CAPTION>
SHARES OWNED
PRIOR TO
SELLING STOCKHOLDER OFFERING (1)
- -------------------------------------------------------------------------- ------------------
<S> <C>
John W. English (2)....................................................... 13,532
J.W. English Real Estate Co. (2).......................................... 344,781
J.W. English Development Co. (2).......................................... 364,960
Tracy A. Achelis (3)...................................................... 7
Robert & Charmaine Bainum (3)............................................. 67
Barab Trust DTD 6/5/90 (Marvin & Gertrude Barab TTEE) (3)................. 2,918
Norman Barron (3)......................................................... 4,026
John F. Becker (3)........................................................ 3,115
John F. Becker IRA (3).................................................... 1,281
First Trust Corp., John Becker IRA (3).................................... 839
Ludwig & Margaret Bernecker (3)........................................... 2,782
Charles A. & Priscilla E. Bourgeois (3)................................... 3,940
Raymond M. and Delores Brennan (3)........................................ 355
Neil C. Clements (3)...................................................... 200
Edward F. & Jeanne C. Dunne Intervivos (3)................................ 1,663
Paul D. Ehrman (3)........................................................ 477
Stanley L. Eisner (3)..................................................... 415
Ewing Family Trust, Philip M. Ewing TTTEE (3)............................. 355
Fairfax Nursing Center (3)................................................ 67
Charles & Judith Fermon (3)............................................... 355
Judith N. Fermon (3)...................................................... 222
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
PRIOR TO
SELLING STOCKHOLDER OFFERING (1)
- -------------------------------------------------------------------------- ------------------
<S> <C>
Benjamin T. M.D. & Jean C. Franklin (3)................................... 840
William F. Glaser (3)..................................................... 927
Frederick F. and Gary A. Jakubus (3)...................................... 839
Mark S. Johnson (3)....................................................... 1,210
Hytham A. Kadrie (3)...................................................... 355
Hytham A. & Osmette Kadrie (3)............................................ 500
Thomas J. Laux (3)........................................................ 200
Heng F. & Joy S. Lim, JTWROS (3).......................................... 569
Maui Impressions Trust (Thomas R. Surguine) (3)........................... 4,001
Charles Mendenhall (3).................................................... 3,725
Miles E. Nuddleman (3).................................................... 2,157
William Palmer (3)........................................................ 420
Lila N. Patel and Natoo C. Patel (3)...................................... 333
Raymond & Alexsandra Rackauskas (3)....................................... 334
Jack R. Ritter and June E. Ritter (3)..................................... 3,529
Calvin Robbins (3)........................................................ 2,293
Norman K. & Barbara J. Rumpf (3).......................................... 2,293
Jareen E. Schmidt (3)..................................................... 198
Ruth M. Schroll Trust (3)................................................. 1,672
Adele L. Barron & Frederick W. Shaw Jr. (3)............................... 1,962
Stephen F. Sherwin (3).................................................... 955
Margaret T. and William G. Spalthoff (3).................................. 989
Michael A. Stoner (3)..................................................... 586
Larry E. and Carol L. Warfel (3).......................................... 2,147
Joseph & Danielle Zerger (3).............................................. 955
-------
TOTAL................................................................. 780,346
</TABLE>
- ---------
(1) Unless otherwise indicated, the number of shares owned prior to this
offering reflects the number of OP Units owned by the Selling Stockholder,
each of which may be acquired from time to time by AIMCO in exchange for one
share of Class A Common Stock (subject to adjustment) upon the tender of
such OP Unit for redemption pursuant to the Limited Partnership Agreement.
(2) The OP Units owned by such Selling Stockholder were acquired from the
Company in connection with the Company's acquisition of the J.W. English
Companies in November 1996. It is expected that John W. English, J.W.
English Real Estate Co. and J.W. English Development Co. will pledge up to
11,176 OP Units, 231,471 OP Units and 245,054 OP Units, respectively, to
Merrill Lynch International Private Finance Limited ("MLIPF") to secure
certain loans. The shares of Class A Common Stock that may be issued in
exchange for such OP Units may be sold hereunder by MLIPF in the event of a
default on such loans.
(3) The OP Units owned by such Selling Stockholder were acquired from the
Company in connection with the English Tender Offers in November 1996.
Because the Selling Stockholders may sell some or all of the shares of Class
A Common Stock offered hereby, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of such shares,
no estimate can be given as to the number of shares of Class A Common Stock that
will be held by the Selling Stockholders upon termination of any offering made
hereby. If all of the shares offered hereby are sold, the Selling Stockholders
will not own any of the outstanding shares of Class A Common Stock.
