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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) OCTOBER 15, 1997
-----------------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
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(Exact name of registrant as specified in its charter)
MARYLAND 1-13232 84-1259577
- -------------------------------- ------------- -------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1873 SOUTH BELLAIRE STREET, SUITE 1700, DENVER, CO 80222-4348
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 757-8101
--------------------
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. OTHER EVENTS
WINTHROP ACQUISITION
On August 22, 1997, AIMCO Properties, L.P., a Delaware limited
partnership and ("AIMCO Properties") a subsidiary limited partnership of
Apartment Investment and Management Company, a Maryland corporation ("AIMCO"
and, together with its majority-owned subsidiaries and controlled entities,
the "Company"), entered into a Purchase and Sale Agreement (the "Purchase
Agreement") with 27 limited partnerships affiliated with Winthrop Financial
Associates for the purchase of portfolio of 35 multifamily residential
properties (collectively, the "Thirty-five Acquisition Properties"). The
Purchase Agreement is included as an exhibit to this report and incorporated
by this reference. The Purchase Agreement provides AIMCO Properties with a
"due diligence" period to inspect the Thirty-five Acquisition Properties.
This period was extended from October 6, 1997 to October 13, 1997 pursuant to
a Letter Agreement, dated October 6, 1997, a copy of which is included as an
exhibit to this report and incorporated herein by this reference, and from
October 13, 1997 to October 15, 1997 pursuant to a Letter Agreement, dated
October 13, 1997, a copy of which is included as an exhibit to this report
and incorporated herein by this reference. The Company determined not to
exercise its option to terminate the Purchase Agreement as of October 15,
1997, and, as of such date, became committed to purchasing the Thirty-five
Acquisition Properties. The Company also amended the purchase price for the
Thirty-five Acquisition Properties pursuant to a Letter Agreement, dated
October 15, 1997, a copy of which is included as an exhibit to this report
and incorporated herein by this reference.
The 35 garden-style apartment communities are located in seven
states, have an average age of 17 years and contain 8,175 apartment units.
Fifteen of the apartment communities are located in Arizona, with 2,602 units
in Phoenix and 816 units in Tucson, eleven apartment communities with 2,075
units are located throughout Texas; two apartment communities with 1,223
units are located in Florida, two apartment communities with 494 units are
located in Michigan, three apartment communities with 536 units are located
in Georgia, one apartment community with 293 units is located in Illinois and
one apartment community with 136 units is located in North Carolina.
The closing of the acquisition of the Thirty-five Acquisition
Properties is expected to occur October 31, 1997, subject to customary
closing conditions. The aggregate purchase price for the Thirty-five
Acquisition Properties, including transaction costs, is approximately $262
million. The Company will pay aggregate consideration of $253.5 million,
including the assumption of $8.3 million in mortgage indebtedness, to
complete the purchase. The Company has also budgeted an additional $16
million in initial capital expenditures which will be incurred subsequent to
the acquisition of the Thirty-five Acquisition Properties. A copy of the
Company's Press Release, dated October 17, 1997, is incorporated herein by
this reference.
RISKS RELATED TO HUD ENFORCEMENT
In October 1997, NHP Incorporated, a Delaware corporation and a
subsidiary of AIMCO ("NHP"), received a subpoena from the Inspector General
of the U.S. Department of Housing and Urban Development ("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 Realty Financial Group, Inc. and Oxford Holdings Corporation, 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.
1
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Combined Statement of Revenues and Certain Expenses of the
Thirty-five Acquisition Properties for the year ended December 31, 1996 and
the six months ended June 30, 1997 (unaudited), together with the Independent
Auditor's Report (included as Exhibit 99.1 to this Report and incorporated
herein by this reference).
(b) Pro Forma Financial Information
The required pro forma financial information is included as Exhibit
99.2 to this Report and incorporated herein by this reference.
2
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(c) Exhibits
The following exhibits are filed with this report:
Exhibit
Number Description
- ------ -----------
*23.1 Consent of Deloitte & Touche LLP.
*99.1 Combined Statement of Revenues and Certain Expenses of
the Thirty-five Acquisition Properties for the year ended
December 31, 1996 and the six months ended June 30, 1997
(unaudited), together with the Independent Auditor's Report.
99.2 Pro Forma Financial Information of Apartment Investment and Management
Company.
*99.3 Purchase and Sale Agreement and Joint Escrow Instructions, made and
entered into as of August 22, 1997, by and between AIMCO Properties,
L.P., a Delaware limited partnership, and each of the parties
identified on Exhibit "A" attached thereto.
*99.4 Letter Agreement, dated October 6, 1997, between AIMCO Properties,
L.P. and each of the parties identified on Exhibit "A" attached to the
Purchase and Sale Agreement and Joint Escrow Instructions, made and
entered into as of August 22, 1997, by and between AIMCO
Properties, L.P., a Delaware limited partnership, and each of the
parties identified on Exhibit "A" attached thereto.
*99.5 Letter Agreement, dated October 13, 1997, between Allan G. Mutchnik,
Counsel to AIMCO Properties, L.P., a Delaware limited partnership,
and William W. Post, counsel to each of the parties identified on
Exhibit "A" attached to the Purchase and Sale Agreement and Joint
Escrow Instructions, made and entered into as of August 22, 1997,
by and between AIMCO Properties, L.P., a Delaware limited
partnership, and each of the parties identified on Exhibit "A"
attached thereto.
*99.6 Letter Agreement, dated October 15, 1997, between AIMCO Properties,
L.P., a Delaware limited partnership, and each of the parties
identified on Exhibit "A" attached to the Purchase and Sale
Agreement and Joint Escrow Instructions, made and entered into as of
August 22, 1997, by and between AIMCO Properties, L.P., a Delaware
limited partnership, and each of the parties identified on
Exhibit "A" attached thereto.
*99.7 Press release of Apartment Investment and Management Company, dated
October 17, 1997.
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* Previously filed
3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Date: October 22, 1997 By: /s/ Leeann Morein
----------------------------------
Leeann Morein
Senior Vice President, Chief
Financial Officer and Secretary
4
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EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
*23.1 Consent of Deloitte & Touche LLP.
*99.1 Combined Statement of Revenues and Certain Expenses of the Thirty-five
Acquisition Properties for the year ended December 31, 1996 and the
six months ended June 30, 1997 (unaudited), together with the
Independent Auditor's Report.
99.2 Pro Forma Financial Information of Apartment Investment and Management
Company.
*99.3 Purchase and Sale Agreement and Joint Escrow Instructions, made and
entered into as of August 22, 1997, by and between AIMCO Properties,
L.P., a Delaware limited partnership, and each of the parties
identified on Exhibit "A" attached thereto.
*99.4 Letter Agreement, dated October 6, 1997, between AIMCO Properties,
L.P. and each of the parties identified on Exhibit "A" attached to the
Purchase and Sale Agreement and Joint Escrow Instructions, made and
entered into as of August 22, 1997, by and between AIMCO
Properties, L.P., a Delaware limited partnership, and each of the
parties identified on Exhibit "A" attached thereto.
*99.5 Letter Agreement, dated October 13, 1997, between Allan G. Mutchnik,
Counsel to AIMCO Properties, L.P., a Delaware limited partnership,
and William W. Post, counsel to each of the parties identified on
Exhibit "A" attached to the Purchase and Sale Agreement and Joint
Escrow Instructions, made and entered into as of August 22, 1997,
by and between AIMCO Properties, L.P., a Delaware limited
partnership, and each of the parties identified on Exhibit "A"
attached thereto.
*99.6 Letter Agreement, dated October 15, 1997, between AIMCO Properties,
L.P., a Delaware limited partnership, and each of the parties
identified on Exhibit "A" attached to the Purchase and Sale
Agreement and Joint Escrow Instructions, made and entered into as of
August 22, 1997, by and between AIMCO Properties, L.P., a Delaware
limited partnership, and each of the parties identified on
Exhibit "A" attached thereto.
*99.7 Press release of Apartment Investment and Management Company, dated
October 17, 1997.
- ------------------
* Previously filed
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PRO FORMA FINANCIAL INFORMATION OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
INTRODUCTION
On May 5, 1997, pursuant to a Stock Purchase Agreement, dated as of April
16, 1997 (the "Stock Purchase Agreement"), Apartment Investment and
Management Company, a Maryland corporation ("AIMCO" and, together with its
majority-owned subsidiaries and controlled entities, the "Company"), acquired
2,866,073 shares of common stock ("NHP Common Stock") of NHP Incorporated
("NHP") in exchange for 2,142,857 shares of AIMCO's Class A Common Stock
("AIMCO Common Stock"). AIMCO contributed such shares of NHP Common Stock to
its wholly owned subsidiary, AIMCO-LP, Inc., which contributed such shares of
NHP Common Stock to AIMCO's operating partnership, AIMCO Properties, L.P.
(the "Operating Partnership"), in exchange for additional partnership
interests in the Operating Partnership. The Operating Partnership contributed
such shares of NHP Common Stock to AIMCO's unconsolidated subsidiary,
AIMCO/NHP Holdings, Inc. ("ANHI"), in exchange for 95,000 shares of ANHI's
Series A Preferred Stock. Also, on May 5, 1997, pursuant to the Stock
Purchase Agreement, ANHI acquired 3,630,000 shares of NHP Common Stock for
$72.6 million in cash. Such cash consideration was obtained by ANHI from the
proceeds of a loan made pursuant to a Credit Agreement (the "ANHI Credit
Facility"). The acquisition of 6,496,073 shares of NHP Common Stock by AIMCO
and ANHI on May 5, 1997, is hereinafter referred to as the "Initial NHP Stock
Purchase."
On June 3, 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"). A substantial majority of the NHP Properties are currently
managed by NHP pursuant to a long-term agreement (the "Master Property
Management Agreement"). AIMCO 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.
1
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On August 26, 1997, AIMCO sold 2,400,000 shares of AIMCO Common Stock to
an institutional investor, at a price of $31.60 per share, and used
substantially all of the net proceeds from such sale to purchase 3,717,000
shares of NHP Common Stock from ANHI for an aggregate price of $74.3 million
(the "August 1997 Stock Offering"). ANHI used the proceeds from its sale of
such shares of NHP Common Stock to repay its outstanding borrowings under the
ANHI Credit facility, and then terminated the ANHI Credit Facility.
On September 12, 1997, AIMCO sold 2,373,418 shares of AIMCO Common Stock
to an institutional investor at a price of $31.60 per share, and sold 279,000
shares of AIMCO Common Stock to another institutional investor at a price of
$33.125 per share. AIMCO used $40 million in proceeds from such sales to
purchase 2,000,000 shares of NHP Common Stock from ANHI (the "Second ANHI
Stock Transfer" and, together with the First ANHI Stock Transfer, the "ANHI
Stock Transfers"), $7,039,500 of such proceeds to purchase an additional
351,975 shares of NHP Common Stock pursuant to the Stock Purchase Agreement,
and $35,462,000 of such proceeds to reduce the amount outstanding under
AIMCO's credit facility. On September 12, 1997, AIMCO also acquired an
additional 82,074 shares of NHP Common Stock pursuant to the Stock Purchase
Agreement in exchange for 61,364 shares of AIMCO Common Stock. AIMCO's
acquisition of an aggregate of 434,049 shares of NHP Common Stock on
September 12, 1997 pursuant to the Stock Purchase Agreement, is hereinafter
referred to as the "Subsequent NHP Stock Purchase" and, together with the
Initial NHP Stock Purchase, the "NHP Stock Purchase." AIMCO's sale of an
aggregate of 2,652,418 shares of AIMCO Common Stock on September 12, 1997,
and the application of the net proceeds thereof is hereinafter referred to as
the "September 1997 Stock Offerings."
On August 22, 1997, the Company entered into a Purchase and Sale
Agreement with 27 limited partnerships affiliated with Winthrop Financial
Associates for the purchase of a portfolio of 35 multifamily residential
properties (the "Thirty-five Acquisiton Properties"). The agreement was
subject to termination in the sole and absolute discretion of the Company
during a due diligence period. On October 15, 1997, the due diligence period
expired and the Company became committed to acquire the Thirty-five
Acquisition Properties.
AIMCO is seeking to acquire the remaining outstanding shares of NHP
Common Stock pursuant to a proposed merger (the "Merger") of AIMCO/NHP
Acquisition Corp., a wholly 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 would be effected
pursuant to an Agreement and Plan of Merger, dated as of April 21, 1997 (the
"Merger Agreement"), by and among AIMCO, NHP and Merger Sub. The Merger
Agreement provides that, upon consummation of the Merger, each outstanding
share of NHP Common Stock, other than NHP Common Stock held by NHP, AIMCO or
Merger Sub, will be converted (subject to certain exceptions) into the right
to receive: (i) 0.74766 shares of AIMCO Common Stock (the "Stock
Consideration"), or (ii) at the election of the holder, 0.37383 shares of
AIMCO Common Stock and $10.00 in cash (the "Mixed Consideration"). As of
August 31, 1997, there were 12,916,939 shares of NHP Common Stock outstanding
and 891,250 outstanding options to purchase NHP Common Stock. In the Merger,
outstanding options
2
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to purchase shares of NHP Common Stock will be converted into options to
purchase shares of AIMCO Common Stock.
Immediately following the Merger, NHP will be a wholly owned subsidiary
of AIMCO. However, immediately following the Merger, AIMCO intends to engage
in a restructuring (the "NHP Reorganization") of the assets and operations of
NHP, possibly along regional or functional lines, that will result in the
Master Property Management Agreement being terminated and NHP's operations
being conducted through ANHI and/or other unconsolidated subsidiaries of
AIMCO (together with ANHI, the "Unconsolidated Subsidiaries"). It is expected
that the Unconsolidated Subsidiaries will have an ownership structure similar
to ANHI, in which the Company holds a 95% economic interest through ownership
of shares of non-voting preferred stock, and certain directors and officers
of AIMCO hold a 5% economic interest through direct or indirect ownership of
all of the outstanding shares of common stock. As a result of the controlling
ownership interest in the Unconsolidated Subsidiaries held by such directors
and officers, AIMCO will account for its interest in the Unconsolidated
Subsidiaries on the equity method.
Pursuant to rights distributed to NHP stockholders in May 1997 (the
"Rights Distribution"), subject to certain conditions, on the earlier of the
effective time of the Merger or December 1, 1997, all of the outstanding
shares of common stock of The WMF Group, Ltd., a wholly owned subsidiary of
NHP ("WMF"), 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.
3
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PRO FORMA FINANCIAL INFORMATION (PRE-MERGER)
The following unaudited Pro Forma Consolidated Balance Sheet (Pre-Merger)
of AIMCO as of June 30, 1997 has been prepared as if each of the following
transactions had occurred as of June 30, 1997: (i) the issuance, pursuant to
the Apartment Investment and Management Company 1997 Stock Award and
Incentive Plan (the "AIMCO Stock Plan"), of 1,100,000 shares of AIMCO Common
Stock financed with notes receivable of $33,000,000 (the "July 1997 Stock
Sale"); (ii) AIMCO's August 1997 sale of 750,000 shares of its Class B
Preferred Stock and the application of the net proceeds thereof to repay
indebtedness (the "Preferred Stock Offering"); (iii) the August 1997 Stock
Offering; (iv) the September 1997 Stock Offerings; (v) the Subsequent NHP
Stock Purchase; (vi) the Company's purchase of 886,600 shares of common stock
of Ambassador Apartments, Inc. (the "Ambassador Stock Acquisition"); (vii)
the Company's receipt of a dividend from ANHI from proceeds ANHI received
from the ANHI Stock Transfers (the "ANHI Dividend"); (viii) the purchase of
third-party notes payable secured by three properties owned by real estate
partnerships in which the Company acquired ownership interests in the NHP
Real Estate Acquisition, and the conversion of such notes payable into loans
from the general partner (the "Loan Acquisitions"); (ix) the purchase of land
leased by two properties owned by real estate partnerships in which the
Company acquired ownership interests in the NHP Real Estate Acquisition (the
"Land Lease Acquisitions"); (x) the payment of third-party notes payable
secured by one property owned by a real estate partnership in which the
Company acquired ownership interests in the NHP Real Estate Acquisition (the
"Property Loan Payment"); (xi) the Company's purchase of the Sawgrass
Apartments (the "Sawgrass Acquisition"); (xii) the Company's purchase of an
interest in a partnership owning the Morton Towers Apartments (the "Morton
Towers Acquisition"); (xiii) the Company's acquisition of the Los Arboles
Apartments (the "Los Arboles Acquisition"); (xiv) the Company's probable
acquisition of 35 multifamily apartment properties from Winthrop Financial
Associates (the "Winthrop Acquisition"); and (xv) the Company's probable
disposition of five real estate properties (the "1997 Dispositions").
