<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 4
TO
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MARCH 17, 1998
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
------------------------------------------------------
(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
- - -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 757-8101
NOT APPLICABLE
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 5. OTHER EVENTS
On March 17, 1998, Apartment Investment and Management Company
("AIMCO") and AIMCO Properties, L.P. entered into an Agreement and Plan of
Merger as amended and restated on May 26, 1998, (the "Insignia Merger
Agreement") with Insignia Financial Group, Inc., a Delaware corporation
("Insignia"), and its subsidiary, Insignia/ESG, Inc. pursuant to which, upon
the approval of stockholders holding a majority of the outstanding common stock
of Insignia, Insignia will be merged with and into AIMCO with AIMCO as the
survivor (the "Insignia Merger"). The Insignia Merger Agreement provides that
prior to the Insignia Merger, Insignia will spin off to its stockholders all
assets related to its U.S. and international commercial real estate business,
its New York-based cooperative and condominium management company, its
single-family home brokerage operations and other related holdings.
Assuming the stockholders of AIMCO and Insignia approve the Insignia
Merger, in the Insignia Merger the Class A common stock, par value $0.01 per
share, of Insignia ("Insignia Common Stock") will be converted into the right to
receive an aggregate of approximately $303 million in Series E Preferred Stock,
par value of $0.01 per share, of AIMCO ("Series E Preferred Stock"). In addition
to receiving the same dividends as holders of AIMCO Common Stock, holders of
Series E Preferred Stock are entitled to a preferred cash dividend of $50
million in the aggregate, and when such dividend is paid, the Series E Preferred
Stock automatically will convert into AIMCO Common Stock on a one-for-one basis,
subject to antidilution adjustments, if any. In addition, AIMCO will assume
approximately $308 million in outstanding indebtedness and other liabilities and
will assume approximately $150 million aggregate liquidation amount of 6 1/2%
Trust Convertible Preferred Securities (the "TOPRs") issued by Insignia
Financing I, a subsidiary of Insignia, for a total transaction value of
approximately $810 million. Also, the Insignia Merger Agreement provides that
AIMCO is required to propose to acquire (by merger) the outstanding shares of
beneficial interest in Insignia Properties Trust, a Maryland real estate
investment trust ("IPT"), at a price of at least $13.25 per IPT share and use
its reasonable best efforts to consummate the transaction after the closing of
the Insignia Merger but not earlier than August 15, 1998. IPT is a 61% owned
subsidiary of Insignia; the 39% of IPT not owned by Insignia is valued at an
aggregate of approximately $100 million, or approximately $13.25 per share.
If the stockholders of AIMCO do not approve the Insignia Merger, but
the stockholders of Insignia do approve it, the Insignia Merger may nonetheless
be consummated. However, instead of receiving $303 million in Series E Preferred
Stock, holders of Insignia Common Stock would receive approximately $203 million
in Series E Preferred Stock and $100 million aggregate liquidation value of
Series F Preferred Stock, par value $0.01 per share, of AIMCO ("Series F
Preferred Stock"). In either case, holders of Series E Preferred Stock would be
entitled to a preferred cash dividend of $50 million. Holders of Series F
Preferred Stock are entitled to receive the greater of (i) the dividends
received by holders of AIMCO Common Stock and (ii) preferred distributions of
10% of the liquidation value of the Series F Preferred Stock, with the preferred
return rate escalating by 1% each year until a 15% annual return is achieved.
Upon the approval by stockholders of AIMCO, the Series F Preferred Stock will
convert into AIMCO Common Stock on a one-to-one basis, subject to antidilution
adjustments, if any.
Insignia Financial Group, Inc. is a leading fully integrated real
estate services company. Insignia is the largest manager of multifamily
residential properties in the United States and is among the largest managers of
commercial properties. Insignia commenced operations in December 1990 and since
then has grown to provide property and/or asset management and other real estate
services for over 2,700 properties which include approximately 280,000
residential units (including cooperative and condominium units), and
approximately 160 million square feet and commercial space located in over 500
cities and 48 states and overseas.
2
<PAGE> 3
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Consolidated Financial Statements and Report of Independent Auditors
for Ambassador Apartments, Inc., as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 (included as Exhibit
99.1 to this Report and incorporated herein by this reference).