19
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the
Selling Stockholders of up to 780,346 shares of Class A Common Stock. The Class
A Common Stock may be sold from time to time by the Selling Stockholders. Such
sales may be made in underwritten offerings or in open market or block
transactions or otherwise on the NYSE, or such other national securities
exchange or automated interdealer quotation system on which shares of Class A
Common Stock are then listed, in the over-the-counter market, in private
transactions or otherwise at prices related to prevailing market prices at the
time of the sale or at negotiated prices. Some or all of the shares of Class A
Common Stock may be sold through brokers acting on behalf of the Selling
Stockholders or to dealers for resale by such dealers. In connection with such
sales, such brokers and dealers may receive compensation in the form of
discounts or commissions from the Selling Stockholders and may receive
commissions from the purchasers of such shares for whom they act as broker or
agent (which discounts and commissions are not anticipated to exceed those
customary in the types of transactions involved). The Selling Stockholders may
offer to sell and may sell shares of the Class A Common Stock in options
transactions or deliver such shares to cover short sales "against the box." If
necessary, a supplemental or amended Prospectus will describe the method of sale
in greater detail. In effecting sales, brokers or dealers engaged by the Selling
Stockholders and/or purchasers of the Class A Common Stock may arrange for other
brokers or dealers to participate. In addition, any of the Class A Common Stock
covered by this prospectus which qualifies for sale pursuant to Rule 144 under
the Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
If shares of Class A Common Stock are sold in an underwritten offering, the
shares will be acquired by the underwriters for their own accounts and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or prices at the time of the sale
or at negotiated prices. Any initial public offering price and any discounts or
commissions allowed or reallowed or paid to dealers may be changed from time to
time. Underwriters may sell shares to or through brokers or dealers, and such
brokers and dealers may receive compensation in the form of discounts,
commissions or commissions from the underwriters and may receive commissions
from the purchasers of such shares for whom they act as broker or agent (which
discounts and commissions are not anticipated to exceed those customary in the
types of transactions involved).
The Company has agreed to pay all expenses in connection with the
registration of the Class A Common Stock being offered hereby. Selling
Stockholders are responsible for paying any other selling expenses, including
underwriting discounts and brokers' commissions, and expenses of Selling
Stockholders' counsel.
The Selling Stockholders and any underwriter, broker or dealer who acts in
connection with the sale of the Class A Common Stock hereunder may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any compensation received by them and any profit on any resale of the Class A
Common Stock as principals may be deemed to be underwriting discounts and
commissions under the Securities Act.
In order to comply with the securities laws of certain jurisdictions, the
securities offered hereby will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the securities offered hereby may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an an
exemption from registration or qualification is available and is complied with.
Pursuant to registration rights agreements between AIMCO and the Selling
Stockholders, AIMCO has agreed to indemnify the Selling Stockholders, each of
their respective officers and directors and any person who controls such Selling
Stockholders, against certain liabilities and expenses arising out of or based
upon the information set forth or incorporated by reference in this Prospectus,
and the Registration Statement of which this Prospectus is a part, including
liabilities under the Securities Act.
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<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of Federal income tax considerations regarding an
investment in Class A Common Stock. This discussion is based upon the Code, the
regulations promulgated by the U.S. Treasury Department thereunder (the
"Treasury Regulations"), rulings issued by the IRS, and judicial decisions, all
in effect as of the date of this Prospectus and which are subject to change,
possibly retroactively. This discussion is for general information only and is
not tax advice. This discussion does not purport to discuss all aspects of
Federal income taxation which may be important to a particular investor in light
of his individual investment or tax circumstances, or to certain types of
investors subject to special tax rules (including insurance companies, financial
institutions or broker-dealers, foreign investors and, except to the extent
discussed below, tax-exempt organizations). No advance ruling has been or will
be sought from the IRS regarding any matter discussed herein.
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 a REIT. 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. Accordingly, the discussion of the Federal income tax treatment of a
REIT below does not reflect the changes made by the Act to the REIT provisions
of the Code. For a summary of such changes, see "--REIT Provisions of the
Taxpayer Relief Act of 1997" below.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND
SALE OF CLASS A COMMON STOCK AND OF AIMCO'S ELECTION TO BE SUBJECT TO TAX, FOR
FEDERAL INCOME TAX PURPOSES, AS A "REAL ESTATE INVESTMENT TRUST."
TAXATION OF AIMCO
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.
AIMCO has elected to be taxed as a REIT under the Code commencing with its
taxable year ending December 31, 1994, and AIMCO intends to continue to operate
in such a manner. AIMCO believes that it was organized in conformity with the
requirements for qualification as a REIT, and that its method of operation since
formation and proposed method of future operation will enable it to meet the
requirements for qualification and taxation as a REIT under the Code. Such
qualification and taxation as a REIT depends upon AIMCO'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. Accordingly, no assurance can be given that the actual results
of AIMCO's operations for any one taxable year will satisfy such requirements.
See "--Failure to Qualify." No assurance can be given that the IRS will not
challenge AIMCO's eligibility for taxation as a REIT.