The following unaudited Pro Forma Consolidated Statement of Operations
(Pre-Merger) of AIMCO for the year ended December 31, 1996 has been prepared
as if each of the following transactions had occurred as of January 1, 1996:
(i) the Initial NHP Stock Purchase and the ANHI Stock Transfers; (ii) the NHP
Real Estate Acquisition; (iii) the NHP Real Estate Reorganization (iv) the
Company's acquisition of (a) the Tustin East Village and The Californian
apartments in June 1997, (b) the Vinings at the Waterways in June 1997, (c)
the Stonebrook Apartments in May 1997, and (d) The Bay Club at Aventura in
April 1997 (collectively, the "Recent Property Acquisitions"); (v) AIMCO's
sale of 1,265,000 shares of AIMCO Common Stock in November 1996, and the
application of the net proceeds thereof to repay indebtedness (the "November
1996 Stock Offering"); (vi) AIMCO's sale of 2,015,000 shares of AIMCO Common
Stock in February 1997, and the application of the net proceeds thereof to
repay indebtedness (the "February 1997 Stock Offering"); (vii) AIMCO's sale
of an aggregate of 2,300,000 shares of AIMCO Common Stock in May 1997, and
the application of the net proceeds thereof to repay indebtedness (the "May
1997 Stock Offering"); (viii) the Preferred Stock Offering; (ix) the August
1997 Stock Offering; (x) the September 1997 Stock Offerings; (xi) the ANHI
Dividend; (xii) the Ambassador Stock Acquisition; (xiii) the Subsequent NHP
Stock Purchase; (xiv) the Loan Acquisitions; (xv) the Land Lease
Acquisitions; (xvi) the Property Loan Payment; (xvii) the Sawgrass
Acquisition; (xviii) the Morton Towers Acquisition; (xix) the Los Arboles
Acquisition; (xx) the Company's acquisition during 1996 of (a) seven
multifamily apartment properties, (b) general and limited partnership
interests in limited partnerships owning 22 multifamily apartment properties,
and (c) general partnership interests in and loans to limited partnerships
owning 12 multifamily apartment properties, and the related issuance of AIMCO
Common Stock and Partnership Common Units of AIMCO Properties, L.P., and the
incurrence
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of indebtedness to finance such acquisitions, and the refinancing of such
indebtedness (the "1996 Acquisitions"); (xxi) the Winthrop Acquisition;
(xxii) the Company's disposition of four multifamily apartment properties in
1996 (the "1996 Dispositions"); (xxiii) the 1997 Dispositions; and (xxiv) the
Company's purchase of a management company in the third quarter of 1996 (the
"Management Company Acquisition"). The July 1997 Stock Sale has no impact on
the Pro Forma Statement of Operations.
The following unaudited Pro Forma Consolidated Statement of Operations
(Pre-Merger) of AIMCO for the six months ended June 30, 1997 is based on the
unaudited historical financial statements of AIMCO and has been prepared as
if each of the following transactions had occurred as of January 1, 1996: (i)
the Initial NHP Stock Purchase and the ANHI Stock Transfers; (ii) the NHP
Real Estate Acquisition; (iii) the Recent Property Acquisitions; (iv) the
February 1997 Stock Offering; (v) the May 1997 Stock Offering; (vi) the
Preferred Stock Offering; (vii) the August 1997 Stock Offering; (viii) the
September 1997 Stock Offerings; (ix) the ANHI Dividend; (x) the Ambassador
Stock Acquisition; (xi) the Subsequent NHP Stock Purchase; (xii) the Loan
Acquisitions; (xiii) the Land Lease Acquisitions; (xiv) the Property Loan
Payment; (xv) the Sawgrass Acquisition; (xvi) the Morton Towers Acquisition;
(xvii) the Los Arboles Acquisition; (xviii) the Winthrop Acquisition; and
(xix) the 1997 Dispositions. The July 1997 Stock Sale has no impact on the
Pro Forma Statement of Operations.
The following Pro Forma Financial Information (Pre-Merger) is based, in
part, on the following historical financial statements, which have been
previously filed by AIMCO: (i) the Consolidated Financial Statements of AIMCO
for the year ended December 31, 1996 and the six months ended June 30, 1997;
(ii) the restated Consolidated Financial Statements of NHP for the year ended
December 31, 1996 (which have been restated to reflect WMF as a discontinued
operation as a result of the Rights Distribution) and for the six months
ended June 30, 1997; (iii) the Combined Financial Statements of the NHP Real
Estate Companies for the year ended December 31, 1996 and the three months
ended March 31, 1997; (iv) the Financial Statements of NHP Southwest
Partners, L.P. for the year ended December 31, 1996 and the three months
ended March 31, 1997; (v) the Combined Financial Statements of the NHP New LP
Entities for the year ended December 31, 1996 and the three months ended
March 31, 1997; (vi) the Combined Financial Statements of the NHP Borrower
Entities for the year ended December 31, 1996 and the three months ended
March 31, 1997; (vii) the Historical Summary of Gross Income and Certain
Expenses of The Bay Club at Aventura for the year ended December 31, 1996 and
the three months ended March 31, 1997; and (viii) the Historical Summary of
Gross Income and Direct Operating Expenses of Morton Towers for the year
ended December 31, 1996 and the six months ended June 30, 1997. The following
Pro Forma Financial Information (Pre-Merger) is also based on the Combined
Statement of Revenues and Certain Expenses of the Thirty-five Acquisition
Properties for the year ended December 31, 1996 and the six months ended
June 30, 1997, which is filed with AIMCO's Current Report on Form 8-K, dated
October 15, 1997, to which this Pro Forma Financial Information is an
exhibit. The following Pro Forma Financial Information (Pre-Merger) should be
read in conjunction with such financial statements and the notes thereto. In
the opinion of AIMCO's management, all material adjustments necessary to
reflect the effects of these transactions have been made.
The following unaudited Pro Forma Financial Information (Pre-Merger) has
been prepared using the purchase method of accounting whereby the assets and
liabilities of NHP are adjusted to estimated fair market value, based upon
preliminary estimates, which are subject to change as additional information
is obtained. The allocations of purchase costs are subject to final
determination based upon estimates and other evaluations of fair market
value. Therefore, the allocations reflected in the following unaudited Pro
Forma Financial Information (Pre-Merger) may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Pre-Merger) is
presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of AIMCO that would have
occurred if such transactions had been completed on the dates indicated, nor
does it purport to be indicative of future financial positions or results of
operations. In the opinion of AIMCO's management, all material adjustments
necessary to reflect the effects of these transactions have been made. The
unaudited Pro Forma Consolidated Statement of Operations (Pre-Merger) of
AIMCO for the six months ended June 30, 1997 is not necessarily indicative of
the results of operations to be expected for the year ending December 31,
1997.
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (PRE-MERGER)
AS OF JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
AIMCO STOCK PROPERTY WINTHROP PROPERTY PRO FORMA
HISTORICAL(A) OFFERINGS(B) ACQUISITIONS(C) ACQUISITION(D) DISPOSITIONS(E) TOTAL
------------ ----------- --------------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Real estate.............................. $ 945,969 $ -- 12,460(K) $ 261,500 $ -- $1,304,185
9,724(L)
12,462(M)
62,070(N)
Real estate held for sale................ 25,945 -- -- (19,072) 6,873
Investments in and notes receivable from
real estate partnerships............... 151,547 -- 24,000(O) -- 175,547
Investment in and notes receivable from
Unconsolidated Subsidiaries............ 57,231 (38,000)(F) 225(P) -- 19,456(S)
Investment in NHP Common Stock........... -- 74,340(G) -- --
48,681(H) 123,021
Cash and cash equivalents................ 21,521 -- -- -- 21,521
Restricted cash.......................... 17,963 -- -- (812) 17,151
Investment in management contracts....... 10,480 -- -- -- 10,480
Accounts receivable...................... 18,870 -- 767(N) (26) 19,611
Deferred financing costs................. 7,184 -- 858(L) 1,266 -- 9,308
Other assets............................. 16,180 -- (225)(P) (75)
57(N)
19,881(Q) 35,818
------------ ----------- --------------- -------------- --------------- ----------
$1,272,890 $ 85,021 $ 142,279 $ 262,766 $ (19,985) $1,742,971
------------ ----------- --------------- -------------- --------------- ----------
------------ ----------- --------------- -------------- --------------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Secured long-term notes payable.......... $ 464,780 $ -- $ (28,703)(O) $ 8,345 $ -- $ 436,882
(7,540)(R)
Secured short-term financing............. 71,878 (71,878)(I) 52,703(O) 254,421 (9,869) 291,724
(35,462)(H) 7,540(R)
(38,000)(F) 12,460(K)
10,582(L)
12,462(M)
5,006(N)
19,881(Q)
Secured long-term tax-exempt bond
financing.............................. 74,799 -- -- -- -- 74,799
Unsecured short-term financing........... 33,000 -- -- -- -- 33,000
Accrued management contract liability.... 106,615 -- -- -- -- 106,615
Accounts payable, accrued and other
liabilities............................ 56,997 (2,222)(I) 877(N) -- (7,423) 48,229
Resident security deposits and prepaid
rents.................................. 6,353 -- 2,255(N) -- (28) 8,580
------------ ----------- --------------- -------------- --------------- ----------
814,422 (147,562) 87,523 262,766 (17,320) 999,829
------------ ----------- --------------- -------------- --------------- ----------
Minority interest in other partnerships and
corporations........................... 6,625 -- 12,726(N) -- -- 19,351
Minority interest in Operating
Partnership............................ 63,366 -- 42,030(N) -- -- 105,396
Class B Preferred Stock ($.01 par value). -- 75,000(I) -- -- -- 75,000
Class A Common Stock ($.01 par value).... 221 11(J) -- -- --
24(G)
27(H) 283
Class B Common Stock ($.01 par value).... 3 -- -- -- -- 3
Additional paid-in capital............... 417,487 (900)(I) -- -- --
32,989(J)
74,316(G)
84,116(H) 608,008
Notes due on common stock purchases...... (7,603) (33,000)(J) -- -- -- (40,603)
Retained earnings (distributions in excess
of earnings)........................... (21,631) -- -- -- (2,665) (24,296)
------------ ----------- --------------- -------------- --------------- ----------
388,477 232,583 -- -- (2,665) 618,395
------------ ----------- --------------- -------------- --------------- ----------
$1,272,890 $ 85,021 $ 142,279 $ 262,766 $ (19,985) $1,742,971
------------ ----------- --------------- -------------- --------------- ----------
------------ ----------- --------------- -------------- --------------- ----------
</TABLE>
6
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (PRE-MERGER)
AS OF JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(A) Represents AIMCO's unaudited condensed consolidated financial position as of
June 30, 1997, which includes the acquisition of the NHP Real Estate
Companies (including the NHP Real Estate Reorganization) and the Initial
NHP Stock Purchase.
(B) Represents adjustments to reflect (i) the July 1997 Stock Sale; (ii) the
Preferred Stock Offering; (iii) the August 1997 Stock Offering; (iv) the
September 1997 Stock Offerings; (v) the Ambassador Stock Acquisition;
(vi) the Subsequent NHP Stock Purchase; and (vii) the ANHI Dividend.
(C) Represents adjustments to reflect (i) the Loan Acquisitions; (ii) the Land
Lease Acquisitions; (iii) the Property Loan Payment; (iv) the Sawgrass
Acquisition; (v) the Morton Towers Acquisition; and (vi) the Los Arboles
Acquisition.
(D) Represents adjustments for the Winthrop Acquisition, with a purchase
price of $261,500, including $8,000 related to closing costs. AIMCO will
assume a mortgage loan in the amount of $8,345, which bears interest at a
rate of 10.04% and matures on April 1, 2002. In addition, AIMCO will finance
the remainder of the purchase price of $254,421, including $1,266 in
deferred financing costs, which will bear interest at a variable rate of
LIBOR plus 2.00% and matures in two years.
(E) Represents adjustments to reflect the 1997 Dispositions comprised of five
properties containing 916 apartment units.
(F) Represents adjustments for the ANHI Dividend, which was used to reduce
amounts outstanding under secured short-term financing.
(G) Represents the issuance of 2,400,000 shares of AIMCO Common Stock in the
August 1997 Stock Offering, resulting in net proceeds of $74,340, and the
application of such net proceeds to purchase 3,717,000 shares of NHP
Common Stock from ANHI.
(H) Represents the issuance of 2,652,418 shares of AIMCO Common Stock in the
September 1997 Stock Offerings, resulting in net proceeds of $82,502, and
the application of such net proceeds to purchase 2,000,000 shares of
NHP Common Stock from ANHI, to effect the Subsequent NHP Stock Purchase and
to reduce amounts outstanding under secured short-term financing. Also
represents adjustments for the 61,364 shares of AIMCO Common Stock issued
in connection with the Subsequent NHP Stock Purchase with a value of $1,641.
(I) Represents the issuance of 750,000 shares of AIMCO Class B Preferred Stock
at $100 per share; the payment of transaction costs of $900 incurred in the
Preferred Stock Offering and the repayment of $71,878 of secured short-term
financing and the payment of accrued liabilities of $2,222 with the net
proceeds of the Preferred Stock Offering.
(J) Represents the issuance of 1,100,000 shares of AIMCO Common Stock in the
July 1997 Stock Sale and the notes receivable from officers financing such
sale of $33,000, which are reflected as a reduction of shareholders' equity
until actually paid.
(K) Represents adjustments for the Land Lease Acquisitions, which were financed
with secured short-term financing.
(L) Represents adjustments for the Sawgrass Acquisition, which was financed with
new secured short-term financing, for which deferred loan costs of $858 were
incurred.
(M) Represents adjustments for the Los Arboles Acquisition, which was financed
with secured short-term financing.
(N) Represents adjustments for the Morton Towers Acquisition, which was financed
with secured short-term financing and issuance of 1.4 million OP Units
valued at $42,030.
(O) Represents adjustments for the Loan Acquisitions, which were financed with
secured short-term financing. The general partner loans from AIMCO to two
of the real estate partnerships totaling $28,703 are eliminated upon
consolidation of the real estate partnerships into AIMCO's financial
statements.
(P) Represents the reclassification of the investment in one of the
Unconsolidated Subsidiaries from other assets to investment in and notes
receivable from Unconsolidated Subsidiaries.
7
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (PRE-MERGER)
AS OF JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(Q) Represents adjustments for the Ambassador Stock Acquisition.
(R) Represents adjustments for the Property Loan Payment, which was financed
with borrowings of secured short-term financing.
(S) Amount represents investment in preferred stock of the Unconsolidated
Subsidiaries of $19,546 and retained earnings of $(90). The combined Pro
Forma Balance Sheet (Pre-Merger) of the Unconsolidated Subsidiaries as of
June 30, 1997 is presented below. At June 30, 1997, the Unconsolidated
Subsidiaries include (i) ANHI, which owned 51.3% of the outstanding shares
of NHP Common Stock prior to the ANHI Stock Transfers, and (ii) an
Unconsolidated Subsidiary which owns the general partnership interest, and
therefore controls, one real estate partnership, owning fourteen real estate
properties with 2,725 apartment units. Interests held by limited partners in
the real estate partnerships controlled by the Unconsolidated Subsidiary are
reflected as minority interest in consolidated partnerships.
<TABLE>
<CAPTION>
ADJUSTMENTS
-----------------------------
HISTORICAL ANHI STOCK UNCONSOLIDATE PRO FORMA
(i) TRANSFERS (ii) NHP (iii) TOTAL (vi)
------------ -------------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Real estate............................................................ $ 143,638 $ -- $ (97,745) $ 45,893
Investment in NHP Common Stock......................................... -- (74,340)(iv) 129,831 15,491
(40,000)(v)
Cash and cash equivalents.............................................. 3,280 1,740 (iv) (2,040) 4,980
2,000 (v)
Restricted cash........................................................ 2,979 -- (2,218) 761
Investment in management contracts..................................... 101,661 -- (101,537) 124
Goodwill............................................................... 87,388 -- (87,388) --
Deferred financing costs............................................... 4,718 -- (4,124) 594
Other assets........................................................... 61,480 -- (61,127) 353
------------ -------------- ------------- -----------
$ 405,144 $ (110,600) $ (226,348) $ 68,196
------------ -------------- ------------- -----------
------------ -------------- ------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage and other notes payable....................................... $ 96,481 $ -- $ (71,005) $ 25,476
Secured short-term financing........................................... 72,600 (72,600)(iv) -- --
Unsecured short-term financing......................................... 71,145 -- (71,145) --
Accounts payable and other liabilities................................. 37,729 -- (36,739) 990
Deferred tax liability................................................. 10,124 -- (10,124) --
------------ -------------- ------------- -----------
288,079 (72,600) (189,013) 26,466
Minority interest in consolidated partnerships......................... 59,609 -- (37,335) 22,274
Preferred Stock........................................................ 57,546 (38,000)(v) -- 19,546
Common Stock........................................................... -- 2,000 (v) -- 2,000
Retained earnings...................................................... (90) (2,000)(v) -- (2,090)
------------ -------------- ------------- -----------
57,456 (38,000) -- 19,456
------------ -------------- ------------- -----------
$ 405,144 $ (110,600) $ (226,348) $ 68,196
------------ -------------- ------------- -----------
------------ -------------- ------------- -----------
</TABLE>
- ------------------------------
(i) Represents the combined unaudited Unconsolidated Subsidiaries'
consolidated financial position as of June 30, 1997.
(ii) Represents the sale of 5,717,000 shares of NHP Common Stock to AIMCO for
$114,340 and the use of proceeds from the sales.
(iii) Represents the adjustments to ANHI's balance sheet to reflect the
reduction in ownership of NHP Common Stock from 51.3% to 6.03% following
the ANHI Stock Transfers. As a result of the sales of such shares of NHP
Common Stock to AIMCO, ANHI's investment in NHP Common Stock is accounted
for on the equity method.
(iv) Represents the sale of 3,717,000 shares of NHP Common Stock to AIMCO for
$74,340 and the repayment of the ANHI Credit Facility of $72,600 and the
receipt of cash of $1,740 with the proceeds from the sale.
(v) Represents the sale of 2,000,000 shares of NHP Common Stock to AIMCO for
$40,000 and the distribution of such proceeds to the stockholders of ANHI.
The holders of the common stock of ANHI used the distribution of $2,000 to
make a payment on the note receivable to ANHI for the such common stock.