Consolidated Financial Statements and Report of Independent Auditors
for Insignia Financial Group, Inc., as of December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997 (included as
Exhibit 99.2 to this Report and incorporated herein by this reference).
Consolidated Financial Statements for Insignia Financial Group, Inc.
as of March 31, 1998 (unaudited) and December 31, 1997 and for the three months
ended March 31, 1998 (unaudited) and 1997 (unaudited) (included as Exhibit 99.3
to this Report and incorporated herein by this reference).
(b) Pro Forma Financial Information
The required pro forma financial information is included as Exhibit
99.4 to this Report and incorporated herein by this reference.
(c) Exhibits
The following exhibits are filed with this report:
Exhibit
Number Description
- -------- -----------
2.1* Amended and Restated Agreement and Plan of Merger, dated as of May
26, 1998, by and among Apartment Investment and Management Company,
AIMCO Properties, L.P., Insignia Financial Group, Inc. and
Insignia/ESG Holdings, Inc.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
12.2 Calculation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
23.1* Consent of Ernst & Young LLP, Chicago, Illinois.
23.2* Consent of Ernst & Young LLP, Greenville, South Carolina.
99.1* Consolidated Financial Statements and Report of Independent Auditors
for Ambassador Apartments, Inc., as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997.
99.2* Consolidated Financial Statements and Report of Independent Auditors
for Insignia Financial Group, Inc., as of December 31, 1997 and 1996
and for each of the three years in the period ended December 31, 1997.
99.3* Consolidated Financial Statements for Insignia Financial Group, Inc.
as of March 31, 1998 and December 31, 1997 and for the three months
ended March 31, 1998 and 1997.
99.4 Pro Forma Financial Information of Apartment Investment and Management
Company as of March 31, 1998 and for the year ended December 31, 1997
and the three months ended March 31, 1998.
* * * * *
* Previously filed
3
<PAGE> 4
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: August 6, 1998 By: /s/ TROY D. BUTTS
------------------------------------
Troy D. Butts
Senior Vice President and Chief
Financial Officer
4
<PAGE> 5
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
2.1* Amended and Restated Agreement and Plan of Merger, dated as of May
26, 1998, by and among Apartment Investment and Management Company,
AIMCO Properties, L.P., Insignia Financial Group, Inc. and
Insignia/ESG Holdings, Inc.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
12.2 Calculation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.
23.1* Consent of Ernst & Young LLP, Chicago, Illinois.
23.2* Consent of Ernst & Young LLP, Greenville, South Carolina.
99.1* Consolidated Financial Statements and Report of Independent Auditors
for Ambassador Apartments, Inc., as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997.
99.2* Consolidated Financial Statements and Report of Independent Auditors
for Insignia Financial Group, Inc., as of December 31, 1997 and 1996
and for each of the three years in the period ended December 31, 1997.
99.3* Consolidated Financial Statements for Insignia Financial Group, Inc.
as of March 31, 1998 and December 31, 1997 and for the three months
ended March 31, 1998 and 1997.
99.4 Pro Forma Financial Information of Apartment Investment and Management
Company as of March 31, 1998 and for the year ended December 31, 1997
and the three months ended March 31, 1998.