If AIMCO 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, AIMCO will be subject to Federal income tax as
follows: First, AIMCO will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, AIMCO may be subject to the "alternative
minimum tax" on its items of tax preference. Third, if AIMCO 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 AIMCO 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
21
<PAGE>
amount equal to (a) the gross income attributable to the greater of the amount
by which AIMCO fails the 75% or 95% test multiplied by (b) a fraction intended
to reflect AIMCO's profitability. Fifth, if AIMCO 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 periods, AIMCO would
be subjected to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. Sixth, if during the ten-year period beginning
on the day on which an asset acquired by AIMCO from a subchapter C corporation
in a transaction in which the adjusted tax basis of the asset in the hands of
AIMCO is determined by reference to the adjusted basis of such asset in the
hands of the subchapter C corporation, AIMCO recognizes gain on the disposition
of such asset, under Treasury regulations not yet promulgated, AIMCO will be
required to recognize any net built-in gain that would have been realized if the
corporation had liquidated at the end of its last taxable year before it
qualifies as a REIT, or in the case of a transfer of assets to AIMCO by a
subchapter C corporation, on the last day before the date of the transfer.
Pursuant to IRS Notice 88-19, AIMCO may elect, in lieu of the treatment
described above, to be subject to tax at the highest regular corporate tax rate
on the excess, if any, of the fair market value over the adjusted basis of any
such asset as of the beginning of the ten-year period ("Built-in Gain"). AIMCO
intends to make such an election and, therefore, will be taxed at the highest
regular corporate rate on such Built-in Gain if and to the extent such assets
are sold within the specified ten-year period.
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 AIMCO Charter provides certain restrictions regarding transfers
of its shares, which provisions are intended to assist AIMCO in continuing to
satisfy the share ownership requirements described in conditions (5) and (6)
above.
To monitor AIMCO's compliance with the share ownership requirements, AIMCO
is required to maintain records regarding the actual ownership of its shares. To
do so, AIMCO 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 AIMCO'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. AIMCO 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, AIMCO'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 AIMCO for purposes of applying the REIT requirements described
herein. A summary of certain rules governing the Federal income taxation of
partnerships and their partners is provided below in "Tax Aspects of AIMCO's
Investments in Partnerships."
22
<PAGE>
INCOME TESTS. In order to maintain qualification as a REIT, AIMCO annually
must satisfy three gross income requirements. First, at least 75% of AIMCO'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 AIMCO'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 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 AIMCO's gross income for each taxable year.
Rents received by AIMCO 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, including the following. 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, AIMCO (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, ANHI and the other Unconsolidated Subsidiaries
will receive management fees and other income. A portion of such fees and other
income will accrue to AIMCO through the Operating Partnership's general
partnership interest in PAMS LP. Such fee and other income generally will not
qualify under the 95% gross income test. AIMCO also expects to indirectly
receive distributions from the Management Subsidiaries through PAMS Inc. and
from ANHI and the other Unconsolidated Subsidiaries that will be classified as
dividend income to the extent of the earnings and profits of PAMS Inc., ANHI and
the other Unconsolidated Subsidiaries. Such distributions will qualify under the
95% gross income test but not under the 75% gross income test.
If AIMCO 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
AIMCO's failure to meet such tests was due to reasonable cause and not due to
willful neglect, AIMCO 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 AIMCO would be entitled to the benefit of these relief provisions.
If these relief provisions are inapplicable to a particular set of circumstances
involving AIMCO, AIMCO 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. AIMCO, 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 AIMCO'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 AIMCO, cash, cash items and U.S. government securities.
Second, not more than 25% of AIMCO'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 AIMCO may not exceed 5% of the value of AIMCO's total assets, and AIMCO may
not own more than 10% of any one issuer's outstanding voting securities.
23
<PAGE>
AIMCO indirectly owns interests in the Management Subsidiaries, ANHI and the
other Unconsolidated 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. In addition, the value of any one issuer's securities owned by
AIMCO may not exceed 5% of the value of AIMCO's total assets. AIMCO believes
that its indirect ownership interest in PAMS Inc., ANHI and the other
Unconsolidated Subsidiaries qualifies under these rules. However, no independent
appraisals have been obtained to support AIMCO's conclusions as to the value of
the Operating Partnership's total assets and the value of the Operating
Partnership's interest in PAMS Inc., ANHI and the other Unconsolidated
Subsidiaries and these values are subject to change in the future. Accordingly,
there can be no assurance that the IRS will not contend that the Operating
Partnership's ownership interest in PAMS Inc., ANHI and the other Unconsolidated
Subsidiaries disqualifies AIMCO from treatment as a REIT.
Immediately following completion of the NHP Merger, AIMCO intends to
restructure its ownership of NHP by transferring the stock or assets of NHP to
ANHI and/or other Unconsolidated Subsidiaries. AIMCO intends that its indirect
ownership interest in any Unconsolidated Subsidiary will comply with the REIT
rules described above.
AIMCO's indirect interests in the Operating Partnership and other Subsidiary
Partnerships are held through wholly owned corporate subsidiaries of AIMCO
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 AIMCO. 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,
AIMCO'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. AIMCO, in order to qualify as a REIT, is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (A) the sum of (i) 95% of AIMCO's
"REIT taxable income" (computed without regard to the dividends paid deduction
and AIMCO'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 AIMCO 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 AIMCO 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 AIMCO 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, AIMCO would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
AIMCO believes that it has made, and intends to make, timely distributions
sufficient to satisfy this annual distribution requirement.