(vi) The pre-Merger pro forma total for the Unconsolidated Subsidiaries
represents the investment in NHP Common Stock of 6.03% and the
consolidated financial position of one real estate partnership owning
fourteen real estate properties containing 2,725 apartment units in which
the Unconsolidated Subsidiaries own the 1% general partnership interest.
8
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------------------------------------
NHP REAL
AIMCO ESTATE NHP REAL ESTATE NHP STOCK WINTHROP PRO FORMA
HISTORICAL(A) ADJUSTMENTS(B) COMPANIES(C) ACQUISITION(D) PURCHASE(E) ACQUISITION(F) TOTAL
---------- -------------- ------------ --------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property
revenues.................... $ 100,516 $ 73,744(G) $ 29,243 $(13,391)(O) $-- $ 48,771(T) $ 238,883
Property operating expenses... (38,400) (41,419)(G) (18,125) 9,286(O) -- (21,896)(T) (110,554)
Owned property management
expense..................... (2,746) (2,552)(G) (1,293) 635(O) -- (2,313)(T) (8,269)
---------- -------------- ------------ --------------- ----------- ----------- ---------
Income from property
operations before
depreciation................ 59,370 29,773 9,825 (3,470) -- 24,562 120,060
Depreciation.................. (19,556) (14,202)(G) (3,904) 996(O) -- (9,153)(T) (45,819)
---------- -------------- ------------ --------------- ----------- ----------- ---------
Income from property
operations.................. 39,814 15,571 5,921 (2,474) -- 15,409 74,241
---------- -------------- ------------ --------------- ----------- ----------- ---------
SERVICE COMPANY BUSINESS
Management fees and other
income...................... 8,367 1,962(H) 7,173(N) -- -- -- 17,502
Management and other
expenses.................... (5,352) (1,254)(H) (8,210)(N) 1,254(P) -- -- (13,562)
Corporate overhead
allocation.................. (590) -- -- -- -- -- (590)
Amortization of management
contracts and depreciation
and amortization of other
assets...................... (718) (508)(I) -- -- -- -- (1,226)
---------- -------------- ------------ --------------- ----------- ----------- ---------
1,707 200 (1,037) 1,254 -- -- 2,124
Minority interest in service
company business............ 10 -- -- -- -- -- 10
---------- -------------- ------------ --------------- ----------- ----------- ---------
Company's share of income from
service company business.... 1,717 200 (1,037) 1,254 -- -- 2,134
---------- -------------- ------------ --------------- ----------- ----------- ---------
General and administrative
expense..................... (1,512) -- -- -- -- -- (1,512)
Interest expense.............. (24,802) (8,169)(J) (10,400) (1,578)(Q) -- (20,527)(U) (65,476)(W)
Interest income............... 523 2,199(K) 2,000 -- -- -- 4,722
---------- -------------- ------------ --------------- ----------- ----------- ---------
Income (loss) before equity in
earnings of unconsolidated
subsidiaries, gain on
disposition of property and
minority interests.......... 15,740 9,801 (3,516) (2,798) -- (5,118) 14,109
Equity in earnings of
unconsolidated
corporations................ -- -- -- -- 5,339(S) -- 5,339(Z)
Equity in losses of
partnerships................ -- 442(L) (5,168) (3,104)(R) -- -- (7,830)
Gain on disposition of
property.................... 44 (44)(G) -- -- -- -- --
---------- -------------- ------------ --------------- ----------- ----------- ---------
Income (loss) before minority
interests................... 15,784 10,199 (8,684) (5,902) 5,339 (5,118) 11,618
Minority interest in other
partnerships................ (111) 2,523(M) -- 254(O) -- -- 2,666
---------- -------------- ------------ --------------- ----------- ----------- ---------
Income (loss) before minority
interest in Operating
Partnership................. 15,673 12,722 (8,684) (5,658) 5,339 (5,118) 14,284
Minority interest in Operating
Partnership................. (2,689) (2,490)(V) -- -- 2,217(V) 909(V) (2,053)
---------- -------------- ------------ --------------- ----------- ----------- ---------
Net income (loss)............. $ 12,984 $ 10,232 $ (8,684) $ (5,648) $7,556 $ (4,209) $ 12,231
---------- -------------- ------------ --------------- ----------- ----------- ---------
---------- -------------- ------------ --------------- ----------- ----------- ---------
Net income allocable to
preferred stockholders...... $ -- $ 5,344(X)
---------- ---------
---------- ---------
Net income allocable to common
stockholders................ $ 12,984 $ 6,887
---------- ---------
---------- ---------
Net income per common
share(Y).................... $ 1.04 $ 0.26
---------- ---------
---------- ---------
Weighted average number of
common shares and common
share equivalents
outstanding................. 12,427 $ 26,592
---------- ---------
---------- ---------
</TABLE>
- --------------------------
(A) Represents AIMCO's audited consolidated results of operations for the year
ended December 31, 1996.
9
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1996: (i) the Recent Property Acquisitions; (ii) the November
1996 Stock Offering; (iii) the February 1997 Stock Offering; (iv) the May
1997 Stock Offering; (v) the August 1997 Stock Offering; (vi) the Preferred
Stock Offering; (vii) the September 1997 Stock Offerings; (viii) the ANHI
Dividend; (ix) the Ambassador Stock Acquisition; (x) the Subsequent NHP
Stock Purchase; (xi) the Loan Acquisitions; (xii) the Land Lease
Acquisitions; (xiii) the Property Loan Payment; (xiv) the Sawgrass
Acquisition; (xv) the Morton Towers Acquisition; (xvi) the Los Arboles
Acquisition; (xvii) the 1997 Dispositions; (xviii) the 1996 Acquisitions;
(xix) the 1996 Dispositions; and (xx) the Management Company Acquisition.
(C) Represents the audited historical combined results of operations of the NHP
Real Estate Companies for the year ended December 31, 1996, excluding gain
on disposition of real estate investments.
(D) Represents the adjustment to reflect the acquisition of the NHP Real
Estate Companies as if it had occurred on January 1, 1996. The
historical financial statements of the NHP Real Estate Companies
consolidate certain real estate partnerships in which they have an
interest that will be presented on the equity method by AIMCO, as a
result of the NHP Real Estate Reorganization. If AIMCO is not in a
position to control the partnership or the real estate assets owned by
any partnership in which it has an interest, such partnership is not
consolidated. Factors which preclude control include, but are not
limited to, not controlling a majority of the general partner interest,
and not owning sufficient interest to control the partnership when there
exists the presence of significant limited partner rights, including the
right to vote on a sale of real estate owned by the partnership or the
refinancing of debt. As a part of the NHP Real Estate Reorganization,
AIMCO transferred its ownership interests in certain partnerships to an
unconsolidated subsidiary or partnership in which AIMCO does not
exercise control; therefore, AIMCO does not consolidate such
partnerships. In addition, represents adjustments to record additional
depreciation and amortization related to the increased basis in the
assets of the NHP Real Estate Companies as a result of the allocation of
the purchase price of the NHP Real Estate Companies and additional
interest expense incurred in connection with borrowings incurred by
AIMCO to consummate the NHP Real Estate Acquisition.
(E) Represents AIMCO's equity in earnings of the Unconsolidated
Subsidiaries, assuming the NHP Stock Purchases occurred on January 1,
1996. AIMCO owns 5,717,000 shares of NHP Common Stock (representing
47.62% of the shares outstanding as of June 30, 1997), and the Operating
Partnership owns a 95% economic interest in ANHI, which owns 779,073
shares of NHP Common Stock (representing 6.03% of such outstanding
shares as of June 30, 1997).
(F) Represents adjustments to reflect the Winthrop Acquisition as if it had
occurred on January 1, 1996.
(G) Represents the pro forma operating results of the 1996 Acquisitions, the
Recent Property Acquisitions, the Sawgrass Acquisition, the Morton Towers
Acquisition, and the Los Arboles Acquisition less the operating results for
the 1996 Dispositions and the 1997 Dispositions. These pro forma
operating results are based on historical results of the properties, except
depreciation, which is based on AIMCO's investment in the properties.
(H) Represents the pro forma operating results of the management companies
acquired by AIMCO since January 1, 1996. These pro forma operating results
are based on historical results of the management companies; however, they
have been adjusted to eliminate management fee income earned by the
respective management companies from the properties which are consolidated.
(I) Represents amortization of the intangible assets related to management
contracts acquired in the Management Company Acquisition. Management
contracts are amortized using the straight-line method over the terms of the
related management contracts.
10
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on AIMCO's Credit Facility and other loans and mortgages
assumed in connection with the 1996 Acquisitions........................ $ (16,887)
Borrowings on AIMCO's Credit Facility and other loans and mortgages
assumed in connection with the Recent Property Acquisitions............. (8,192)
Borrowings on AIMCO's new secured short-term financing in connection with
the Sawgrass Acquisition................................................ (898)
Borrowings on AIMCO's Credit Facility in connection with the Los Arboles
Acquisition............................................................. (897)
Borrowings on AIMCO's Credit Facility in connection with the Morton Towers
Acquisition............................................................. (360)
Borrowings on AIMCO's Credit Facility in connection with the Land Lease
Acquisitions............................................................ (1,440)
Borrowings on AIMCO's Credit Facility in connection with the Loan
Acquisitions............................................................ (3,795)
Borrowings on AIMCO's Credit Facility in connection with the Ambassador
Stock Acquisition....................................................... (1,431)
Reduction in interest for the payment of loans in connection with the Loan
Acquisitions and the Property Loan Payment.............................. 3,327
Repayments on AIMCO's Credit Facility and other indebtedness with proceeds
from the 1996 Dispositions, the 1997 Dispositions, the November
1996 Stock Offering, the February 1997 Stock Offering, the May 1997
Stock Offering, the Preferred Stock Offering, and the September 1997
Stock Offerings......................................................... 19,669
Repayments on AIMCO's Credit Facility with proceeds from the ANHI
Dividend................................................................ 2,735
---------
$ (8,169)
---------
---------
</TABLE>
(K) Represents adjustment to interest income in connection with the Loan
Acquisitions. Interest income is eliminated upon consolidation for two of
the loans purchased. In addition, interest income of $442, related to a loan
with a real estate partnership accounted for on the equity method in which
AIMCO has a 16.72% ownership interest, has been eliminated against equity in
losses of partnerships.
(L) Represents adjustment to eliminate interest expense on the portion of the
general partner loan owned by AIMCO on one of the real estate partnerships
as a result of the Loan Acquisitions.
(M) Represents the minority interest in consolidated real estate partnerships.
(N) Represents revenues and expenses from ancillary businesses purchased from
the NHP Real Estate Companies.
(O) Represents adjustments to present the net historical operations of certain
real estate partnerships on the equity method that were previously
consolidated by the NHP Real Estate Companies.
(P) Represents a reduction in personnel costs pursuant to a restructuring plan,
approved by AIMCO senior management, assuming that the acquisition of the
NHP Real Estate Companies had occurred on January 1, 1996 and that the
restructuring plan was completed on January 1, 1996. The restructuring plan
specifically identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job functions,
location and the date of completion.
11
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(Q) Represents (i) interest of $4,016 related to borrowings on AIMCO's Credit
Facility of $55,807 to finance the NHP Real Estate Acquisition; offset by
(ii) a decrease in interest of $2,438 related to the presentation of certain
real estate partnerships on the equity method.
(R) Represents (i) adjustments of $1,208 related to the presentation of certain
real estate partnerships on the equity method that were previously
consolidated by the NHP Real Estate Companies as a result of the NHP Real
Estate Reorganization; and (ii) adjustments of $1,896 representing
amortization of the increased basis in investments in real estate
partnerships, as a result of the allocation of the combined purchase price
of NHP and the NHP Real Estate Companies, based on an estimated average life
of 17.5 years.
(S) Represents adjustments as if the NHP Stock Purchase and the ANHI Stock
Transfers occurred on January 1, 1996, resulting in (i) AIMCO's equity in
earnings of the Unconsolidated Subsidiaries' operating results of $355,
primarily representing 6.03% of NHP's results of operations; and (ii)
AIMCO's equity in earnings of $4,984 for its 47.62% interest in NHP.
(T) Represents the pro forma operating results of the Winthrop Acquisition as
if it had occurred on January 1, 1996. These pro forma operating results
are based on historical results of the properties, except depreciation,
which is based on AIMCO's investment in the properties.
(U) Represents (i) interest of $842 related to the mortgage assumed in
connection with the Winthrop Acquisition at an interest rate of 10.04%;
(ii) interest of $19,052 related to the borrowings for the Winthrop
Acquisition at an interest rate of LIBOR plus 2.00%; and (iii)
amortization of deferred financing costs of $633 related to the
borrowings for the Winthrop Acquisition.
(V) Represents adjustments to minority interest in the Operating Partnership
assuming the Recent Property Acquisitions, the November 1996 Stock
Offering, the February 1997 Stock Offering, the May 1997 Stock Offering,
the July 1997 Stock Sale, the Preferred Stock Offering, the August 1997
Stock Offering, the September 1997 Stock Offerings, the ANHI Dividend,
the Ambassador Stock Acquisition, the Loan Acquisitions, the Land Lease
Acquisitions, the Property Loan Payment, the Sawgrass Acquisition, the
Morton Towers Acquisition, the Los Arboles Acquisition, the 1996
Acquisitions, the 1996 Dispositions, the 1997 Dispositions, the Management
Company Acquisition, the NHP Stock Purchase, the NHP Real Estate
Acquisition, and the Winthrop Acquisition had occurred as of January 1,
1996. On a pro forma basis, without giving effect to the NHP Stock
Purchase and the NHP Real Estate Acquisition, as of December 31, 1996, the
minority interest percentage is approximately 18.24%. On a pro forma
basis, giving effect to the NHP Stock Purchase and the NHP Real Estate
Acquisition, as of December 31, 1996, the minority interest percentage is
approximately 17.75%.
(W) The pro forma amounts presented assume an average interest rate of 7.88%
per annum (on floating rate debt, representing LIBOR plus 1.45% on AIMCO's
Credit Facility) on outstanding debt obligations with a weighted average
term of 8.34 years. An increase of 0.25% in the interest rate would
increase pro forma interest expense to $66,715, decrease net income
applicable to common shareholders to $5,867 and decrease net income per
common share to $0.22.
(X) Represents net income allocable to holders of the AIMCO Class B Preferred
Stock as if the Preferred Stock Offering had occurred on January 1, 1996.
(Y) In February 1997, the Financial Accounting Standards Board issued Statement
128 which specifies the computation, presentation and disclosure
requirements for basic earnings per share and diluted earnings per share.
AIMCO's management believes that adoption of Statement 128 will not have a
material effect on the earnings per share of AIMCO.
12
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(Z) Amount represents (i) AIMCO's equity in earnings of the
Unconsolidated Subsidiaries' operating results of $355, detailed below;
and (ii) AIMCO's equity in earnings of $4,984 for its 47.62% interest
in NHP. The combined Pro Forma Statement of Operations (Pre-Merger) of
the Unconsolidated Subsidiaries for the year ended December 31, 1996 is
presented below, which is based on a series of transactions, including
(i) the Initial NHP Stock Purchase, resulting in ANHI owning 51.3% of
NHP, (ii) the ANHI Stock Transfers, resulting in ANHI owning 6.03% of
NHP, and the (iii) contribution, from AIMCO to one of the
Unconsolidated Subsidiaries, of the general partnership interest, and
therefore controlling interest, in one real estate partnership (the
"Consolidated Real Estate Partnership"), owning fourteen real estate
properties with 2,725 apartment units. Interests held by limited
partners in the real estate partnerships controlled by the
Unconsolidated Subsidiary are reflected as minority interest in
consolidated partnerships.
<TABLE>
<CAPTION>
CONTRIBUTE
NHP STOCK NHP ANHI STOCK REAL PRO FORMA
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) TRANSFERS(iv) ESTATE(v) TOTAL
----------- ------------ --------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues... $ -- $ -- $ 11,002 (vi) $ (11,002) $ 12,777 $ 12,777
Property operating expenses.......... -- -- (5,937)(vi) 5,937 (8,665) (8,665)
Owned property management expense.... -- -- (853)(vi) 853 (613) (613)
----------- ------------ --------------- ------------ ----------- -----------
Income from property operations
before depreciation................ -- -- 4,212 (4,212) 3,499 3,499
Depreciation......................... -- -- (3,108)(vi) 3,108 (1,606) (1,606)
----------- ------------ --------------- ------------ ----------- -----------
Income from property operations...... -- -- 1,104 (1,104) 1,893 1,893
----------- ------------ --------------- ------------ ----------- -----------
Management fees and other income..... -- 194,979 (127,266)(vii) (67,713) -- --
Management and other expenses........ -- (153,907) 127,266 (vii) 16,987 --
9,654 (viii) --
Amortization of management contracts
and goodwill and depreciation and
amortization of other assets....... -- (6,321) (3,660)(ix) 9,981 (41) (41)
----------- ------------ --------------- ------------ ----------- -----------
-- 34,751 5,994 (40,745) (41) (41)
----------- ------------ --------------- ------------ ----------- -----------
General and administrative........... -- (14,074) -- 14,074 -- --
Interest expense..................... (5,932) (3,982) (4,082)(vi) 13,996 (2,640) (2,640)
Interest income...................... -- 747 -- (747) -- --
----------- ------------ --------------- ------------ ----------- -----------
Income before income taxes, equity in
earnings and minority interests.... (5,932) 17,442 3,016 (14,526) (788) (788)
Income tax provision................. -- (6,977) (135)(x) 7,112 -- (249)
(249)(xiii)
Equity in earnings of NHP............ -- -- (3,086)(xi) 3,717 (xiv) -- 631
Minority interest in NHP............. -- -- (3,652)(xii) 3,652 -- --
Minority interest in partnerships.... -- -- 11 (vi) (11) 780 780
----------- ------------ --------------- ------------ ----------- -----------
Net income........................... $ (5,932) $ 10,465 $ (3,846) $ (305) $ (8) $ 374
----------- ------------ --------------- ------------ ----------- -----------
----------- ------------ --------------- ------------ ----------- -----------
Income attributable to preferred
stockholder........................ $ 355
-----------
-----------
Income attributable to common
stockholder........................ $ 19
-----------
-----------
</TABLE>
- --------------------------
(i) Represents interest expense related to indebtedness of $72,765 (including
deferred financing costs) incurred pursuant to the ANHI Credit Facility to
finance the cash portion of the Initial NHP Stock Purchase.