</TABLE>
* Previously filed
<PAGE> 1
EXHIBIT 12.1
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------------------
Three months
Ended January 10, 1994
March 31, Year ended December 31, (Inception)
--------------------- ---------------------------------- Through
1998 1997 1997 1996 1995 December 31, 1994
-------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Earnings (1) $ 18,571 $ 6,063 $ 67,535 $ 15,696 $ 14,988 $ 7,702
Fixed charges:
Interest expense 15,441 9,452 51,385 24,802 13,322 1,576
Capitalized interest 330 231 1,300 821 113 29
-------- -------- -------- -------- -------- -----------------
Total fixed charges (A) 15,771 9,683 52,685 25,623 13,435 1,605
-------- -------- -------- -------- -------- -----------------
Earnings before fixed charges (2)(B) $ 34,012 $ 15,515 $118,920 $ 40,498 $ 28,310 $ 9,278
======== ======== ======== ======== ======== =================
Ratio of earnings to fixed
charges (B divided by A) 2.2:1.0 1.6:1.0 2.3:1.0 1.6:1.0 2.1:1.0 5.8:1.0
======== ======== ======== ======== ======== =================
<CAPTION>
PRO FORMA
------------------------------------------------
Three months ended Year ended
March 31, 1998 December 31, 1997
----------------------- ---------------------
Pre-Merger Merger Pre-Merger Merger
----------------------- ---------------------
<S> <C> <C> <C> <C>
Earning s (1) $ 23,282 $ 19,430 $ 90,927 $102,572
Fixed charges:
Interest expense 20,937 28,537 85,552 108,599
Capitalized interest 330 330 1,300 1,300
---------- -------- -------- --------
Total fixed charges (A) 21,267 28,867 86,852 109,899
---------- -------- -------- --------
Earnings before fixed charges (2)(B) $ 44,219 $ 47,967 $176,479 $211,171
========== ======== ======== ========
Ratio of earnings to fixed
charges (B divided by A) 2.1:1.0 1.7:1.0 2.0:1.0 1.9:1.0
========== ======== ======== =======
</TABLE>
AIMCO PREDECESSORS
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------
January 1, 1994 Year ended
Through December 31,
July 28, 1994 1993
--------------- --------------
<S> <C> <C>
Earnings (1) $ (1,463) $ 627
Fixed charges:
Interest expense 4,214 3,510
Capitalized interest -- --
--------------- --------------
Total fixed charges (A) 4,214 3,510
--------------- --------------
Earnings before fixed charges (2) (B) $ 2,751 $ 4,137
=============== ==============
Ratio of earnings to fixed
charges (B divided by A) (3) 1.2:1.0
=============== ==============
</TABLE>
(1) Earnings represents pretax income before Minority Interest in Operating
Partnership and minority interest in other partnerships Equity in earnings
of unconsolidated subsidiaries and partnerships is included in earnings
only to the extent of dividends and distributions received.
(2) Earnings before fixed charges exclude capitalized interest.
(3) Earnings for the period January 1, 1994 through July 28, 1994 were
inadequate to cover fixed charges. The deficiency for the period was
$1,463.
<PAGE> 1
EXHIBIT 12.2
CALCULATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
<TABLE>
<CAPTION>
Historical
----------------------------------------------------------------------------------
Three months
Ended January 10, 1994
March 31, Year ended December 31, (Inception)
--------------------- ---------------------------------- Through
1998 1997 1997 1996 1995 December 31, 1994
-------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Earnings (1) $ 18,571 $ 6,063 $ 67,535 $ 15,696 $ 14,988 $ 7,702
Fixed charges:
Interest expense 15,441 9,452 51,385 24,802 13,322 1,576
Capitalized interest 330 231 1,300 821 113 29
Preferred stock dividends 3,681 -- 2,315 -- 5,169 3,114
-------- -------- -------- -------- -------- -----------------
Total fixed charges (A) 19,452 9,683 55,000 25,623 18,604 4,719
-------- -------- -------- -------- -------- -----------------
Earnings before fixed charges (2)(B) $ 34,012 $ 15,515 $118,920 $ 40,498 $ 28,310 $ 9,278
======== ======== ======== ======== ======== =================
Ratio of earnings to fixed
charges (B divided by A) 1.7:1.0 1.6:1.0 2.2:1.0 1.6:1.0 1.5:1.0 2.0:1.0
======== ======== ======== ======== ======== =================
<CAPTION>
Pro Forma
-----------------------------------------------
Three months ended Year ended
March 31, 1998 December 31, 1997
--------------------- ---------------------
Pre-Merger Merger Pre-Merger Merger
--------------------- ---------------------
<S> <C> <C> <C> <C>
Earnings (1) $ 23,282 $ 19,430 $ 90,927 $102,572
Fixed charges:
Interest expense 20,937 28,537 85,552 108,599
Capitalized interest 330 330 1,300 1,300
Preferred stock dividends 7,287 7,287 29,424 29,424
-------- -------- -------- --------
Total fixed charges (A) 28,554 36,484 116,276 139,323
-------- -------- -------- --------
Earnings before fixed charges (2)(B) $ 44,219 $ 47,967 $176,479 $211,171
======== ======== ======== ========
Ratio of earnings to fixed
charges (B divided by A) 1.5:1.0 1.3:1.0 1.5:1.0 1.5:1.0
======== ======== ======= =======
</TABLE>
AIMCO PREDECESSORS
<TABLE>
<CAPTION>
Historical
----------------------------------
January 1, 1994 Year ended
Through December 31,
July 28, 1994 1993
--------------- --------------
<S> <C> <C>
Income (loss) before extraordinary item and income taxes $ (1,463) $ 627
Fixed charges:
Interest expense 4,214 3,510
Capitalized interest -- --
Preferred stock dividends (3) -- --
-------------- --------------
Total fixed charges (A) 4,214 3,510
-------------- --------------
Earnings before fixed charges (2) (B) $ 2,751 $ 4,137
============== ==============
Ratio of earnings to fixed charges (B divided by A) (4) 1.2:1.0
============== ==============
</TABLE>
(1) Earnings represents pretax income before Minority Interest in Operating
Partnership and minority interest in other partnerships. Equity in earnings
of unconsolidated subsidiaries and partnerships is included in earnings
only to the extent of dividends and distributions received.