It is possible that AIMCO, 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 AIMCO. In the event that such timing differences
occur, in order to meet the 95% distribution requirement, AIMCO 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, AIMCO may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in AIMCO's deduction for
dividends paid for the earlier year. Thus, AIMCO may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, AIMCO will be
required to pay interest based on the amount of any deduction taken for
deficiency dividends.
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FAILURE TO QUALIFY. If AIMCO fails to qualify for taxation as a REIT in any
taxable year, and the relief provisions do not apply, AIMCO 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
AIMCO fails to qualify will not be deductible by AIMCO nor will they be required
to be made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to stockholders will be taxable as ordinary income,
and, subject to certain limitations of the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, AIMCO 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 AIMCO would
be entitled to such statutory relief.
TAX ASPECTS OF AIMCO'S INVESTMENTS IN PARTNERSHIPS
GENERAL. Most of AIMCO'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. AIMCO 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, AIMCO will
include its proportionate share of assets held by the Subsidiary Partnerships.
See "--Taxation of AIMCO--Ownership of Partnership Interests."
ENTITY CLASSIFICATION. AIMCO's direct and indirect investment in
partnerships involves special tax considerations, including the possibility of a
challenge by the IRS of the status of any of the Subsidiary 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 AIMCO's assets and items of gross income would change and could preclude
AIMCO from satisfying the asset tests and the income tests (see "--Taxation of
AIMCO--Asset Tests" and "--Taxation of AIMCO--Income Tests"), and in turn could
prevent AIMCO from qualifying as a REIT. See "--Taxation of AIMCO--Failure to
Qualify" above for a discussion of the effect of AIMCO'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 AIMCO might incur a tax liability without any related cash
distributions.
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 AIMCO to the Operating Partnership of the
cash proceeds received in any offerings of its stock.
In general, certain holders of Partnership Common Units ("OP Units") issued
by the Operating Partnership will be allocated lower amounts of depreciation
deductions for tax purposes and increased taxable income and gain on sale by the
Operating Partnership or other Subsidiary 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
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taxable transaction such as a sale. Thus, the carryover basis of the contributed
Owned Properties in the hands of the Subsidiary Partnerships may cause AIMCO 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 AIMCO to recognize taxable income in excess of cash proceeds,
which might adversely affect AIMCO's ability to comply with the REIT
distribution requirements. See "--Taxation of AIMCO--Annual Distribution
Requirements."
With respect to any property purchased or to be purchased by any of the
Subsidiary Partnerships (other than through the issuance of OP Units) subsequent
to the formation of AIMCO, 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. AIMCO's share of any gain realized by the Operating
Partnership or another Subsidiary 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 other Subsidiary
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 AIMCO's investment objectives.
TAXATION OF MANAGEMENT SUBSIDIARIES AND UNCONSOLIDATED SUBSIDIARIES
A portion of the amounts to be used to fund distributions to stockholders is
expected to come from the Management Subsidiaries, ANHI and the other
Unconsolidated Subsidiaries, through dividends paid on the non-voting preferred
stock of PAMS Inc., ANHI and the other Unconsolidated Subsidiaries 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. Each of PAMS Inc., ANHI and
the other Unconsolidated Subsidiaries will not qualify as a REIT and will pay
Federal, state and local income taxes on its taxable income at normal corporate
rates. The Management Subsidiaries, ANHI and the other Unconsolidated
Subsidiaries intend to claim annual deductions for interest and amortization. No
assurance can be given that the IRS will not challenge such deductions. Any
Federal, state or local income taxes that PAMS Inc., ANHI and the other
Unconsolidated Subsidiaries is required to pay will reduce AIMCO'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 AIMCO qualifies as a REIT, distributions made to
AIMCO'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 AIMCO's actual net capital gain for the taxable year)
without regard to the period for which the stockholder has held its stock.
However, corporate stockholders 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 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 AIMCO 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 AIMCO and received by the
stockholder on December 31 of such year, provided that the dividend is actually
paid by AIMCO
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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 AIMCO.
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 AIMCO required to be treated by such stockholder as long-term
capital gain.
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 Class A Common 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 whose income is
includable in gross income for U.S. Federal income tax purposes regardless of
its source or a trust the income of which is includable in gross income for
United States 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 ending 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. 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 AIMCO's earnings and profits which are not attributable to
capital gains of AIMCO and which are not effectively 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 Class A Common Stock. In cases where the dividend income from
a Non-U.S. Holder's investment in Class A Common Stock 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 DISTRIBUTIONS. Unless Class A Common Stock constitutes a
United States Real Property Interest (a "USRPI"), distributions by AIMCO which
are not dividends out of the 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
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 accumulated
earnings and profits of AIMCO. If 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.