(ii) Represents the historical operating results of NHP for the year ended
December 31, 1996, which have been restated to reflect WMF as a
discontinued operation as a result of the Rights Distribution.
(iii) Represents adjustments for the following: (i) operating results of the
real estate held for investment, which was held for sale by NHP; (ii) an
adjustment to offset on-site personnel and general and administrative cost
13
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
reimbursement against the related revenue; (iii) a reduction in
personnel costs pursuant to a restructuring plan; (iv) incremental
depreciation and amortization resulting from stating the tangible
and intangible assets related to the property management and other
businesses operated by ANHI at their respective fair values; (v)
adjustment to the estimated Federal and state tax provisions; and
(vi) the allocation of 48.7% of NHP's income owned by other
stockholders to minority interest.
(iv) Represents the sale of 5,717,000 shares of NHP Common Stock to AIMCO
reducing ANHI's ownership of NHP Common Stock from 51.3% to 6.03%;
therefore, ANHI will account for its investment in NHP on the equity
method.
(v) Represents the results of operations of the Consolidated Real Estate
Partnership as if the contribution of the general partnership interest
from AIMCO to the Unconsolidated Subsidiary had occurred on January 1,
1996.
(vi) Represents the operating results of the real estate held for investment
by AIMCO, which was previously held for sale by NHP.
(vii) Represents an adjustment to offset certain property management costs and
related reimbursements against the related revenue.
(viii) Represents a reduction in personnel costs pursuant to a restructuring
plan, approved by AIMCO senior management, assuming that the acquisition
of NHP had occurred on January 1, 1996 and that the restructuring plan
was completed on January 1, 1996. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job functions,
location and the date of completion.
(ix) Represents depreciation and amortization of the tangible and
intangible assets related to the property management and other
businesses operated by ANHI, including amortization of management
contracts of $1,899, depreciation of furniture, fixtures and
equipment of $669, and amortization of goodwill of $4,335, less
ANHI's 51.3% share of NHP's historical depreciation and
amortization of $3,243. Management contracts are amortized using
the straight-line method over the weighted average life of 14.7
years. Furniture, fixtures and equipment are depreciated using the
straight-line method over the estimated life of 5 years. Goodwill
is amortized using the straight-line method over 20 years.
(x) Represents the adjustment to the estimated Federal and state tax
provisions calculated on the operating results of ANHI, excluding
the amortization of goodwill which is not deductible for tax
purposes.
(xi) Represents the equity in earnings of NHP attributable to ANHI's ownership
of 51.3% of the NHP Common Stock outstanding as a result of the Initial
NHP Stock Purchase.
(xii) Represents the share of NHP income attributable to the 48.7% of the NHP
Common Stock owned by other stockholders.
(xiii) Represents the adjustment to the estimated Federal and state tax
provisions calculated on the operating results of ANHI, as adjusted for
the ANHI Stock Transfers.
(xiv) Represents the adjustment for the reduction in equity in earnings of NHP
resulting from the ANHI Stock Transfers, reducing ANHI's investment in
NHP from 51.3% to 6.03% as of January 1, 1996.
14
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
-------------------------------------------------
AIMCO NHP REAL ESTATE NHP STOCK WINTHROP PRO FORMA
HISTORICAL(A) ADJUSTMENTS(B) ACQUISITION(C) PURCHASES(D) ACQUISITION(E) TOTAL
------------- --------------- --------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues.... $ 79,719 $ 11,684(F) $ 6,660(J) $ -- $ 24,711(R) $122,774
Property operating expenses........... (31,160) (5,535)(F) (2,941)(J) -- (10,696)(R) (50,332)
Owned property management expense..... (2,734) (181)(F) (282)(J) -- (1,193)(R) (4,390)
------------- ------- ------- ----- --------- --------
Income from property operations before
depreciation........................ 45,825 5,968 3,437 -- 12,822 68,052
Depreciation.......................... (15,046) (2,630)(F) (1,346)(J) -- (4,576)(R) (23,598)
------------- ------- ------- ----- --------- --------
Income from property operations....... 30,779 3,338 2,091 -- 8,246 44,454
------------- ------- ------- ----- --------- --------
SERVICE COMPANY BUSINESS
Management fees and other income...... 5,605 -- 1,405(K) -- -- 7,010
Management and other expenses......... (2,643) -- (4,878)(K) -- -- (4,906)
2,615(L)
Corporate overhead allocation......... (294) -- -- -- -- (294)
Amortization of management contracts
and depreciation and amortization of
other assets........................ (635) -- -- -- -- (635)
------------- ------- ------- ----- --------- --------
2,033 -- (858) -- -- 1,175
------------- ------- ------- ----- --------- --------
Minority interest in service company
business............................ (2) -- -- -- -- (2)
------------- ------- ------- ----- --------- --------
Company's share of income from service
company business.................... 2,031 -- (858) -- -- 1,173
------------- ------- ------- ----- --------- --------
General and administrative expense.... (784) -- -- -- -- (784)
Interest expense...................... (20,604) 2,329(G) (3,391)(J) -- (10,514)(S)
(1,631)(M) (33,811)(U)
Interest income....................... 1,341 1,099(H) 540(K) -- -- 2,980
------------- ------- ------- ----- --------- --------
Income (loss) before equity in
earnings of unconsolidated
subsidiaries and minority
interests........................... 12,763 6,766 (3,249) -- (2,268) 14,012
Equity in earnings of unconsolidated
corporations........................ (86) -- -- 86(O) --
40(P)
571(Q) 611(X)
Equity in losses of partnerships...... (379) 221(I) (2,432)(J) -- --
(790)(N) (3,380)
------------- ------- ------- ----- --------- --------
Income (loss) before minority
interests........................... 12,298 6,987 (6,471) 697 (2,268) 11,243
Minority interest in other
partnerships........................ (565) (239) 16(J) -- -- (788)
------------- ------- ------- ----- --------- --------
Income (loss) before minority interest
in Operating Partnership............ 11,733 6,748 (6,455) 697 (2,268) 10,455
Minority interest in Operating
Partnership......................... (1,616) (1,319) 899(T) (20)(T) 351(T) (1,705)
------------- ------- ------- ----- --------- --------
Net income (loss)..................... $ 10,117 $ 5,429 $ (5,556) $ 677 $ (1,917) $ 8,750
------------- ------- ------- ----- --------- --------
------------- ------- ------- ----- --------- --------
Net income allocable to preferred
stockholder......................... $ -- $ 2,672(V)
------------- --------
------------- --------
Net income allocable to common
stockholders........................ $ 10,117 $ 6,078
------------- --------
------------- --------
Net income per common share (W)....... $ 0.55 $ 0.21
------------- --------
------------- --------
Weighted average number of common
shares and common share equivalents
outstanding......................... 18,559 $ 28,281
------------- --------
------------- --------
</TABLE>
15
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(A) Represents AIMCO's unaudited consolidated results of operations for the six
months ended June 30, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1996: (i) the Recent Property Acquisitions; (ii) the February
1997 Stock Offering; (iii) the May 1997 Stock Offering; (iv) the Preferred
Stock Offering (v) the September 1997 Stock Offerings; (vi) the ANHI
Dividend; (vii) the Ambassador Stock Acquisition; (viii) the Subsequent
NHP Stock Purchase; (ix) the Loan Acquisitions; (x) the Land Lease
Acquisitions; (xi) the Property Loan Payment; (xii) the Sawgrass
Acquisition; (xiii) the Morton Towers Acquisition; (xiv) the Los Arboles
Acquisition; and (xv) the 1997 Dispositions.
(C) Represents the adjustment to reflect the acquisition of the NHP Real
Estate Companies as if it had occurred on January 1, 1996. The
historical financial statements of the NHP Real Estate Companies
consolidate certain real estate partnerships in which they have an
interest that will be presented on the equity method by AIMCO as a
result of the NHP Real Estate Reorganization. If AIMCO is not in a
position to control the partnership or the real estate assets owned by
any partnership in which it has an interest, such partnership is not
consolidated. Factors which preclude control include, but are not
limited to, not controlling a majority of the general partner interest,
and not owning sufficient interest to control the partnership when there
exists the presence of significant limited partner rights, including the
right to vote on a sale of real estate owned by the partnership or the
refinancing of debt. As part of the NHP Real Estate Reorganization,
AIMCO transferred its ownership interests in certain partnerships to an
unconsolidated subsidiary or partnership in which AIMCO does not
exercise control; therefore, AIMCO does not consolidate such
partnerships. In addition, represents adjustments to record additional
depreciation and amortization related to the increased basis in the
assets of the NHP Real Estate Companies as a result of the allocation of
the purchase price of the NHP Real Estate Companies and additional
interest expense incurred in connection with borrowings incurred by
AIMCO to consummate the NHP Real Estate Acquisition.
(D) Represents the adjustment to reflect AIMCO's purchase of the 5,717,000
shares of NHP Common Stock from ANHI with the proceeds from the August 1997
Stock Offering and the September 1997 Stock Offerings as if they had
occurred on January 1, 1996 and the corresponding adjustments to the equity
in earnings of the Unconsolidated Subsidiaries.
(E) Represents adjustments to reflect the Winthrop Acquisition as if it had
occurred on January 1, 1996.
(F) Represents adjustments to reflect the Recent Property Acquisitions the
Sawgrass Acquisition, the Morton Towers Acquisition, and the Los Arboles
Acquisition, less the 1997 Dispositions as if they had occurred on
January 1, 1996. These pro forma operating results are based on historical
results of the properties, except for depreciation, which is based on
AIMCO's investment in the properties.
16
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(G) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on AIMCO's Credit Facility and other loans and mortgages assumed
in connection with the Recent Property Acquisitions...................... $ (2,961)
Borrowings on AIMCO's new secured short-term financing in connection with
the Sawgrass Acquisition................................................. (458)
Borrowings on AIMCO's Credit Facility in connection with the Los Arboles
Acquisition.............................................................. (443)
Borrowings on AIMCO's Credit Facility in connection with the Morton Towers
Acquisition.............................................................. (178)
Borrowings on AIMCO's Credit Facility in connection with the Land Lease
Acquisitions............................................................. (711)
Borrowings on AIMCO's Credit Facility in connection with the Loan
Acquisitions............................................................. (1,873)
Borrowings on AIMCO's Credit Facility in connection with the Ambassador
Stock Acquisition......................................................... (707)
Reduction in interest for the payment of loans in connection with the Loan
Acquisitions and the Property Loan Payment............................... 1,680
Repayments on AIMCO's Credit Facility and other indebtedness with proceeds
from the 1997 Dispositions, the February 1997 Stock Offering, the May
1997 Stock Offering, the Preferred Stock Offering, and the September 1997
Stock Offerings.......................................................... 6,629
Repayments on AIMCO's Credit Facility with proceeds from the ANHI
Dividend................................................................. 1,351
---------
$ 2,329
---------
---------
</TABLE>
(H) Represents adjustments to interest income in connection with the Loan
Acquisitions. Interest income is eliminated upon consolidation for two of
the loans purchased. In addition, interest income of $221, related to a loan
with a real estate partnership accounted for on the equity method in which
AIMCO has a 16.72% ownership interest, has been eliminated against equity in
losses of partnerships.
(I) Represents adjustment to eliminate interest expense on the portion of the
general partner loan owned by AIMCO on one of the real estate partnerships
as a result of the Loan Acquisitions.
(J) Represents adjustments to reflect the acquisition of the NHP Real Estate
Companies and the corresponding historical results of operations as if they
had occurred on January 1, 1996, including reflecting the NHP Real Estate
Reorganization.
(K) Represents the adjustment to record the revenues and expenses from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1996.
(L) Represents a reduction in personnel costs pursuant to a restructuring plan,
approved by AIMCO senior management, assuming that the acquisition of the
NHP Real Estate Companies had occurred on January 1, 1996 and that the
restructuring plan was completed on January 1, 1996. The restructuring plan
specifically identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job functions,
location and the date of completion.
(M) Represents the increase in interest expense related to borrowings on AIMCO's
Credit Facility of $55,807 to finance the NHP Real Estate Acquisition.
17
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(N) Represents amortization of the increased basis in investment in real estate
partnerships, as a result of the allocation of the purchase price of the NHP
Real Estate Companies, based on an estimated average life of 17.5 years.
(O) Represents the reversal of operating results generated by AIMCO's
Unconsolidated Subsidiaries during the historical period of ownership from
May 3, 1977 to June 30, 1997 when one of the Unconsolidated Subsidiaries
held a 51.3% interest in NHP.
(P) Represents AIMCO's equity in earnings of the Unconsolidated Subsidiaries'
operating results, primarily representing 6.03% of NHP's results of
operations, as if the NHP Stock Purchase and the ANHI Stock Transfers
occurred on January 1, 1996.
(Q) Represents AIMCO's equity in earnings for its 47.62% interest in NHP as if
the ANHI Stock Transfers occurred on January 1, 1996.
(R) Represents the pro forma operating results of the Winthrop Acquisition as
if it had occurred on January 1, 1996. These pro forma operating results
are based on historical results of the properties, except depreciation,
which is based on AIMCO's investment in the properties.
(S) Represents (i) interest of $451 related to the mortgage assumed in
connection with the Winthrop Acquisition at an interest rate of 10.04%;
(ii) interest of $9,746 related to the borrowings for the Winthrop
Acquisition at an interest rate of LIBOR plus 2.00%; and (iii)
amortization of deferred financing costs of $317 related to the
borrowings for the Winthrop Acquisition.
(T) Represents adjustments to minority interest in the Operating Partnership
assuming the Recent Property Acquisitions, the February 1997 Stock
Offering, the May 1997 Stock Offering, the July 1997 Stock Sale, the
Preferred Stock Offering, the August 1997 Stock Offering, the September
1997 Stock Offerings, the ANHI Dividend, the Ambassador Stock
Acquisition, the Loan Acquisitions, the Land Lease Acquisitions, the
Property Loan Payment, the Sawgrass Acquisition, the Morton Towers
Acquisition, the Los Arboles Acquisition, the NHP Stock Purchase, the NHP
Real Estate Acquisitions and the Winthrop Acquisition had occurred as of
January 1, 1996. On a pro forma basis, giving effect to these
transactions, as of June 30, 1997, the minority interest percentage is
approximately 15.47%.
(U) The pro forma amounts presented assume an average interest rate of 8.01%
per annum (on floating rate debt, representing LIBOR plus 1.45% on
AIMCO's Credit Facility) on outstanding debt obligations with a weighted
average term of 7.34 years. An increase of 0.25% in the interest rate
would increase pro forma interest expense to $34,431, decrease net income
applicable to common shareholders to $5,556 and decrease net income per
common share to $0.20.
(V) Represents the net income allocated to holders of the AIMCO Class B
Preferred Stock as if the Preferred Stock Offering had occurred as of
January 1, 1996.
(W) In February 1997, the Financial Accounting Standards Board issued Statement
128 which specifies the computation, presentation and disclosure
requirements for basic earnings per share and diluted earnings per share.
AIMCO's management believes that adoption of Statement 128 will not have a
material effect on the earnings per share of AIMCO.
18
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(X) Amount represents (i) AIMCO's equity in earnings of the
Unconsolidated Subsidiaries' operating results of $40, detailed below;
and (ii) AIMCO's equity in earnings of $571 for its 47.62% interest in
NHP. The combined Pro Forma Statement of Operations (Pre-Merger) of the
Unconsolidated Subsidiaries for the six months ended June 30, 1997 is
presented below, which is based on a series of transactions, including
the Initial NHP Stock Purchase, resulting in ANHI owning 51.3% of NHP,
the ANHI Stock Transfers, resulting in ANHI owning only 6.03% of NHP, and
the contribution, from AIMCO to one of the Unconsolidated Subsidiaries,
of the general partnership interest, and therefore controlling interest,
in one real estate partnership, owning fourteen real estate properties
with 2,725 apartment units. Interests held by limited partners in the
real estate partnerships controlled by the Unconsolidated Subsidiary are
reflected as minority interest in consolidated partnerships.