(2) Earnings before fixed charges exclude capitalized interest.
(3) The AIMCO Predecessors did not have any shares of Preferred Stock
outstanding during the period from January 1, 1993 through July 28, 1994.
(4) Earnings for the period January 1, 1994 through July 28, 1994 were
inadequate to cover fixed charges. The deficiency for the period was
$1,463.
<PAGE> 1
EXHIBIT 99.4
PRO FORMA FINANCIAL INFORMATION OF
AIMCO
(PRE-MERGER)
INTRODUCTION
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Class A Common Stock, par value $0.01 per share (the
"AIMCO Common Stock"), valued at $180.8 million, and paid $86.5 million in cash.
The total cost of the purchase of NHP was $349.5 million.
In June 1997, AIMCO purchased a group of companies (the "NHP Real Estate
Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP 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"). AIMCO paid aggregate consideration of $54.8
million in cash and warrants to purchase 399,999 shares of AIMCO Common Stock at
an exercise price of $36.00 per share. AIMCO engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which will result in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the AIMCO Operating Partnership holds 99% limited partner
interest and certain directors and officers of AIMCO directly or indirectly,
hold a 1% general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through corporations (the "Unconsolidated
Subsidiaries") in which the AIMCO Operating Partnership holds non-voting
preferred stock that represents a 95% economic interest, and certain officers
and/or directors of AIMCO hold, directly or indirectly, all of the voting common
stock, representing a 5% economic interest. As a result of the controlling
ownership interest in the Unconsolidated Subsidiaries held by others, AIMCO
accounts for its interest in the Unconsolidated Subsidiaries on the equity
method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 shares of AIMCO Common Stock. Any outstanding options to
purchase Ambassador Common Stock were converted, at the election of the option
holder, into cash or options to purchase AIMCO Common Stock at their current
exercise price divided by the Conversion Ratio. In accordance with the Agreement
and Plan of Merger, dated December 23, 1997 and supplemented by letter dated as
of March 11, 1998, (the "Ambassador Merger Agreement"), the outstanding shares
of Class A Senior Cumulative Convertible Preferred Stock of Ambassador, (the
"Ambassador Preferred Stock") were redeemed and converted into Ambassador Common
Stock prior to the Ambassador Merger. Following the consummation of the
Ambassador Merger, a subsidiary of the AIMCO Operating Partnership was merged
with and into the Ambassador Operating Partnership (the "Ambassador OP Merger").
Each outstanding unit of limited partnership interest in the Ambassador
Operating Partnership was converted into the right to receive 0.553 AIMCO OP
Units, and as a result, the Ambassador Operating Partnership became a 99.9%
owned subsidiary partnership of the AIMCO Operating Partnership.