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DISPOSITION OF STOCK OF AIMCO. Unless Class A Common 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 AIMCO 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. AIMCO believes
that it is, and it expects to continue to be a domestically controlled REIT, and
therefore that the sale of Class A Common Stock will not be subject to taxation
under FIRPTA. Because the Class A Common Stock is publicly traded, however, no
assurance can be given that AIMCO will continue to be a domestically controlled
REIT.
If AIMCO 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 Class A Common Stock is listed) and (ii) the
selling Non-U.S. Holder held 5% or less of AIMCO's outstanding stock at all
times during a specified testing period.
If gain on the sale of stock of AIMCO 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 purchaser of the stock could be required to withhold 10% of the purchase
price and remit such amount to the IRS.
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 Class A Common Stock 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. Class A Common Stock 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. AIMCO must report annually to
the IRS 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 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
Class A Common Stock to a Non-U.S. Holder at an address outside the United
States.
The payment of the proceeds from the disposition of Class A Common Stock 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.
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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 IRS.
These information reporting and backup withholding rules are under review by
the U.S. Treasury and their application to the Class A Common Stock could be
changed by future regulations. On April 15, 1996, the IRS 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 investors in Class A Common
Stock should consult their tax advisors concerning the potential adoption of
such proposed Treasury Regulations and the potential effect on their ownership
of Class A Common Stock.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Based upon a published ruling by the IRS, distributions by AIMCO 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 AIMCO may be treated as UBTI to certain domestic private pension trusts
if AIMCO is treated as a "pension-held REIT." AIMCO believes that it is not, and
does not expect to become, a "pension-held REIT." If AIMCO were to become a
pension-held REIT, these rules generally would only apply to certain pension
trusts that hold more than 10% of AIMCO's stock.
REIT PROVISIONS OF THE TAXPAYER RELIEF ACT OF 1997
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, for certain
noncorporate taxpayers (including individuals), the rate of taxation of capital
gains will depend upon (i) the taxpayer's holding period in the capital asset
(with a preferential rate available for capital assets held more than 18 months)
and (ii) the taxpayer's marginal tax rate for ordinary income. Each prospective
investor should consult his or her own tax advisor regarding the tax
consequences to him or her of the changes made by the Act.
OTHER TAX CONSEQUENCES
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX
CONSEQUENCES. Prospective investors in Class A Common Stock should recognize
that the present Federal income tax treatment of an investment in AIMCO 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 IRS 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 AIMCO. 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
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election by the corporation to become a REIT, and thus would effectively
preclude AIMCO from re-electing REIT status following a termination of its REIT
qualification.
STATE AND LOCAL TAXES. AIMCO and its stockholders may be subject to state
or local taxation in various state or local jurisdictions, including those in
which they transact business or reside. The state and local tax treatment of
AIMCO and its stockholders may not conform to the Federal income tax
consequences discussed above. Consequently, prospective investors should consult
their own tax advisors regarding the application and effect of state and local
tax laws on an investment in AIMCO.
LEGAL MATTERS
Certain legal matters will be passed upon for AIMCO by Skadden, Arps, Slate,
Meagher & Flom LLP, Los Angeles, California. The validity of the Class A Common
Stock offered hereby will be passed on for AIMCO by Piper & Marbury L.L.P.,
Baltimore, Maryland. Certain matters as to Florida law will be passed upon for
AIMCO by Shumaker, Cook & Kendrick, Tampa, Florida.
EXPERTS
The consolidated financial statements of AIMCO and the combined financial
statements of the AIMCO Predecessors included in AIMCO'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 reports thereon included
therein and incorporated herein by reference. Such consolidated financial
statements 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 Historical Summary of Gross Income and Direct Operating Expenses of
Morton Towers for the year ended December 31, 1996 appearing in AIMCO's Current
Report on Form 8-K, dated September 19, 1997, 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.
The Historical Summary of Gross Income and Direct Operating Expenses of The
Bay Club at Aventura for the year ended December 31, 1996 included in Amendment
No. 1 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, 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.
The Historical Summary of Gross Income and Direct Operating Expenses of
Villa Ladera Apartments for the year ended December 31, 1995 included in AIMCO'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.
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The consolidated financial statements of NHP for the years ended December
31, 1996, 1995 and 1994 included in Amendment No. 3 to AIMCO'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 herein by reference. 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 of NHP. The
financial statements of these real estate partnerships were audited by other
auditors, whose reports are incorporated herein by reference to Amendments No. 1
and 2 to AIMCO'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 combined financial statements of NHP Real Estate Companies (as defined
in Note 1 of such financial statements) for the years ended December 31, 1996,
1995 and 1994 included in Amendment No. 5 to AIMCO's Current Report on Form 8-K
dated June 3, 1997, have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such 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.