<TABLE>
<CAPTION>
CONTRIBUTE
ANHI REAL PRE-MERGER
HISTORICAL STOCK ESTATE PRO FORMA
(i) TRANSFERS (ii) (iii) TOTAL
------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues........................ $ 4,103 $ (3,067) $ 5,182 $ 6,218
Property operating expenses............................... (2,403) 1,716 (3,433) (4,120)
Owned property management expense......................... (198) 147 (257) (308)
------------ -------------- ----------- -----------
Income from property operations before depreciation....... 1,502 (1,204) 1,492 1,790
Depreciation.............................................. (654) 520 (669) (803)
------------ -------------- ----------- -----------
848 (684) 823 987
------------ -------------- ----------- -----------
SERVICE COMPANY BUSINESS
Management fees and other income.......................... 11,800 (11,800) -- --
Management and other expenses............................. (2,899) 2,899 -- --
Amortization of management contracts and goodwill and
depreciation and amortization of other assets........... (1,819) 1,815 (17) (21)
------------ -------------- ----------- -----------
7,082 (7,086) (17) (21)
------------ -------------- ----------- -----------
General and administrative................................ (2,700) 2,700 -- --
Interest expense.......................................... (3,153) 2,986 (835) (1,002)
Interest income........................................... 440 (440) -- --
------------ -------------- ----------- -----------
Income before income taxes, equity in earnings and
minority interests...................................... 2,517 (2,524) (29) (36)
Income tax provision...................................... (940) 940
(27)(iv) (27)
Equity in earnings of NHP................................. -- 72(v) 72
Minority interest in NHP.................................. (1,568) 1,568 --
Minority interest in partnerships......................... 6 -- 27 33
------------ -------------- ----------- -----------
Net income................................................ $ 15 $ 29 $ (2) $ 42
------------ -------------- ----------- -----------
------------ -------------- ----------- -----------
Income attributable to preferred stockholder.............. $ 40
-----------
-----------
Income attributable to common stockholder................. $ 2
-----------
-----------
</TABLE>
19
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(i) Represents the unaudited combined results of operations of the
Unconsolidated Subsidiaries for the six months ended June 30, 1997,
excluding the income from discontinued operations of WMF.
(ii) Represents the sale of 5,717,000 shares of NHP Common Stock to AIMCO
reducing ANHI's ownership of NHP Common Stock from 51.3% to 6.03%;
therefore, ANHI will account for its investment in NHP on the equity
method.
(iii) Represents the results of operations of the Consolidated Real Estate
Partnership as if the contribution of the general partnership interest
from AIMCO to the Unconsolidated Subsidiary had occurred on January 1,
1996.
(iv) Represents the adjustment to the estimated Federal and state tax
provisions calculated on the operating results of ANHI, as adjusted for
the ANHI Stock Transfers.
(v) Represents the adjustment for the reduction in equity in earnings of NHP
resulting from the ANHI Stock Transfers, reducing ANHI's investment in NHP
from 51.3% to 6.03% as of January 1, 1996.
20
<PAGE>
PRO FORMA FINANCIAL INFORMATION (MERGER)
The following Pro Forma Condensed Consolidated Balance Sheet (Merger) of
AIMCO as of June 30, 1997 has been prepared as if each of the following
transactions had occurred as of June 30, 1997: (i) the Merger; (ii) the WMF
Spin-Off; (iii) the NHP Reorganization; and (iv) each of the transactions
reflected in the Pro Forma Condensed Consolidated Balance Sheet (Pre-Merger)
of AIMCO as of June 30, 1997, included elsewhere here in. The following Pro
Forma Condensed Consolidated Statements of Operations (Merger) of AIMCO for
the year ended December 31, 1996 and the six months ended June 30, 1997 have
been prepared as if each of the following transactions had occurred as of
January 1, 1996 (i) the Merger; (ii) the WMF Spin-Off; (iii) the NHP
Reorganization; and (iv) each of the transactions reflected in the Pro Forma
Condensed Consolidated Statements of Operations (Pre-Merger) of AIMCO for the
year ended December 31, 1996 and the six months ended June 30, 1997 included
elsewhere herein.
The following Pro Forma Financial Information (Merger) assumes that ANHI
elects to receive Mixed Consideration, and all other NHP stockholders elect
to receive Stock Consideration. However, the notes to the pro forma financial
statements disclose the effect of all NHP stockholders electing to receive
Mixed Consideration. The Pro Forma Financial Information (Merger) also
assumes that no NHP stockholder will receive cash in lieu of shares in excess
of the Ownership limit in AIMCO's Charter or fractional shares.
The following Pro Forma Financial Information (Merger) is based, in part,
on the Pro Forma Financial Information (Pre-Merger) included elsewhere
herein. The Pro Forma Financial Information (Pre-Merger) gives effect to all
material transactions of AIMCO prior to the Merger and as of the date hereof,
including the NHP Stock Purchase, the ANHI Stock Transfers, the NHP Real
Estate Acquisition, the NHP Real Estate Reorganization, certain acquisitions
and dispositions, certain completed sales of shares of AIMCO Common Stock and
the sale of shares of the AIMCO Class B Preferred Stock. See "Pro Forma
Financial Information (Pre-Merger)." The Pro Forma Financial Information
(Merger) is also based, in part, on the following historical financial
statements, which have been previously filed by AIMCO: (i) the Consolidated
Financial Statements of AIMCO for the year ended December 31, 1996 and the
six months ended June 30, 1997; (ii) the restated Consolidated Financial
Statements of NHP for the year ended December 31, 1996 (which have been
restated to reflect WMF as a discontinued operation as a result of the Rights
Distribution) and for the six months ended June 30, 1997; (iii) the Combined
Financial Statements of the NHP Real Estate Companies for the year ended
December 31, 1996 and the three months ended March 31, 1997; (iv) the
Financial Statements of NHP Southwest Partners, L.P. for the year ended
December 31, 1996 and the three months ended March 31, 1997; (v) the Combined
Financial Statements of the NHP New LP Entities for the year ended December
31, 1996 and the three months ended March 31, 1997; (vi) the Combined
Financial Statements of the NHP Borrower Entities for the year ended December
31, 1996 and the three months ended March 31, 1997; (vii) the Historical
Summaries of Gross Income and Certain Expenses of The Bay Club at Aventura
for the year ended December 31, 1996 and the three months ended March 31,
1997; (viii) the Historical Summaries of Gross Income and Direct Operating
Expenses of Morton Towers for the year ended December 31, 1996 and the six
months ended June 30, 1997; and (ix) the Combined Statement of Revenues and
Certain Expenses of the Thirty-five Acquisition Properties for the year ended
December 31, 1996 and the six months ended June 30, 1997. The Pro Forma
Financial Information (Merger) should be read in conjunction with such
financial statements and the notes thereto.
The unaudited Pro Forma Financial Information (Merger) has been prepared
using the purchase method of accounting whereby the assets and liabilities of
NHP are adjusted to estimated fair market value, based upon preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Merger)
may differ from the amounts ultimately determined.
The unaudited Pro Forma Financial Information (Merger) is presented for
informational purposes only and is not necessarily indicative of the financial
position or results of operations of AIMCO that would have occurred if such
transactions had been completed on the dates indicated, nor does it purport to
be indicative of future financial positions or results of operations. In the
opinion of AIMCO's management, all material adjustments necessary to reflect the
effects of these transactions have been made. The unaudited Pro Forma
Consolidated Statement of Operations (Merger) for the six months ended June 30,
1997 is not necessarily indicative of the results of operations to be expected
for the year ending December 31, 1997.
21
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (MERGER)
AS OF JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
PRE- MERGER --------------------------------------------------- MERGER
PRO FORMA NHP MERGER NHP REOR- PRO FORMA
TOTAL(A) HISTORICAL(B) ADJUSTMENTS(C) GANIZATION(D) TOTAL
---------- ------------- -------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Real estate............................. $1,304,185 $ 89,952 $ 14,369 (E) $(88,242)(J)
(105,435)(K) $1,214,829
Real estate held for sale............... 6,873 -- -- -- 6,873
Investments in real estate
partnerships.......................... 175,547 -- -- (19,592)(J)
(22,049)(J)
36,918(K) 170,824
Investment in and notes receivable from
Unconsolidated Subsidiaries........... 19,456 -- -- 63,879(J)
40,000(L)(M)
17,004(J)
17,605(L)(N) 157,944(R)
Investment in NHP Common Stock.......... 123,021 -- 15,581 (F) --
119,737 (G)
(258,339)(E) --
Cash and cash equivalents............... 21,521 2,040 -- (1,136)(K)
(904)(L) 21,521
Restricted cash......................... 17,151 2,218 -- (1,975)(K)
(243)(L) 17,151
Investment in management contracts...... 10,480 46,957 111,533 (E) (51,131)(L)(O)
(106,615)(H) 11,224
Goodwill related to service provider
businesses............................ -- -- 40,000 (E) (40,000)(L)(P) --
Goodwill................................ -- 5,579 94,489 (E) (34,665)(L)(P) 65,403
Accounts receivable..................... 19,611 17,292 -- (17,292)(L) 19,611
Deferred financing costs................ 9,308 1,201 -- (1,201)(K) 9,308
Net deferred tax asset.................. -- 12,797 (6,000)(I) --
(6,797)(E) --
Other assets............................ 35,818 54,442 (6,505)(E) (774)(K)
(22,979)(I) (24,184)(L) 35,818
---------- ------------- -------------- ---------- ---------------
$1,742,971 $232,478 $ (11,526) $(233,417) $1,730,506
---------- ------------- -------------- ---------- ---------------
---------- ------------- -------------- ---------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Secured long-term notes payable......... $ 436,882 $ 71,005 $ -- $ (49,000)(J)
(71,005)(K) $ 387,882
Secured short-term financing............ 291,724 -- 7,791 (F) (400)(K) 299,115(Q)
Secured long-term tax-exempt
financing............................. 74,799 -- -- -- 74,799
Unsecured short-term financing.......... 33,000 71,145 -- (71,145)(L) 33,000
Accrued management contract liability... 106,615 -- (106,615)(H) -- --
Accounts payable, accrued and other
liabilities........................... 48,229 16,809 5,497 (E) (2,013)(K)
(16,793)(L) 51,729
Resident security deposits and prepaid
rents................................. 8,580 -- -- -- 8,580
Other long-term liabilities............. -- 14,567 -- (14,567)(L) --
Deferred tax liability.................. -- -- 8,309 (E) (8,309)(L) --
---------- ------------- -------------- ---------- ---------------
999,829 173,526 (85,018) (233,232) 855,105
---------- ------------- -------------- ---------- ---------------
Minority interest in other partnerships
and corporations...................... 19,351 -- -- (185)(K) 19,166
Minority interest in Operating
Partnership........................... 105,396 -- -- -- 105,396
Class B Preferred Stock ($.01 par
value)................................ 75,000 -- -- -- 75,000
Class A Common Stock ($.01 par value)... 283 127 3 (F) --
45 (G)
(127)(E) 331
Class B Common Stock ($.01 par value)... 3 -- -- -- 3
Additional paid-in capital.............. 608,008 134,483 7,787 (F) --
119,692 (G)
(134,483)(E)
4,917 (E) 740,404
Notes due on common stock purchases..... (40,603) -- -- -- (40,603)
Retained earnings (distributions in
excess of earnings)................... (24,296) (75,658) (28,979)(I)
104,637 (E) -- (24,296)
---------- ------------- -------------- ---------- ---------------
618,395 58,952 73,492 -- 750,839(Q)
---------- ------------- -------------- ---------- ---------------
$1,742,971 $232,478 $ (11,526) $(233,417) $1,730,506
---------- ------------- -------------- ---------- ---------------
---------- ------------- -------------- ---------- ---------------
The pro forma statement above is presented assuming all NHP stockholders (other than ANHI) elect to receive Stock
Consideration in the Merger. See note (Q) for the effect on the pro forma statement assuming all NHP Stockholders elect to
receive Mixed Consideration in the Merger.
</TABLE>
22
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (MERGER)
AS OF JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(A) Represents AIMCO's pro forma consolidated financial position as of June 30,
1997, which gives effect to the NHP Stock Purchase, the ANHI Stock
Transfers, the NHP Real Estate Acquisition, the NHP Real Estate
Reorganization, certain acquisitions and dispositions, certain completed
sales of shares of AIMCO Common Stock and the sale of the shares of AIMCO
Class B Preferred Stock. See "Pro Forma Financial Information
(Pre-Merger)."
(B) Represents the unaudited consolidated financial position of NHP as of June
30, 1997.
(C) Represents the following adjustments occurring as a result of the Merger:
(i) the issuance of 4,767,365 shares of AIMCO Common Stock, valued at
$127,527 (based on $26.75 per share, the closing sale price on the New
York Stock Exchange ("NYSE") of the AIMCO Common Stock on February 13,
1997, the date on which a letter agreement was entered into relating to
the Merger), as Merger Consideration to holders of NHP Common Stock
outstanding as of August 31, 1997 (including 291,240 shares, valued at
$7,790, issued to ANHI and 4,476,125 shares, valued at $119,737, issued to
NHP stockholders); (ii) the additional purchase price consideration of
$4,917 for the Merger resulting from the NHP Stock Options, which vested
upon the consummation of the NHP Stock Purchase and will be converted to
options to purchase shares of AIMCO Common Stock; (iii) the allocation of
the combined purchase price of NHP and the NHP Real Estate Companies
based on the preliminary estimates of relative fair value of the combined
assets and liabilities of NHP and the NHP Real Estate Companies; and (iv)
the elimination of the net assets of WMF as a result of the WMF Spin-Off.
(D) Represents adjustments related to the NHP Reorganization, whereby AIMCO will
contribute to the combined Unconsolidated Subsidiaries: (i) certain assets
and liabilities of NHP, primarily related to the management operations and
other businesses owned by NHP; and (ii) sixteen real estate properties
containing 3,625 apartment units and the related liabilities, and interests
in four real estate partnerships owning four real estate properties
containing 2,836 apartment units. In addition, AIMCO will contribute twelve
real estate properties containing 2,905 apartment units to the
Unconsolidated Partnership. The adjustments reflect the transfer of assets
valued at AIMCO's new basis resulting from the allocation of the combined
purchase price of NHP and the NHP Real Estate Companies. AIMCO will receive
notes payable from the Unconsolidated Subsidiaries as consideration for
certain assets sold and will receive equity, in the form of preferred stock
in exchange for certain assets contributed. The businesses of NHP that will
be contributed to and operated by the Unconsolidated Subsidiaries have
goodwill associated with them; therefore, a portion of the goodwill has been
transferred to the Unconsolidated Subsidiaries. The net deferred tax
liability is assumed by the Unconsolidated Subsidiaries as it resulted from
the assets and liabilities transferred to the Unconsolidated Subsidiaries.
(E) On a pro forma basis, AIMCO currently has an investment in NHP Common Stock
of $123,021, comprised of 6,151,049 shares of NHP Common Stock. In
connection with the Merger, (i) AIMCO will issue 291,240 shares of AIMCO
Common Stock valued at $7,790 (based on $26.75 per share, the closing
sale price on the NYSE of the AIMCO Common Stock on February 13, 1997)
and pay cash of $7,791 to acquire 779,073 shares of NHP Common Stock
owned by ANHI; and (ii) AIMCO will issue 4,476,125 shares of AIMCO
Common Stock valued at $119,737 (based on $26.75 per share, the closing
sale price on the NYSE of the AIMCO Common Stock on February 13, 1997),
assuming all NHP stockholders elect to receive Stock Consideration, to
acquire the shares of NHP Common Stock owned by the NHP stockholders.
AIMCO's investment in NHP Common Stock of $258,339, which will be
eliminated upon completion of the Merger, is as follows:
<TABLE>
<S> <C>
Amount of NHP Common Stock at pre-Merger................................................ $ 123,021
Purchase NHP Common Stock from ANHI..................................................... 15,581
Purchase NHP Common Stock from public................................................... 119,737
---------
Total Investment........................................................................ $ 258,339
---------
---------
</TABLE>
At June 30, 1997, NHP has a deferred tax asset in the amount of
$12,797. In connection with the WMF Spin-Off, the deferred tax asset will
be reduced by $6,000, which relates to net operating loss carryforwards
which will be utilized to reduce taxable gains related to the WMF
Spin-Off. The remaining deferred tax asset of $6,797 was netted against
the deferred tax liability of $15,106, of which the primary component is
the difference between the new basis of the management contracts, as a
result of the combined purchase price of NHP and the NHP Real Estate
Companies, and the historical tax basis.
23
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (MERGER)
AS OF JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
The total purchase price of NHP is $450,588, as follows:
<TABLE>
<S> <C>
Cash paid in the NHP Stock Purchase..................................................... $ 79,640
Issuance of 2,204,221 shares of AIMCO Common Stock in connection with the NHP Stock
Purchase at $26.75 per share.......................................................... 58,962
Issuance of 4,767,365 shares of AIMCO Common Stock in the Merger, at $26.75 per share... 127,527
Cash paid to ANHI as Mixed Consideration in the Merger.................................. 7,791
Assumption of NHP liabilities........................................................... 173,526
Transaction and severance costs......................................................... 5,497
Generation of deferred tax liability.................................................... 8,309
Consideration for NHP Stock Options outstanding......................................... 4,917
Less: Consideration given to ANHI in Merger............................................. (15,581)
---------
Total................................................................................... $ 450,588
---------
---------
</TABLE>
This amount was allocated to the various assets of NHP to be acquired in the
Merger, as follows:
<TABLE>
<S> <C>
Purchase price.......................................................................... $ 450,588
Historical basis of NHP's assets acquired............................................... (203,499)
---------
Step up to record fair value of NHP's assets purchased.................................. $ 247,089
---------
---------
</TABLE>
The step-up was applied to NHP's assets as follows:
<TABLE>
<S> <C>
Real estate............................................................................. $ 14,369
Investment in management contracts...................................................... 111,533
Reduction in value of other assets...................................................... (6,505)
Reclassification of deferred tax asset.................................................. (6,797)
Goodwill related to service provider businesses......................................... 40,000
Goodwill................................................................................ 94,489
---------
Total................................................................................... $ 247,089
---------
---------
</TABLE>
The goodwill related to service provider businesses of $40,000 is
the fair value of the identifiable intangible assets related to several
service provider businesses owned by NHP, including businesses that
provide (i) group purchasing services; (ii) comprehensive risk-management
and insurance services; (iii) asset management services; (iv) the
origination and underwriting of investments and long-term asset
management services to institutional investors that finance apartment
developments qualifying for the federal low-income housing tax credit
program; (v) home health care assistance to residents; and (vi) the
placement of insurance coverage for master insurance programs and loss
prevention services.