Also during 1997, AIMCO (i) acquired (a) 44 properties for aggregate
purchase consideration of $467.4 million, of which $56.0 million was paid in the
form of 1.9 million AIMCO OP Units (b) paid $34.2 million in cash and issued OP
Units valued at $7.3 million in connection with the acquisition of partnership
interests through tender offers in certain partnerships ((a) and (b) together
are the "1997 Property Acquisitions") and (c) paid $19.9 million to acquire
886,600 shares of Ambassador Common Stock
1
<PAGE> 2
(together with the 1997 Property Acquisitions, the "1997 Acquisitions"); (ii)
sold (a) approximately 16,367,000 shares of AIMCO Common Stock for aggregate net
proceeds of $513.4 million; (b) 750,000 shares of AIMCO Class B Cumulative
Convertible Preferred Stock for net proceeds of $75 million; and (c) 2,400,000
shares of AIMCO Class C 9% Cumulative Preferred Stock for net proceeds of $58.1
million (collectively, the "1997 Stock Offerings"); and (iii) sold five real
estate properties (the "1997 Dispositions").
During 1998, AIMCO (i) (a) sold 4,200,000 shares of AIMCO Class D 8.75%
Cumulative Preferred Stock for net proceeds of $101.5 million (the "1998 Stock
Offering") and (b) sold 4,050,000 shares of AIMCO class G Preferred Stock for
net proceeds of $98.0 million (the "Class G Preferred Stock Offering")
(collectively, the "1998 Stock Offerings"); (ii) purchased 11 properties for
aggregate purchase consideration of $89.6 million, of which $23.4 million was
paid in the form of AIMCO OP Units (the "1998 Acquisitions"); (iii) sold one
real estate property (the "1998 Disposition"); and (iv) completed the Ambassador
Merger.
PRO FORMA FINANCIAL INFORMATION (PRE-MERGER)
The following Pro Forma Consolidated Balance Sheet (Pre-Merger) of AIMCO as
of March 31, 1998 has been prepared as if each of the following transactions had
occurred as of March 31, 1998: (i) the purchase of two properties for an
aggregate purchase price of $14.7 million; (ii) the Ambassador Merger; and
(iii) the Class G Preferred Stock Offering.
The following Pro Forma Consolidated Statement of Operations (Pre-Merger)
of AIMCO for the year ended December 31, 1997 has been prepared as if each of
the following transactions had occurred as of January 1, 1997: (i) the 1997
Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions; (iv)
the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization; (vi)
the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP Reorganization;
(ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi) the 1998
Disposition; and (xii) the Ambassador Merger.
The following Pro Forma Consolidated Statement of Operations (Pre-Merger)
of AIMCO for the three months ended March 31, 1998 has been prepared as if each
of the following transactions had occurred as of January 1, 1997: (i) the 1998
Stock Offerings; (ii) the 1998 Acquisitions; (iii) the 1998 Disposition; and
(iv) the Ambassador Merger.
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 audited Consolidated Financial Statements of
AIMCO for the year ended December 31, 1997; (ii) the unaudited Consolidated
Financial Statements of AIMCO for the three months ended March 31, 1998; (iii)
the audited Consolidated Financial Statements of Ambassador for the year ended
December 31, 1997; (iv) the unaudited Consolidated Financial Statements of
Ambassador for the three months ended March 31, 1998; (v) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (vi) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (vii) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (viii) the unaudited Combined Financial Statements of the NHP
New LP Entities for the three months ended March 31, 1997; (ix) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (x) the unaudited Historical Summaries of Gross Income and
Certain Expenses of The Bay Club at Aventura for the three months ended March
31, 1997; (xi) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xii) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xiii) the unaudited Statement of Revenues and Certain Expenses of First
Alexandria Associates, a Limited Partnership for the nine months ended September
30, 1997; (xiv) the unaudited Statement of Revenues and Certain Expenses of
Country Lakes Associates Two, a Limited Partnership for the nine months ended
September 30, 1997; (xv) the unaudited Statement of Revenues and Certain
Expenses of Point West Limited Partnership, A Limited Partnership for the nine
months ended September 30, 1997; and (xvi) the unaudited Statement of Revenues
and Certain Expenses for The Oak Park Partnership for the nine months ended
September 30, 1997. The following Pro Forma Financial Information (Pre-Merger)
should be read in conjunction with such financial statements and the notes
thereto.
2
<PAGE> 3
The unaudited Pro Forma Financial Information (Pre-Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, the 1997
Acquisitions, and the 1998 Acquisitions 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.