As noted in their report, Arthur Andersen LLP did not audit the 1996, 1995
and 1994 financial statements of certain real estate partnerships accounted for
under the equity method by the NHP Real Estate Companies. The financial
statements of these real estate partnerships were audited by other auditors,
whose reports are filed as exhibits to Amendments No. 1 and 3 to AIMCO's Current
Report on Form 8-K, dated June 3, 1997, and Arthur Andersen LLP's opinion,
insofar as it relates to the amounts included in the combined 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; Fishbein & Company, P.C.; Freeman and Vessillo; Friduss, Lukee, Schiff &
Co., PC; George A. Heironymous & Company, LLC; Goldenberg Rosenthal Friedlander,
LLP; Hansen, Hunter & Kibbee, P.C.; J.H. Cohn LLP; J.A. Plumer & Co., P.A.;
Prague & Company, P.C.; Robert Ercolini & Company; Marks Shron & Company, LLP;
Reznick Fedder & Silverman; Russell Thompson Butler & Houston; Sciarabba Walker
& Co., LLP; Wallace Sanders & Company; Warady and Davis; Ziner and Company, PC;
and Zinner & Co.
The financial statements of NHP Southwest Partners, LP for the year ended
December 31, 1996 and for the period from January 20, 1995 through December 31,
1995 included in Amendment No. 5 to AIMCO's Current Report on Form 8-K, dated
June 3, 1997, have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such 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 combined financial statements of NHP New LP Entities (as defined in Note
1 of such financial statements) for the year ended December 31, 1996 and for the
period from January 20, 1995 through December 31, 1995 included in Amendment No.
1 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, have been audited
by Arthur Andersen LLP, independent public accountants, as set forth in their
report thereon included therein and incorporated herein by reference. Such
combined financial statements are incorporated
31
<PAGE>
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
The combined financial statements of NHP Borrower Entities (as defined in
Note 1 of such financial statements) for the year ended December 31, 1996 and
for the period from January 20, 1995 through December 31, 1995 included in
Amendment No. 1 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, have
been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report thereon included therein and incorporated herein by
reference. Such 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 Combined Statement of Revenues and Certain Expenses of the Thirty-Five
Acquisition Properties (as defined in Note 1 of such financial statements (which
represent the Winthrop Portfolio)) for the year ended December 31, 1996,
included in AIMCO's Current Report on Form 8-K, dated October 15, 1997, have
been audited by Deloitte & Touche LLP, independent public accountants, as set
forth in their report thereon included therein and incorporated herein by
reference. Such 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.
32
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONS.
The estimated expenses, other than underwriting discounts and commissions,
in connection with the offering of the Securities, are as follows:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission............. $ 8,499
Printing and Engraving Expenses.................................... 5,000
Legal Fees and Expenses............................................ 25,000
Accounting Fees and Expenses....................................... 35,000
Miscellaneous...................................................... 5,000
---------
TOTAL.............................................................. $ 78,499
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AIMCO's Charter limits the liability of AIMCO's directors and officers to
AIMCO and its stockholders to the fullest extent permitted from time to time by
Maryland law. Maryland law presently permits the liability of directors and
officers to a corporation or its stockholders for money damages to be limited,
except (i) to the extent that it is proved that the director or officer actually
received an improper benefit or profit in money, property or services for the
amount of the benefit or profit in money, property or services actually
received, or (ii) if a judgment or other final adjudication is entered in a
proceeding based on a finding that the director's or officer's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. This provision
does not limit the ability of the Company or its stockholders to obtain other
relief, such as an injunction or rescission.
AIMCO's Charter and Bylaws require AIMCO to indemnify its directors,
officers and certain other parties to the fullest extent permitted from time to
time by Maryland law. The Maryland General Corporation Law permits a corporation
to indemnify its directors, officers and certain other parties against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service to or at the request of the corporation, unless
it is established that (i) the act or omission of the indemnified party was
material to the matter giving rise to the proceeding and (x) was committed in
bad faith or (y) was the result of active and deliberate dishonesty, (ii) the
indemnified party actually received an improper personal benefit in money,
property or services or (iii) in the case of any criminal proceeding, the
indemnified party had reasonable cause to believe that the act or omission was
unlawful. Indemnification may be made against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by the director or officer
in connection with the proceeding; PROVIDED, HOWEVER, that if the proceeding is
one by or in the right of the corporation, indemnification may not be made with
respect to any proceeding in which the director or officer has been adjudged to
be liable to the corporation. In addition, a director or officer may not be
indemnified with respect to any proceeding charging improper personal benefit to
the director or officer in which the director or officer was adjudged to be
liable on the basis that personal benefit was improperly received. The
termination of any proceeding by conviction, or upon a plea of nolo contendere
or its equivalent, or an entry of any order of probation prior to judgment,
creates a rebuttable presumption that the director or officer did not meet the
requisite standard of conduct required for indemnification to be permitted. It
is the position of the Securities and Exchange Commission that indemnification
of directors and officers for liabilities arising under the Securities Act is
against public policy and is unenforceable pursuant to Section 14 of the
Securities Act.
The Company has entered into agreements with certain of its officers,
pursuant to which the Company has agreed to indemnify such officers to the
fullest extent permitted by applicable law.