Goodwill of $94,489 represents the consideration paid in excess of
identifiable tangible assets and identifiable intangible assets, based on
the preliminary valuation of the tangible and intangible assets.
As of June 30, 1997, NHP's shareholder's equity was $58,952, which
is detailed as follows:
<TABLE>
<S> <C>
Common stock............................................................................ $ 127
Additional paid-in capital.............................................................. 134,483
Retained earnings, of which $28,979 is attributable to WMF.............................. (75,658)
---------
Total shareholders' equity.............................................................. $ 58,952
---------
---------
</TABLE>
Upon completion of the Merger, the entire amount of common stock and
additional paid-in capital is eliminated, along with $104,637 of retained
deficit, representing the total amount of $(75,658), less the $28,979
allocated to WMF.
24
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (MERGER)
AS OF JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(F) Represents the issuance of 291,240 shares of AIMCO Common Stock, valued at
approximately $7,790, and borrowings incurred to fund the cash portion of
the Mixed Consideration payable to ANHI of $7,791, in exchange for 779,073
shares of NHP Common Stock owned by ANHI prior to the Merger.
(G) Represents the issuance of 4,476,125 shares of AIMCO Common Stock, valued at
approximately $119,737, to NHP stockholders, in exchange for all of the
shares of NHP Common Stock not owned by AIMCO or ANHI prior to the Merger,
assuming that all NHP stockholders elect to receive Stock Consideration. In
the Merger, NHP stockholders may elect to receive Stock Consideration or
Mixed Consideration. If all NHP stockholders elect to receive Mixed
Consideration, 2,238,063 fewer shares of AIMCO Common Stock would be issued
with a resulting decrease in stockholders' equity of $59,868 and an increase
in unsecured financing of approximately $59,868 (assuming the cash portion
of the Mixed Consideration is financed with additional borrowings.)
(H) Represents the elimination of the accrued liability related to management
contracts acquired in connection with the NHP Real Estate Acquisition.
Subsequent to the Merger, AIMCO will control all parties to the Master
Property Management Agreement and will eliminate such agreement.
(I) Represents the elimination of the net assets of WMF which are being
distributed as a result of the WMF Spin-Off.
(J) Represents the contribution from AIMCO to the Unconsolidated Subsidiaries,
at AIMCO's new basis as a result of the allocation of the combined purchase
prices of NHP and the NHP Real Estate Companies, of sixteen real estate
properties containing 3,625 apartment units and the related liabilities, and
the investment in four real estate partnerships owning four real estate
properties containing 2,836 apartment units and the related mortgage notes
payable, which bear interest at 7.98% per annum and mature in four years.
The real estate and the related mortgage notes payable are being contributed
to the Unconsolidated Subsidiaries to reduce future income taxes. In
exchange for such assets, AIMCO will receive notes receivable from the
Unconsolidated Subsidiaries of $63,879 and preferred stock of $17,004.
Certain of the interests in the real estate partnerships contributed to the
Unconsolidated Subsidiaries with a new basis of $22,049 will be controlled
by the Unconsolidated Subsidiaries and, therefore, the assets and
liabilities of such real estate partnerships are consolidated by the
Unconsolidated Subsidiaries. Prior to being contributed to the
Unconsolidated Subsidiaries, such interests in real estate partnerships had
been held by the Unconsolidated Partnership. The remainder of the interests
in real estate partnerships with a new basis of $19,592 will be accounted
for by the Unconsolidated Subsidiaries on the equity method.
(K) Represents the contribution to the Unconsolidated Partnership, at AIMCO's
new basis as a result of the allocation of the combined purchase prices of
NHP and the NHP Real Estate Companies, of the real estate owned by NHP prior
to the Merger, comprised of twelve real estate properties containing 2,905
apartment units.
(L) Represents certain assets and liabilities of NHP, primarily related to the
management operations and other businesses owned by NHP, contributed by
AIMCO to the Unconsolidated Subsidiaries, valued at AIMCO's new basis
resulting from the allocation of the combined purchase price of NHP and the
NHP Real Estate Companies.
(M) Pursuant to the NHP Reorganization, AIMCO is selling certain net assets to
the Unconsolidated Subsidiaries. In exchange for such assets, AIMCO will
receive a note receivable from the Unconsolidated Subsidiaries. The note
will bear interest at 10% per annum and mature in ten years.
(N) Represents the increase in AIMCO's investment in the Unconsolidated
Subsidiaries to reflect the contribution of the equity in certain assets and
liabilities to the Unconsolidated Subsidiaries.
(O) Represents the contribution to the Unconsolidated Subsidiaries of the
management operations and other businesses of NHP at AIMCO's new basis as a
result of the allocation of the combined purchase prices of NHP and the NHP
Real Estate Companies. The average remaining life of the management
contracts contributed is 14.66 years.
(P) Represents the contribution of the goodwill related to the management
operations and the service provider businesses of NHP that are being
contributed to, and will be operated by the Unconsolidated Subsidiaries. The
goodwill related to the management operations and the goodwill related to
the service provider businesses are both deemed to have a life of 20 years.
(Q) Pursuant to the Merger, NHP stockholders may elect to receive Stock
Consideration or Mixed Consideration. If all NHP stockholders elect to
receive Mixed Consideration in the Merger, 2,238,063 fewer shares of AIMCO
Common Stock would be issued with a resulting decrease in stockholders'
equity of $59,868 and an increase in unsecured financing of approximately
$59,868 (assuming the cash portion of the Mixed Consideration is financed
with additional borrowings).
25
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (MERGER)
AS OF JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(R) Amount represents notes receivable from the Unconsolidated Subsidiaries of
$103,879, investment in preferred stock of the Unconsolidated Subsidiaries
of $54,155, and retained earnings of $(90). The combined Pro Forma Balance
Sheet (Merger) of the Unconsolidated Subsidiaries as of June 30, 1997 is
presented below, which reflects the effects of the Merger and the NHP
Reorganization as if such transactions had occurred as of June 30, 1997.
<TABLE>
<CAPTION>
ADJUSTMENTS
PRE-MERGER -------------------------------
PRO FORMA NHP REORGANIZA- MERGER PRO
TOTAL(i) MERGER(ii) TION(iii) FORMA TOTAL
----------- ----------- ------------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Real estate.......................................... $ 45,893 $ -- $ 88,242 (iv) $ 134,135
Investment in real estate partnerships............... -- -- 19,592 (iv) 19,592
Investment in NHP Common Stock....................... 15,491 (15,581) 90 (iv) --
Cash and cash equivalents............................ 4,980 7,791 904 (v) 13,675
Restricted cash...................................... 761 -- 243 (v) 1,004
Investment in management contracts................... 124 -- 51,131 (v) 51,255
Goodwill related to service provider businesses...... -- -- 40,000 (v) 40,000
Goodwill............................................. -- -- 34,665 (v) 34,665
Deferred financing costs............................. 594 -- -- 594
Investment in parent................................. -- 7,790 -- 7,790
Other assets......................................... 353 -- 41,476 (v)
(90)(iv) 41,739
----------- ----------- -------- -----------
$ 68,196 $ -- $ 276,253 $ 344,449
----------- ----------- -------- -----------
----------- ----------- -------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage and other notes payable..................... $ 25,476 $ -- $ 49,000 (iv)(vi) $ 74,476
Notes payable to AIMCO............................... -- -- 40,000 (v)(vii)
63,879 (iv)(vii) 103,879
Unsecured short-term financing....................... -- -- 71,145 (v)(viii) 71,145
Accounts payable and other liabilities............... 990 -- 16,793 (v) 17,783
Other long-term liabilities.......................... -- 14,567 (v) 14,567
Deferred tax liability............................... -- -- 8,309 (v)(ix) 8,309
----------- ----------- -------- -----------
26,466 -- 263,693 290,159
Minority interest in consolidated partnerships....... 22,274 -- (22,049)(iv)(x) 225
Preferred Stock...................................... 19,546 -- 17,605 (v)
17,004 (iv) 54,155
Common Stock......................................... 2,000 -- -- 2,000
Retained earnings.................................... (2,090) -- -- (2,090)
----------- ----------- -------- -----------
19,456 -- 34,609 54,065
----------- ----------- -------- -----------
$ 68,196 $ -- $ 276,253 $ 344,449
----------- ----------- -------- -----------
----------- ----------- -------- -----------
</TABLE>
(i) Represents the combined Unconsolidated Subsidiaries' pro forma
consolidated financial position as of June 30, 1997, which gives
effect to the ANHI Stock Transfers, reducing ANHI's ownership of
NHP Common Stock from 51.2% to 6.03%. See "Pro Forma Financial
Information (Pre-Merger)."
(ii) In connection with the Merger, AIMCO will acquire all of the
outstanding shares of NHP Common Stock, including shares owned by
ANHI. ANHI will elect to receive Mixed Consideration of 291,217
shares of AIMCO Common Stock valued at approximately $7,790 (based
on $26.75 per share, the market price per share of AIMCO Common
Stock on February 13, 1997) and cash of $7,791 in exchange for the
779,073 shares of NHP Common Stock owned by ANHI.
26
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (MERGER)
AS OF JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(iii) Represents adjustments related to the NHP Reorganization, whereby
AIMCO will contribute or sell to the combined Unconsolidated
Subsidiaries: (i) certain assets and liabilities of NHP, primarily
related to the management operations and other businesses owned by
NHP; and (ii) sixteen real estate properties containing 3,625
apartment units and the related liabilities, and interests in four
real estate partnerships owning four real estate properties
containing 2,836 apartment units. In addition, AIMCO will
contribute twelve real estate properties containing 2,905
apartment units to the Unconsolidated Partnership. The adjustments
reflect the transfer of assets valued at AIMCO's new basis
resulting from the allocation of the combined purchase price of
NHP and the NHP Real Estate Companies. AIMCO will receive notes
payable from the Unconsolidated Subsidiaries as consideration for
certain assets sold and will receive equity, in the form of
preferred stock in exchange for certain assets contributed. The
businesses of NHP that will be contributed to and operated by the
Unconsolidated Subsidiaries have goodwill associated with them;
therefore, a portion of the goodwill has been transferred to the
Unconsolidated Subsidiaries. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the
assets and liabilities transferred to the Unconsolidated
Subsidiaries.
(iv) Represents the contribution from AIMCO to the Unconsolidated
Subsidiaries, at AIMCO's new basis as a result of the allocation
of the combined purchase prices of NHP and the NHP Real Estate
Companies, of sixteen real estate properties containing 3,625
apartment units and the related liabilities, and interests in four
real estate partnerships owning four real estate properties
containing 2,836 apartment units and the related mortgage notes
payable, which bear interest at 7.98% per annum and mature in four
years. The real estate and the related mortgage note payable are
being contributed to the Unconsolidated Subsidiaries to reduce the
income tax provision. In exchange for such assets, AIMCO will
receive notes receivable from the Unconsolidated Subsidiaries of
$63,879 and preferred stock of $17,004. Certain of the interests
in the real estate partnerships contributed to the Unconsolidated
Subsidiaries with a new basis of $88,242 will be controlled by the
Unconsolidated Subsidiaries and, therefore, the assets and
liabilities of such real estate partnerships are consolidated by
the Unconsolidated Subsidiaries. Prior to being contributed to the
Unconsolidated Subsidiaries, such interests in real estate
partnerships had been held by the Unconsolidated Partnership. The
remainder of the interests in the real estate partnerships with a
new basis of $19,592 will be accounted for by the Unconsolidated
Subsidiaries on the equity method.
(v) Represents certain assets and liabilities of NHP, primarily
related to the management operations and other businesses owned by
NHP, contributed by AIMCO to the Unconsolidated Subsidiaries,
valued at AIMCO's new basis resulting from the allocation of the
combined purchase price of NHP and the NHP Real Estate Companies.
(vi) Represents the mortgage note payable related to the real estate
contributed to the Unconsolidated Subsidiaries in conjunction with
the NHP Reorganization. The mortgage note payable bears interest
at 7.98% per annum and has a remaining life of four years.
(vii) Represents notes payable to AIMCO in exchange for certain of the
assets sold to the Unconsolidated Subsidiaries as part of the NHP
Reorganization. The notes bear interest at 10% per annum and have
an average life of ten years.
(viii) Represents the contribution of the NHP unsecured line of credit at
June 30, 1997 to the Unconsolidated Subsidiaries as part of the
NHP Reorganization. The NHP unsecured line of credit bears
interest at a floating rate of LIBOR plus 0.75% per annum (6.7% at
June 30, 1997) and has a remaining life of one year.
(ix) Represents the establishment of the estimated net deferred federal
and state tax liabilities at a combined rate of 40% for the
estimated difference between the book and tax basis of the net
assets (other than goodwill) of the Unconsolidated Subsidiaries.
The primary component of the deferred tax liability is the
difference between the new basis of the management contracts, as a
result of the allocation of the combined purchase price of NHP and
the NHP Real Estate Companies, and the historical tax basis.
(x) Represents adjustment to eliminate the minority interest in one
real estate partnership which owns fourteen real estate
properties. Prior to the Merger, the Unconsolidated Subsidiaries
owned the general partnership interests in the real estate
partnership and AIMCO owned virtually all of the limited
partnership interests. Pursuant to the NHP Reorganization, AIMCO
has contributed its limited partnership interests to the
Unconsolidated Subsidiaries, resulting in the Unconsolidated
Subsidiaries owning 99% of the real estate partnership.
27
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
PRE-MERGER ---------------------------------------------
PRO FORMA NHP MERGER NHP REOR-
TOTAL(A) HISTORICAL(B) ADJUSTMENTS(C) GANIZATION(D)
----------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues................................ $ 238,883 $ -- $ 11,002(E) $ (11,458)(L)
(11,002)(M)
Property operating expenses....................................... (110,554) -- (5,937)(E) 5,516(L)
5,937(M)
Owned property management expense................................. (8,269) -- (853)(E) 415(L)
853(M)
473(N)
----------- ------------- --------------- -------------
Income from property operations before depreciation............... 120,060 -- 4,212 (9,266)
Depreciation...................................................... (45,819) -- (3,650)(E) 3,088(L)
3,650(M)
----------- ------------- --------------- -------------
Income from property operations................................... 74,241 -- 562 (2,528)
----------- ------------- --------------- -------------
SERVICE COMPANY BUSINESS
Management fees and other income.................................. 17,502 194,979 (127,266)(F) (65,429)(O)
(1,851)(N)
Management and other expenses..................................... (13,562) (153,907) 127,266(F) 15,274(O)
9,654(G) 250(P)
Corporate overhead allocation..................................... (590) -- -- --
Amortization of management contracts and depreciation and
amortization of other assets.................................... (1,226) (6,321) (5,687)(H) 11,760(O)
----------- ------------- --------------- -------------
2,124 34,751 3,967 (39,996)
Minority interest in service company business..................... 10 -- -- --
----------- ------------- --------------- -------------
Company's share of income from service company business........... 2,134 34,751 3,967 (39,996)
----------- ------------- --------------- -------------
General and administrative expense................................ (1,512) (14,074) -- 14,074(O)
756(P)
Interest expense.................................................. (65,476) (3,982) (4,082)(E) 3,982(O)
(560)(I) 4,011(L)
4,082(M)
Interest income................................................... 4,722 747 -- (747)(O)
319(Q)
200(R)
----------- ------------- --------------- -------------
Income (loss) before equity in earnings of unconsolidated
subsidiaries, and minority interests............................ 14,109 17,442 (113) (15,847)
Equity in earnings of unconsolidated corporations................. 5,339 -- (4,984)(J) 1,928(S)
3,800(T)
6,069(T)
Equity in losses of partnerships.................................. (7,830) -- (6,016)(K) 2,138(L)
(3,508)(M)
1,378(N)
----------- ------------- --------------- -------------
Income (loss) before minority interests........................... 11,618 17,442 (11,113) (4,042)
Minority interest in other partnerships........................... 2,666 -- 11(E) (12)(L)
----------- ------------- --------------- -------------
Income (loss) before minority interest in Operating Partnership... 14,284 17,442 (11,102) (4,054)
Income tax provision.............................................. (6,977) -- 6,977(O)
Minority interest in Operating Partnership........................ (2,053) -- (117)(U) (398)(U)
----------- ------------- --------------- -------------
Net income (loss)................................................. $ 12,231 $ 10,465 $ (11,219) $ 2,525
----------- ------------- --------------- -------------
----------- ------------- --------------- -------------
Net income allocable to preferred stockholder..................... $ 5,344
-----------
-----------
Net income allocable to common stockholders....................... $ 6,887
-----------
-----------
Net income per common share(W).................................... $ 0.26
-----------
-----------
Weighted average number of common shares and common share
equivalents outstanding......................................... 26,592
-----------
-----------
<CAPTION>
PRO FORMA
TOTAL
-----------
<S> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues................................ $ 227,425
Property operating expenses....................................... (105,038)
Owned property management expense................................. (7,381)
-----------
Income from property operations before depreciation............... 115,006
Depreciation...................................................... (42,731)
-----------
Income from property operations................................... 72,275
-----------
SERVICE COMPANY BUSINESS
Management fees and other income.................................. 17,935
Management and other expenses..................................... (15,025)
Corporate overhead allocation..................................... (590)
Amortization of management contracts and depreciation and
amortization of other assets.................................... (1,474)
-----------
846
Minority interest in service company business..................... 10
-----------
Company's share of income from service company business........... 856
-----------
General and administrative expense................................ (756)
Interest expense.................................................. (62,025)(V)
Interest income................................................... 5,241
-----------
Income (loss) before equity in earnings of unconsolidated
subsidiaries, and minority interests............................ 15,591
Equity in earnings of unconsolidated corporations................. 12,152(X)
Equity in losses of partnerships.................................. (13,838)
-----------
Income (loss) before minority interests........................... 13,905
Minority interest in other partnerships........................... 2,665
-----------
Income (loss) before minority interest in Operating Partnership... 16,570
Income tax provision.............................................. --
Minority interest in Operating Partnership........................ (2,568)
-----------
Net income (loss)................................................. $ 14,002(V)
-----------
-----------
Net income allocable to preferred stockholder..................... $ 5,344
-----------
-----------
Net income allocable to common stockholders....................... $ 8,658(V)
-----------
-----------
Net income per common share(W).................................... $ 0.27(V)
-----------
-----------
Weighted average number of common shares and common share
equivalents outstanding......................................... 31,638(V)
-----------
-----------
</TABLE>
The pro forma statement above is presented assuming all NHP stockholders (other
than ANHI) elect to receive Stock Consideration. See note (V) for the effect on
the pro forma statement if all NHP stockholders elect to receive Mixed
Consideration.
28
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(A) Represents AIMCO's pro forma results of operations for the year ended
December 31, 1996 which give effect to the NHP Stock Purchase, the ANHI
Stock Transfers, the NHP Real Estate Acquisition, the NHP Real Estate
Reorganization, certain acquisitions and dispositions, certain completed
sales of AIMCO Common Stock and the sale of the shares of AIMCO Class B
Preferred Stock. See "Pro Forma Financial Information (Pre-Merger)."
(B) Represents the audited consolidated results of operations of NHP for the
year ended December 31, 1996, which have been restated to reflect WMF as a
discontinued operation as a result of the Rights Distribution.
(C) Represents the following adjustments occurring as a result of the Merger:
(i) the reclassification of NHP's real estate held for sale to real estate
held for investment; (ii) the offsetting of on-site personnel and general
and administrative cost reimbursement against the related revenue; (iii) the
reduction in personnel costs, primarily severance costs, pursuant to a
restructuring plan; (iv) the incremental amortization of the purchase price
adjustment related to the management contracts, furniture, fixtures and
equipment, and goodwill; (v) the reversal of equity in earnings in NHP
during the pre-merger period when AIMCO held a 47.62% interest in NHP; and
(vi) the amortization of the increased basis in investments in real estate
partnerships based on the purchase price adjustment related to the real
estate and an estimated average life of 17.5 years.
(D) Represents adjustments related to the NHP Reorganization, whereby AIMCO will
contribute to the combined Unconsolidated Subsidiaries: (i) certain assets
and liabilities of NHP, primarily related to the management operations and
other businesses owned by NHP; and (ii) sixteen real estate properties
containing 3,625 apartment units and the related liabilities, and interests
in four real estate partnerships owning four real estate properties
containing 2,836 apartment units. In addition, AIMCO will contribute twelve
real estate properties containing 2,905 apartment units to the
Unconsolidated Partnership. The adjustments represent (i) the related
revenues and expenses primarily related to the management operations and
other businesses owned by NHP; and (ii) the historical results of operations
of such real estate properties and interests in such real estate
partnerships contributed, with additional depreciation and amortization
recorded related to AIMCO's new basis resulting from the allocation of the
combined purchase price of NHP and the NHP Real Estate Companies.
(E) Represents the operating results of real estate held for investment by
AIMCO, which was classified as real estate held for sale by NHP prior to the
Initial NHP Stock Purchase.
(F) Represents the offsetting of on-site personnel and general and
administrative cost reimbursement against the related revenue.
(G) Represents a reduction in personnel costs, primarily severance costs,
pursuant to a restructuring plan, approved by AIMCO senior management,
specifically identifying all significant actions to be taken to complete the
restructuring plan, assuming that the Merger had occurred on January 1, 1996
and that the restructuring plan was completed on January 1, 1996.
(H) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management and other business
operated by the Unconsolidated Subsidiaries, based on AIMCO's new basis as
adjusted by the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies, including amortization of management contracts of
$3,702, depreciation of furniture, fixtures and equipment of $1,302 and
amortization of goodwill of $7,004, less NHP's historical depreciation and
amortization of $6,321. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be 14.7 years. Furniture, fixtures and equipment are
depreciated using the straight-line method over the estimated life of 5
years. Goodwill is amortized using the straight-line method over 20
years. The life of goodwill is currently under the review of the
Securities and Exchange Commission ("SEC"). AIMCO is in receipt of a
comment letter from the SEC that suggests a five-year life for goodwill,
rather than the 20-year life as presented herein. If the life of goodwill
were changed to five years, goodwill amortization would be $28,016,
net loss applicable to common stockholders would be $(5,361) and net loss
per share of AIMCO Common Stock would be $(0.17).
(I) Represents the interest related to the indebtedness of $7,791 incurred to
finance the cash portion of the Mixed Consideration payable to ANHI. The
borrowings were made under AIMCO's Credit Facility, which bears interest at
LIBOR plus 1.70% per annum.
(J) Represents the reversal of equity in earnings in NHP during the period prior
to the Merger when AIMCO held a 47.62% interest in NHP, as a result of AIMCO
owning 100% of the NHP Common Stock pursuant to the Merger.
(K) Represents adjustment for amortization of the increased basis in investments
in real estate partnerships, as a result of the allocation of the combined
purchase price of NHP and the NHP Real Estate Companies, based on an
estimated average life of 17.5 years.
(L) Represents the results of operations of real estate contributed to the
Unconsolidated Subsidiaries, including sixteen real estate properties
containing 3,625 apartment units and interests in four real estate
partnerships owning four real estate properties containing 2,836 apartment
units.
29
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(M) Represents the contribution of NHP's twelve real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership pursuant
to the NHP Reorganization.
(N) Represents the elimination of the income generated by the management
contracts which are related to the interests in real estate partnerships
owned by AIMCO or the Unconsolidated Partnership.
(O) Represents the historical income and expenses associated with certain assets
and liabilities of NHP that will be contributed to the Unconsolidated
Subsidiaries, primarily related to the management operations and other
businesses owned by NHP.
(P) Represents adjustments for management costs that will be incurred by the
Unconsolidated Subsidiaries rather than by AIMCO, primarily related to
personnel costs, for work performed on the businesses contributed to held by
the Unconsolidated Subsidiaries.
(Q) Represents the interest income of $6,388 earned on notes payable of $63,879
to AIMCO issued as consideration for certain real estate assets and
liabilities and interests in certain real estate partnerships sold to the
Unconsolidated Subsidiaries by AIMCO, net of the elimination of AIMCO's
share of the related interest expense of $6,069 reflected in the equity in
earnings of ANHI's operating results.
(R) Represents interest income of $4,000 earned on the notes receivable from the
Unconsolidated Subsidiaries, after elimination of AIMCO's share of $3,800 of
the related interest expense.
(S) Represents adjustment to AIMCO's equity in earnings of the Unconsolidated
Subsidiaries on a post-Merger basis, before elimination of interest expense
on notes receivable from the Unconsolidated Subsidiaries.
(T) Represents elimination of AIMCO's share of the related interest expense
reflected in the equity in earnings of ANHI's operating results.
(U) Represents adjustments to minority interest in the Operating Partnership
assuming the Merger had occurred as of January 1, 1996. On a pro forma
basis, giving effect to the Merger, as of December 31, 1996, the minority
interest percentage is approximately 13.63%, assuming that ANHI elects Mixed
Consideration and all other NHP stockholders elect Stock Consideration.
(V) Pursuant to the Merger, NHP stockholders may elect to receive Stock
Consideration or Mixed Consideration. Set forth below is a summary of the
pro forma net income applicable to holders of AIMCO Common Stock and net
income per common share (i) assuming that ANHI elects Mixed Consideration
and all other NHP stockholders, excluding AIMCO, elect to receive Stock
Consideration (Stock Consideration); and (ii) assuming all NHP stockholders,
excluding AIMCO but including ANHI, elect to receive Mixed Consideration
(Mixed Consideration). The detail below assumes an average interest rate of
7.19% per annum (representing LIBOR plus 1.70%, the current rate under
AIMCO's unsecured credit facility) on the additional borrowings of $59,868.
<TABLE>
<CAPTION>
STOCK MIXED
CONSIDERATION CONSIDERATION
------------- -------------
<S> <C> <C>
Increase in interest expense........................................ $ -- $ 4,304
------------- -------------
------------- -------------
Income before minority interest in Operating Partnership (after
minority interest in other partnerships).......................... $ 16,570 $ 12,266
Minority interest in Operating Partnership.......................... (2,568) (1,981)
------------- -------------
Net income.......................................................... $ 14,002 $ 10,285
------------- -------------
------------- -------------
Net income attributable to common stockholders...................... $ 8,658 $ 4,941
------------- -------------
------------- -------------
Net income per share................................................ $ 0.27 $ 0.17
------------- -------------
------------- -------------
Minority interest percentage........................................ 13.63% 13.63%
------------- -------------
------------- -------------
Number of common shares and common share equivalents................ 31,638 29,400
------------- -------------
------------- -------------
</TABLE>
30
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
Additionally, the following table presents the net impact to pro forma net
income applicable to holders of AIMCO Common Stock and net income per common
share assuming the interest rate increases by 0.25%.
<TABLE>
<CAPTION>
STOCK MIXED
CONSIDERATION CONSIDERATION
------------- -------------
<S> <C> <C>
Increase in interest expense........................................ $ -- $ 4,454
------------- -------------
------------- -------------
Income before minority interest in Operating Partnership (after
minority interest in other partnerships).......................... $ 15,302 $ 10,848
Minority interest in Operating Partnership.......................... (2,395) (1,788)
------------- -------------
Net income.......................................................... $ 12,907 $ 9,060
------------- -------------
------------- -------------
Net income attributable to common stockholders...................... $ 7,563 $ 3,716
------------- -------------
------------- -------------
Net income per share................................................ $ 0.24 $ 0.13
------------- -------------
------------- -------------
Minority interest percentage........................................ 13.63% 13.63%
------------- -------------
------------- -------------
Number of common shares and common share equivalents................ 31,638 29,400
------------- -------------
------------- -------------
</TABLE>
(W) In February 1997, the Financial Accounting Standards Board issued Statement
128 EARNINGS PER SHARE ("Statement 128") which specifies the computation,
presentation and disclosure requirements for basic earnings per share and
diluted earnings per share. AIMCO's management believes that adoption of
Statement 128 will not have a material effect on the earnings per share of
AIMCO.
31
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(X) The combined Pro Forma Statement of Operations (Merger) of the
Unconsolidated Subsidiaries for the year ended December 31, 1996 is
presented below, which reflects the effects of the Merger and the NHP
Reorganization as if these transactions had occurred as of January 1, 1996.
<TABLE>
<CAPTION>
PRE- ADJUSTMENTS
MERGER ------------------------------ MERGER
PRO FORMA NHP PRO FORMA
TOTAL(i) MERGER(ii) REORGANIZATION(iii) TOTAL
----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues.................... $ 12,777 $ -- $ 11,458 (iv) $ 24,235
Property operating expenses........................... (8,665) -- (5,516)(iv) (14,181)
Owned property management expense..................... (613) -- (415)(iv) (1,028)
----------- ----------- ------- -----------
Income from property operations before depreciation... 3,499 -- 5,527 9,026
Depreciation.......................................... (1,606) -- (3,088)(iv) (4,694)
----------- ----------- ------- -----------
Income from property operations....................... 1,893 -- 2,439 4,332
----------- ----------- ------- -----------
Management fees and other income...................... -- -- 65,429(v) 65,429
Management and other expenses......................... -- -- (15,524)(v) (15,524)
Amortization of management contracts and goodwill and
depreciation and amortization of other assets....... (41) -- (11,760)(v) (11,801))(ix)
----------- ----------- ------- -----------
(41) -- 38,145 38,104
----------- ----------- ------- -----------
General and administrative............................ -- -- (14,830)(v) (14,830)
Interest expense...................................... (2,640) -- (3,982)(v)
(3,910)(iv)
(4,000)(vi)
(6,388)(vi) (20,920)
Interest income....................................... -- -- 747(v) 747
----------- ----------- ------- -----------
Income before income taxes, equity in earnings and
minority interests.................................. (788) -- 8,221 7,433
Income tax provision.................................. (249) -- (3,431)(vii) (3,680)
Equity in earnings of NHP............................. 631 (631) -- --
Equity in losses of unconsolidated partnerships....... -- -- (1,358)(v) (1,358)
Minority interest in NHP.............................. -- -- -- --
Minority interest in partnerships..................... 780 -- (772)(viii) 8
----------- ----------- ------- -----------
Net income............................................ $ 374 $ (631) $ 2,660 $ 2,403
----------- ----------- ------- -----------
----------- ----------- ------- -----------
Income attributable to preferred stockholder.......... $ 355 $ 2,283
----------- -----------
----------- -----------
Income attributable to common stockholder............. $ 19 $ 120
----------- -----------
----------- -----------
</TABLE>
----------------------------
(i) Represents the combined Unconsolidated Subsidiaries' pro forma
consolidated statement of operations, which gives effect to the
ANHI Stock Transfers, reducing ANHI's ownership of NHP Common
Stock from 51.3% to 6.03% of the outstanding shares of NHP Common
Stock. See "Pro Forma Financial Information (Pre-Merger)."
(ii) Represents adjustments for the Merger. Subsequent to the Merger,
all of the outstanding shares of NHP Common Stock will be owned by
AIMCO.
(iii) Represents adjustments related to the NHP Reorganization, whereby
AIMCO will contribute to the combined Unconsolidated Subsidiaries:
(i) certain assets and liabilities of NHP, primarily related to
the management operations and other businesses owned by NHP; and
(ii) sixteen real estate properties containing 3,625 apartment
units and the related liabilities,
32
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
and interests in four real estate partnerships owning four real
estate properties containing 2,836 apartment units. Adjustments
reflect (a) income and expenses associated with certain assets and
liabilities of NHP that will be contributed to the Unconsolidated
Subsidiaries, primarily related to the management operations and
other businesses owned by NHP; (b) adjustments for management
costs that will be incurred by the Unconsolidated Subsidiaries
rather than by AIMCO, primarily related to personnel costs, for
work performed on the businesses contributed to the Unconsolidated
Subsidiaries; (c) depreciation and amortization of the tangible
and intangible assets related to the management operations and
other business contributed to the Unconsolidated Subsidiaries; (d)
interest expense associated with NHP's historical notes payable
and on the notes payable to AIMCO; (e) historical interest income
of NHP; (f) income tax provision; and (g) the historical results
of operations of real estate properties and interests in real
estate partnerships contributed, with additional depreciation and
amortization recorded related to AIMCO's new basis resulting from
the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(iv) Represents adjustments for the historical results of operations of
the real estate properties and interest in real estate
partnerships contributed, with additional depreciation and
amortization recorded related to AIMCO's new basis resulting from
the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(v) Represents adjustments to reflect income and expenses associated
with certain assets and liabilities of NHP contributed.
(vi) Represents the interest expense incurred on notes payable to AIMCO
of $40,000 issued in connection with the sale of certain assets
and liabilities to the Unconsolidated Subsidiaries and $63,879
issued in connection with the sale of certain real estate assets
and related liabilities and interests in certain real estate
partnerships to the Unconsolidated Subsidiaries.
(vii) Represents the estimated Federal and state tax provisions, which
are calculated on the operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not
deductible for tax purposes. The Unconsolidated Subsidiaries
current tax provision for the year ended December 31, 1996 would
be approximately $80 which differs from the book tax provision
primarily due to differences in amortization of tangible and
intangible assets and expensing of lease and severance costs which
are included in purchase consideration for financial reporting.
(viii) Represents the reduction of minority interest in one real estate
partnership owning fourteen real estate properties containing
2,725 apartment units. As part of the NHP Reorganization, AIMCO
will contribute the limited partnership interests in the
partnership currently consolidated by the Unconsolidated
Subsidiaries. Therefore, the Unconsolidated Subsidiaries will own
99% of the interests in such partnership.
(ix) The life of good will is currently under the review of the SEC.
AIMCO is in receipt of a comment letter from the SEC that suggests
a five-year life for goodwill, rather than the 20-year life as
presented herein. If the life of goodwill were changed to
five years, amortization of management contracts and goodwill and
depreciation and amortization of other assets would be $32,811 and
net loss would be $(14,684).