II-1
<PAGE>
The Agreement of Limited Partnership (the "Operating Partnership Agreement")
of the Operating Partnership also provides for indemnification of AIMCO, or any
director or officer of AIMCO, in its capacity as the previous general partner of
the Operating Partnership, from and against all losses, claims, damages,
liabilities, joint or several, expenses (including legal fees), fines,
settlements and other amounts incurred in connection with any actions relating
to the operations of the Operating Partnership, as set forth in the Operating
Partnership Agreement.
Section 11.6 of the Apartment Investment and Management Company 1997 Stock
Award and Incentive Plan (the "1997 Plan"), Section 2.8 of the Amended and
Restated Apartment Investment and Management Company Non-Qualified Employee
Stock Option Plan (the "Non-Qualified Plan"), Section 2.8 of the Apartment
Investment and Management Company 1996 Stock Award and Incentive Plan (the "1996
Plan"), and Section 6.7 of the 1994 Stock Option Plan of Apartment Investment
and Management Company (the "1994 Plan") specifically provide that, to the
fullest extent permitted by law, each of the members of the Board of Directors
of AIMCO (the "Board"), the Compensation Committee of the Board and each of the
directors, officers and employees of AIMCO, any AIMCO subsidiary, the Operating
Partnership and any subsidiary of the Operating Partnership shall be held
harmless and indemnified by AIMCO for any liability, loss (including amounts
paid in settlement), damages or expenses (including reasonable attorneys' fees)
suffered by virtue of any determinations, acts or failures to act, or alleged
acts or failures to act, in connection with the administration of the 1997 Plan,
the Non-Qualified Plan, the 1996 Plan or the 1994 Plan, as the case may be, so
long as such person is not determined by a final adjudication to be guilty of
willful misconduct with respect to such determination, action or failure to act.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
4.6 Specimen certificate for Class A Common Stock (incorporated by reference from
AIMCO's Registration Statement on Form 8-A filed on July 19, 1994).
5.1 Opinion of Piper & Marbury L.L.P. regarding the validity of the Securities offered
hereby.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax matters.*
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in their opinion
filed as Exhibit 8.1).*
23.3 Consent of Piper & Marbury L.L.P. (included in their opinion filed as Exhibit
5.1).*
23.4 Consent of Shumaker, Loop & Kendrick.*
23.5 Consent of Arthur Andersen LLP dated September 22, 1997.*
23.6 Consent of Deloitte & Touche LLP dated September 22, 1997.*
23.7 Consent of Anders, Minkler & Diehl LLP dated September 22, 1997.*
23.8 Consent of Dauby O'Connor & Zaleski, LLC dated September 22, 1997.*
23.9 Consent of Edwards Leap & Sauer dated September 22, 1997.*
23.10 Consent of Fishbein & Company, P.C. dated September 22, 1997.*
23.11 Consent of Freeman & Vessillo, dated September 22, 1997.*
23.12 Consent of Friduss, Lukee, Schiff & Co., PC dated September 22, 1997.*
23.13 Consent of George A. Hieronymous & Company, LLC dated September 22, 1997.*
23.14 Consent of Goldenberg Rosenthal Friedlander, LLP dated September 22, 1997.*
23.15 Consent of Hansen, Hunter & Kibbee, P.C. dated September 22, 1997.*
23.16 Consent of J.H. Cohn LLP dated September 22, 1997.*
23.17 Consent of J.A. Plumer & Co., P.A. dated September 22, 1997.*
23.18 Consent of Marks Shron & Company, LLP dated September 22, 1997.*
23.19 Consent of Prague & Company, P.C. dated September 22, 1997.*
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
23.20 Consent of Reznick Fedder & Silverman dated September 22, 1997.*
23.21 Consent of Robert Ercolini & Company dated September 22, 1997.*
23.22 Consent of Russell Thompson Butler & Houston dated September 22, 1997.*
23.23 Consent of Sciarabba Walker & Co., LLP dated September 22, 1997.*
23.24 Consent of Wallace Sanders & Company dated September 22, 1997.*
23.25 Consent of Warady and Davis dated September 22, 1997.*
23.26 Consent of Ziner and Company, PC dated September 22, 1997.*
23.27 Consent of Zinner & Co. dated September 22, 1997.*
23.28 Consent of Ernst & Young LLP dated October 3, 1997 (Exhibit 23.1 to AIMCO's Current
Report on Form 8-K, dated September 19, 1997, is incorporated herein by
reference).
23.29 Consent of Deloitte & Touche LLP dated October 20, 1997 (Exhibit 23.1 to AIMCO's
Current Report on Form 8-K, dated October 15, 1997, is incorporated herein by
reference).
23.30 Consent of Arthur Andersen LLP dated October 21, 1997 (Exhibit 23.1 to Amendment
No. 3 to AIMCO's Current Report on Form 8-K, dated April 16, 1997, is incorporated
herein by reference).