33
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
PRE-MERGER -------------------------------------------- MERGER
PRO FORMA NHP MERGER NHP REOR- PRO FORMA
TOTAL(A) HISTORICAL(B) ADJUSTMENTS(C) GANIZATION(D) TOTAL
----------- ------------ --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues................. $ 122,774 $ 2,916 $ 6,006(E) $ (6,188)(L)
(2,916)(M) $122,592
Property operating expenses........................ (50,332) (1,863) (3,786)(E) 2,362(L)
1,863(M) (51,756)
Owned property management expense.................. (4,390) -- (427)(E) 182(L)
237(N) (4,398)
----------- ------------ --------------- ------------- -----------
Income from property operations before
depreciation..................................... 68,052 1,053 1,793 (4,460) 66,438
Depreciation....................................... (23,598) (500) (852)(E) 1,504(L)
1,352(M) (22,094)
----------- ------------ --------------- ------------- -----------
Income from property operations.................... 44,454 553 941 (1,604) 44,344
----------- ------------ --------------- ------------- -----------
SERVICE COMPANY BUSINESS
Management fees and other income................... 7,010 101,687 (64,900)(F) (35,645)(O)
(926)(N) 7,226
Management and other expenses...................... (4,906) (79,633) 64,900(F) 14,003(O) (5,636)
Corporate overhead allocation...................... (294) -- -- -- (294)
Amortization of management contracts and
depreciation and amortization of other assets.... (635) (4,755) (1,249)(G) 5,880(O) (759)
----------- ------------ --------------- ------------- -----------
1,175 17,299 (1,249) (16,688) 537
Minority Interest in service company business...... (2) -- -- -- (2)
----------- ------------ --------------- ------------- -----------
Company's share of income from service company
business......................................... 1,173 17,299 (1,249) (16,688) 535
----------- ------------ --------------- ------------- -----------
General and administrative expense................. (784) (13,293) 5,546(H) 8,125(O) (406)
Interest expense................................... (33,811) (3,670) (2,304)(E) 3,670(O)
(277)(I) 2,006(L)
3,440(M) (30,946)(U)
Interest income.................................... 2,980 1,109 -- (1,109)(O)
159(P)
100(Q) 3,239
----------- ------------ --------------- ------------- -----------
Income (loss) before equity in earnings of
unconsolidated subsidiaries, and minority
interests........................................ 14,012 1,998 2,657 (1,901) 16,766
Equity in earnings of unconsolidated
corporations..................................... 611 -- (571)(J) (1,034)(R)
1,900(S)
3,035(S) 3,941(W)
Equity in losses of partnerships................... (3,380) -- (3,008)(K) 713(L)
(1,936)(M)
689(N) (6,922)
----------- ------------ --------------- ------------- -----------
Income (loss) before minority interests............ 11,243 1,998 (922) 1,466 13,785
Minority interest in other partnerships............ (788) -- 7(E) (10)(M) (791)
----------- ------------ --------------- ------------- -----------
Income (loss) before minority interest in Operating
Partnership...................................... 10,455 1,998 (915) 1,456 12,994
Income tax provision............................... -- (799) -- 799(O) --
Minority interest in Operating Partnership......... (1,705) -- 283(T) (270)(T) (1,692)
----------- ------------ --------------- ------------- -----------
Net income (loss).................................. $ 8,750 $ 1,199 $ (632) $ 1,985 $ 11,302(U)
----------- ------------ --------------- ------------- -----------
----------- ------------ --------------- ------------- -----------
Net income allocable to preferred stockholder...... $ 2,672 $ 2,672
----------- -----------
----------- -----------
Net income allocable to common stockholders........ $ 6,078 $ 8,630(U)
----------- -----------
----------- -----------
Net income per common share(V)..................... $ 0.21 $ 0.26(U)
----------- -----------
----------- -----------
Weighted average number of common shares and common
share equivalents outstanding.................... 28,281 33,307(U)
----------- -----------
----------- -----------
</TABLE>
The pro forma statement above is presented assuming all NHP stockholders
(other than ANHI) elect to receive Stock Consideration. See note (U) for the
effect on the pro forma statement assuming all NHP stockholders elect to receive
Mixed Consideration.
34
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(A) Represents AIMCO's pro forma results of operations for the six months ended
June 30, 1997, which gives effect to the NHP Stock Purchase, the ANHI Stock
Transfers, the NHP Real Estate Acquisition, the NHP Real Estate
Reorganization, certain acquisitions and dispositions, certain completed
sales of AIMCO Common Stock and the sale of the shares of AIMCO Class B
Preferred Stock. See "Pro Forma Financial Information (Pre-Merger)."
(B) Represents the unaudited consolidated results of operations of NHP for the
six months ended June 30, 1997.
(C) Represents the following adjustments occurring as a result of the Merger:
(i) the reclassification of NHP's real estate held for sale to real estate
held for investment; (ii) the offsetting of on-site personnel and general
and administrative cost reimbursement against the related revenue; (iii) the
reduction in personnel costs, primarily severance costs, pursuant to a
restructuring plan; (iv) the incremental amortization of the purchase price
adjustment related to the management contracts, furniture, fixtures and
equipment, and goodwill; (v) the reversal of equity in earnings in NHP
during the pre-merger period when AIMCO held a 47.62% interest in NHP; and
(vi) the amortization of the increased basis in investments in real estate
partnerships based on the purchase price adjustment related to the real
estate and an estimated average life of 17.5 years.
(D) Represents adjustments related to the NHP Reorganization, whereby AIMCO will
contribute or sell to the combined Unconsolidated Subsidiaries: (i) certain
assets and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP; and (ii) sixteen real estate
properties containing 3,625 apartment units and the related liabilities, and
interests in four real estate partnerships owning four real estate
properties containing 2,836 apartment units. In addition, AIMCO will
contribute twelve real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership. The adjustments represent (i) the related
revenues and expenses primarily related to the management operations and
other businesses owned by NHP; and (ii) the historical results of operations
of such real estate properties and interests in such real estate
partnerships contributed, with additional depreciation and amortization
recorded related to AIMCO's new basis resulting from the allocation of the
combined purchase price of NHP and the NHP Real Estate Companies.
(E) Represents the operating results of real estate held for investment by
AIMCO, which was classified as real estate held for sale by NHP prior to the
Initial NHP Stock Purchase.
(F) Represents the offsetting of on-site personnel and general and
administrative cost reimbursement against the related revenue.
(G) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management and other business
operated by the Unconsolidated Subsidiaries, based on AIMCO's new basis as
adusted by the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies, including amortization of management contracts of
$1,851, depreciation of furniture, fixtures and equipment of $651 and
amortization of goodwill of $3,502, less NHP's historical depreciation and
amortization of $4,755. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be 14.7 years. Furniture, fixtures and equipment are
depreciated using the straight-line method over the estimated life of 5
years. Goodwill is amortized using the straight-line method over 20
years. The life of good will is currently under the review of the
SEC. AIMCO is in receipt of a comment letter from the SEC that suggests
a five-year life for goodwill, rather than the 20-year life as presented
herein. If the life of goodwill were changed to five years, goodwill
amortization would be $14,008, net income applicable to common stockholders
would be $1,491 and net income per share of AIMCO Common Stock would
be $0.04.
(H) Represents a reduction in personnel costs, primarily severance costs,
pursuant to a restructuring plan, approved by AIMCO senior management,
specifically identifying all significant actions to be taken to complete the
restructuring plan, assuming that the Merger had occurred on January 1, 1996
and that the restructuring plan was completed on January 1, 1996.
(I) Represents the interest related to the indebtedness of $7,791 incurred to
finance the cash portion of the Merger Consideration to ANHI. The borrowings
were made under AIMCO's Credit Facility, which bears interest at LIBOR plus
1.70% per annum.
(J) Represents the reversal of equity in earnings in NHP during the pre-merger
period when AIMCO held a 47.62% interest in NHP, as a result of AIMCO's
acquisition of 100% of the NHP Common Stock.
(K) Represents adjustment for amortization of the increased basis in investments
in real estate partnerships, as a result of the allocation of the combined
purchase price of NHP and the NHP Real Estate Companies, based on an
estimated average life of 17.5 years.
(L) Represents the results of operations of real estate contributed to the
Unconsolidated Subsidiaries, including sixteen real estate properties
containing 3,625 apartment units and interests in four real estate
partnerships owning four real estate properties containing 2,836 apartment
units.
35
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(M) Represents the contribution of NHP's twelve real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership pursuant
to the NHP Reorganization.
(N) Represents the elimination of the income generated by the management
contracts which are related to the interests in real estate partnerships
owned by AIMCO or the Unconsolidated Partnership.
(O) Represents the historical income and expenses associated with certain assets
and liabilities of NHP that will be contributed to the Unconsolidated
Subsidiaries, primarily related to the management operations and other
businesses owned by NHP.
(P) Represents the interest income of $3,194 earned on notes payable of $63,879
to AIMCO issued as consideration for certain real estate assets and
liabilities and interests in certain real estate partnerships sold to the
Unconsolidated Subsidiaries by AIMCO, net of the elimination of AIMCO's
share of the related interest expense of $3,035 reflected in the equity in
earnings of ANHI's operating results.
(Q) Represents interest income of $2,000 earned on the notes receivable from the
Unconsolidated Subsidiaries, after elimination of AIMCO's share of $1,900 of
the related interest expense.
(R) Represents adjustment to AIMCO's equity in income (loss) of the
Unconsolidated Subsidiaries on a post-Merger basis, before elimination of
interest expense on notes receivable from the Unconsolidated Subsidiaries.
(S) Represents elimination of AIMCO's share of the related interest expense
reflected in the equity in earnings of ANHI's operating results.
(T) Represents adjustments to minority interest in the Operating Partnership
assuming the Merger had occurred as of January 1, 1996. On a pro forma
basis, giving effect to the Merger, as of June 30, 1997, the minority
interest percentage is approximately 11.97%, assuming that ANHI elects to
receive Mixed Consideration and all other NHP stockholders elect to receive
Stock Consideration.
(U) Pursuant to the Merger, NHP stockholders may elect to receive Stock
Consideration or Mixed Consideration. Set forth below is a summary of the
pro forma net income applicable to holders of AIMCO Common Stock and net
income per share of AIMCO Common Stock (i) assuming that ANHI elects Mixed
Consideration and all other NHP stockholders, excluding AIMCO, elect to
receive Stock Consideration (Stock Consideration); and assuming all NHP
stockholders, excluding AIMCO but including ANHI, elect to receive Mixed
Consideration (Mixed Consideration). The detail below assumes an average
interest rate of 7.36% per annum (representing LIBOR plus 1.70%, the current
rate under AIMCO's unsecured credit facility) on the additional borrowings
of $59,868.
<TABLE>
<CAPTION>
STOCK MIXED
CONSIDERATION CONSIDERATION
------------- -------------
<S> <C> <C>
Increase in interest expense........................................ $ -- $ 2,204
------------- -------------
------------- -------------
Income before minority interest in Operating Partnership (after
minority interest in other partnerships).......................... $ 12,994 $ 10,790
Minority interest in Operating Partnership.......................... (1,692) (1,428)
------------- -------------
Net income.......................................................... $ 11,302 $ 9,362
------------- -------------
------------- -------------
Net income attributable to common stockholders...................... $ 8,630 $ 6,690
------------- -------------
------------- -------------
Net income per share................................................ $ 0.26 $ 0.22
------------- -------------
------------- -------------
Minority interest percentage in Operating Partnership............... 11.97% 11.97%
------------- -------------
------------- -------------
Number of common shares and common share equivalents................ 33,307 31,069
------------- -------------
------------- -------------
</TABLE>
36
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
Additionally, the following table presents the net impact to pro forma net
income applicable to holders of AIMCO Common Stock and net income per share
of AIMCO Common Stock assuming the interest rate per annum increases by
0.25%.
<TABLE>
<CAPTION>
STOCK MIXED
CONSIDERATION CONSIDERATION
------------- -------------
<S> <C> <C>
Increase in interest expense........................................ $ -- $ 2,279
------------- -------------
------------- -------------
Income before minority interest in Operating Partnership (after
minority interest in other partnerships).......................... $ 12,365 $ 10,086
Minority interest in Operating Partnership.......................... (1,616) (1,343)
------------- -------------
Net income.......................................................... $ 10,749 $ 8,743
------------- -------------
------------- -------------
Net income attributable to common stockholders...................... $ 8,077 $ 6,071
------------- -------------
------------- -------------
Net income per share................................................ $ 0.24 $ 0.20
------------- -------------
------------- -------------
Minority interest percentage in Operating Partnership............... 11.97% 11.97%
------------- -------------
------------- -------------
Number of common shares and common share equivalents................ 33,307 31,069
------------- -------------
------------- -------------
</TABLE>
(V) In February 1997, the Financial Accounting Standards Board issued Statement
128 which specifies the computation, presentation and disclosure
requirements for basic earnings per share and diluted earnings per share.
AIMCO's management believes that adoption of Statement 128 will not have a
material effect on the earnings per share of AIMCO.
37
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(W) The combined Pro Forma Statement of Operations (Merger) of the
Unconsolidated Subsidiaries for the six months ended June 30, 1997 is
presented below, which reflects the effects of the Merger and the NHP
Reorganization as if these transactions had occurred as of January 1, 1996.
<TABLE>
<CAPTION>
ADJUSTMENTS
PRE-MERGER ----------------------------- MERGER
PRO FORMA NHP REOR- PRO FORMA
TOTAL(i) MERGER(ii) GANIZATION(iii) TOTAL
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
RENTAL PROPERTY OPERATIONS
Rental and other property revenues....................... $ 6,218 $ -- $ 6,188 (iv) $ 12,406
Property operating expenses.............................. (4,120) -- (2,362)(iv) (6,482)
Owned property management expense........................ (308) -- (183)(iv) (491)
----------- --- ------- -----------
Income from property operations before depreciation...... 1,790 -- 3,643 5,433
Depreciation............................................. (803) -- (1,504)(iv) (2,307)
----------- --- ------- -----------
987 -- 2,139 3,126
----------- --- ------- -----------
SERVICE COMPANY BUSINESS
Management fees and other income......................... -- -- 35,645(v) 35,645
Management and other expenses............................ -- (14,003)(v) (14,003)
Amortization of management contracts and goodwill and
depreciation and amortization of other assets.......... (21) (5,880)(v) (5,901)(ix)
----------- --- ------- -----------
(21) -- 15,762 15,741
----------- --- ------- -----------
General and administrative............................... -- (8,125)(v) (8,125)
Interest expense......................................... (1,002) -- (3,670)(v)
(2,006)(iv)
(2,000)(vi) (11,872)
(3,194)(vi)
Interest income.......................................... -- -- 1,109(v) 1,109
----------- --- ------- -----------
Income before income taxes, equity in earnings and
minority interests..................................... (36) -- 15 (21)
Income tax provision..................................... (27) (318)(vii) (345)
Equity in earnings of NHP................................ 72 (72) -- --
Minority interest in partnerships........................ 33 (713)(viii) (680)
----------- --- ------- -----------
Net income............................................... $ 42 $ (72) $ (1,016) $ (1,046)
----------- --- ------- -----------
----------- --- ------- -----------
Income attributable to preferred stockholder............. $ 40 $ (994)
----------- -----------
----------- -----------
Income attributable to common stockholder................ $ 2 $ (52)
----------- -----------
----------- -----------
</TABLE>
---------------------------
(i) Represents the combined Unconsolidated Subsidiaries' pro forma
consolidated statement of operations as of June 30, 1997, which
gives effect to the ANHI Stock Transfers, reducing ANHI's
ownership of NHP Common Stock from 51.3% to 6.03%. See "Pro Forma
Financial Information (Pre-Merger)."
(ii) Represents adjustments for the Merger. Subsequent to the Merger,
all of the outstanding shares of NHP Common Stock will be owned by
AIMCO.
(iii) Represents adjustments related to the NHP Reorganization, whereby
AIMCO will contribute to the combined Unconsolidated Subsidiaries:
(i) certain assets and liabilities of NHP, primarily related to
the management operations and other businesses owned by NHP; and
(ii) sixteen real estate properties containing 3,625 apartment
units and the related liabilities, and interests in four real
estate partnerships owning four real estate properties containing
2,836 apartment units. Adjustments reflect (i) income and expenses
associated with certain assets and liabilities of NHP that will be
contributed to
38
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP; (ii)
adjustments for management costs that will be incurred by the
Unconsolidated Subsidiaries rather than by AIMCO, primarily
related to personnel costs, for work performed on the businesses
contributed to by the Unconsolidated Subsidiaries; (iii)
depreciation and amortization of the tangible and intangible
assets related to the management operations and other business
contributed to the Unconsolidated Subsidiaries; (iv) interest
expense associated with NHP's historical notes payable and on the
notes payable to AIMCO; (v) historical interest income of NHP;
(vi) income tax provision; and (vii) the historical results of
operations of real estate properties and interests in real estate
partnerships contributed, with additional depreciation and
amortization recorded related to AIMCO's new basis resulting from
the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(iv) Represents adjustments for the historical results of operations of
the real estate properties and interest in real estate
partnerships contributed, with additional depreciation and
amortization recorded related to AIMCO's new basis resulting from
the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(v) Represents adjustments to reflect income and expenses associated
with certain assets and liabilities of NHP contributed.
(vi) Represents the interest expense incurred on notes payable to AIMCO
of $40,000 issued in connection with the sale of certain assets
and liabilities to the Unconsolidated Subsidiaries and $63,879
issued in connection with the sale of certain real estate assets
and related liabilities and interests in certain real estate
partnerships to the Unconsolidated Subsidiaries.
(vii) Represents the estimated Federal and state tax provisions, which
are calculated on the operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not
deductible for tax purposes. The Unconsolidated Subsidiaries
current tax benefit for the six months ended June 30, 1997 would
be approximately $255 which differs from the book tax provision
primarily due to differences in amortization of tangible and
intangible assets and expensing of lease costs which are included
in purchase consideration for financial reporting.
(viii) Represents the reduction of minority interest in one real estate
partnership owning fourteen real estate properties containing
2,725 apartment units. As part of the NHP Reorganization, AIMCO
will contribute the limited partnership interests in the
partnership currently consolidated by the Unconsolidated
Subsidiaries. Therefore, the Unconsolidated Subsidiaries will own
99% of the interests in such partnership.
(ix) The life of good will is currently under the review of the
SEC. AIMCO is in receipt of a comment letter from the SEC that
suggests a five-year life for goodwill, rather than the 20-year
life as presented herein. If the life of goodwill were changed
to five years, amortization of management contracts and goodwill
and depreciation and amortization of other assets would be $16,405
and net loss would be $(9,585).
39