23.31 Consent of Arthur Andersen LLP dated October 21, 1997 (Exhibit 23.26 to Amendment
No. 5 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, is incorporated
herein by reference).
24 Power of Attorney.*
</TABLE>
- ---------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) shall
not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on this Form S-3 and has duly caused this Amendment No.
1 to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, on the 23rd
day of October, 1997.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ TERRY CONSIDINE
--------------------------------------
Terry Considine,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement on Form S-3 has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- -------------------------- -------------------
<C> <S> <C>
Chairman of the Board and
/s/ TERRY CONSIDINE Chief Executive Officer
--------------------------------- (Principal Executive October 23, 1997
Terry Considine Officer)
Senior Vice President,
/s/ LEEANN MOREIN* Chief Financial Officer
--------------------------------- and Secretary (Principal October 23, 1997
Leeann Morein Financial Officer)
Vice President and Chief
/s/ PATRICIA K. HEATH* Accounting Officer
--------------------------------- (Principal Accounting October 23, 1997
Patricia K. Heath Officer)
/s/ PETER K. KOMPANIEZ*
--------------------------------- Vice Chairman, President October 23, 1997
Peter K. Kompaniez and Director
--------------------------------- Director
Richard S. Ellwood
/s/ J. LANDIS MARTIN*
--------------------------------- Director October 23, 1997
J. Landis Martin
/s/ THOMAS L. RHODES*
--------------------------------- Director October 23, 1997
Thomas L. Rhodes
--------------------------------- Director
John D. Smith
*By: /s/ TERRY CONSIDINE
----------------------------
Terry Considine
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
4.6 Specimen certificate for Class A Common Stock (incorporated by reference from AIMCO's
Registration Statement on Form 8-A filed on July 19, 1994).
5.1 Opinion of Piper & Marbury L.L.P. regarding the validity of the Securities offered
hereby.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax matters.*
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in their opinion filed as
Exhibit 8.1).*
23.3 Consent of Piper & Marbury L.L.P. (included in their opinion filed as Exhibit 5.1).*
23.4 Consent of Shumaker, Loop & Kendrick.*
23.5 Consent of Arthur Andersen LLP dated September 22, 1997.*
23.6 Consent of Deloitte & Touche LLP dated September 22, 1997.*
23.7 Consent of Anders, Minkler & Diehl LLP dated September 22, 1997.*
23.8 Consent of Dauby O'Connor & Zaleski, LLC dated September 22, 1997.*
23.9 Consent of Edwards Leap & Sauer dated September 22, 1997.*
23.10 Consent of Fishbein & Company, P.C. dated September 22, 1997.*
23.11 Consent of Freeman & Vessillo, dated September 22, 1997.*
23.12 Consent of Friduss, Lukee, Schiff & Co., PC dated September 22, 1997.*
23.13 Consent of George A. Hieronymous & Company, LLC dated September 22, 1997.*
23.14 Consent of Goldenberg Rosenthal Friedlander, LLP dated September 22, 1997.*
23.15 Consent of Hansen, Hunter & Kibbee, P.C. dated September 22, 1997.*
23.16 Consent of J.H. Cohn LLP dated September 22, 1997.*
23.17 Consent of J.A. Plumer & Co., P.A. dated September 22, 1997.*
23.18 Consent of Marks Shron & Company, LLP dated September 22, 1997.*
23.19 Consent of Prague & Company, P.C. dated September 22, 1997.*
23.20 Consent of Reznick Fedder & Silverman dated September 22, 1997.*
23.21 Consent of Robert Ercolini & Company dated September 22, 1997.*
23.22 Consent of Russell Thompson Butler & Houston dated September 22, 1997.*
23.23 Consent of Sciarabba Walker & Co., LLP dated September 22, 1997.*
23.24 Consent of Wallace Sanders & Company dated September 22, 1997.*
23.25 Consent of Warady and Davis dated September 22, 1997.*
23.26 Consent of Ziner and Company, PC dated September 22, 1997.*
23.27 Consent of Zinner & Co. dated September 22, 1997.*
23.28 Consent of Ernst & Young LLP dated October 3, 1997 (Exhibit 23.1 to AIMCO's Current
Report on Form 8-K, dated September 19, 1997, is incorporated herein by reference).
23.29 Consent of Deloitte & Touche LLP dated October 20, 1997 (Exhibit 23.1 to AIMCO's Current
Report on Form 8-K, dated October 15, 1997, is incorporated herein by reference).
23.30 Consent of Arthur Andersen LLP dated October 21, 1997 (Exhibit 23.1 to Amendment No. 3
to AIMCO's Current Report on Form 8-K, dated April 16, 1997, is incorporated herein by
reference).
23.31 Consent of Arthur Andersen LLP dated October 21, 1997 (Exhibit 23.26 to Amendment No. 5
to AIMCO's Current Report on Form 8-K, dated June 3, 1997, is incorporated herein by
reference).
24 Power of Attorney.*
</TABLE>
- ---------
* Previously filed.