3
<PAGE> 4
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEET (PRE-MERGER)
AS OF MARCH 31, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
AMBASSADOR
COMPLETED AMBASSADOR PURCHASE PRICE PRO
HISTORICAL(A) TRANSACTIONS(B) HISTORICAL(C) ADJUSTMENTS(D) FORMA
------------- --------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Real estate............................ $1,537,646 $ 14,727 $496,595 $ 199,326(E) $2,248,294
Property held for sale................. 35,824 -- -- -- 35,824
Investments in securities.............. 23,759 -- -- (268,171)(E)
249,996(F) 5,584
Investments in and notes receivable
from unconsolidated subsidiaries..... 88,775 -- -- -- 88,775(H)
Investments in and notes receivable
from unconsolidated real estate
partnerships......................... 245,682 -- 1,270 1,020(E) 247,972
Cash and cash equivalents.............. 35,948 -- 5,484 -- 41,432
Restricted cash........................ 31,186 -- 30,948 -- 62,134
Accounts receivable.................... 24,586 -- 1,196 -- 25,782
Deferred financing costs............... 14,367 18 14,978 (10,619)(E) 18,744
Goodwill............................... 123,634 -- -- 123,634
Other assets........................... 59,064 -- 3,949 (862)(E) 62,151
---------- -------- -------- --------- ----------
Total assets................... $2,220,471 $ 14,745 $554,420 $ 170,690 $2,960,326
========== ======== ======== ========= ==========
Secured notes payable.................. $ 697,036 $ 1,142 $ 37,209 $ -- $ 735,387
Secured tax-exempt bond financing...... 73,560 -- 318,397 -- 391,957
Secured short term financing........... 40,900 (87,743) 31,550 19,557(E)
2,513(G) 6,777
Unsecured short-term financing......... -- -- 2,513 (2,513)(G) --
Accounts payable, accrued and other
liabilities.......................... 82,809 -- 6,886 47,378(E) 137,073
Security deposits and prepaid rents.... 10,023 -- 2,532 -- 12,555
---------- -------- -------- --------- ----------
904,328 (86,601) 399,087 66,935 1,283,749
Minority interest in other
partnerships......................... 36,128 1,888 18,872 (13,120)(E) 43,768
Minority interest in Operating
Partnership.......................... 124,952 1,471 7,424 (7,424)(E) 126,423
Class A common stock, $.01 par value... 411 -- 107 (107)(E)
66(F) 477
Class B common stock, $.01 par value... 2 -- -- -- 2
Non-voting preferred stock, $.01 par
value................................ -- -- 24,132 (24,132)(E) --
Class B Cumulative Convertible
Preferred Stock, $.01 par value...... 75,000 -- -- -- 75,000
Class C Cumulative Preferred Stock $.01
par value............................ 60,000 -- -- -- 60,000
Class D Cumulative Preferred Stock $.01
par value............................ 105,000 -- -- -- 105,000
Class G Cumulative Preferred Stock,
$.01 par value....................... -- 101,250 -- -- 101,250
Additional paid in capital............. 992,001 (3,263) 148,930 (148,930)(E)
249,930(F)
1,634(E) 1,240,302
Notes receivable on common stock
purchases............................ (41,608) -- -- -- (41,608)
Distributions in excess of earnings.... (33,900) -- (44,132) 44,132(E) (33,900)
Accumulated other comprehensive
losses............................... (1,843) -- -- 1,706(E) (137)
---------- -------- -------- --------- ----------
1,155,063 97,987 129,037 124,299 1,506,386
---------- -------- -------- --------- ----------
Total liabilities and equity... $2,220,471 $ 14,745 $554,420 $ 170,690 $2,960,326
========== ======== ======== ========= ==========
</TABLE>
- ---------------
(A) Represents the unaudited historical consolidated financial position of
AIMCO as of March 31, 1998, as reported in AIMCO's Quarterly Report on Form
10-Q.
4
<PAGE> 5
(B) Represents adjustments to reflect the purchase of two properties for an
aggregate purchase price of $14,727 and the sale of 4,050,000 shares of
AIMCO Class G Preferred Stock for net proceeds of $98.0 million.
(C) Represents the unaudited historical consolidated financial position of
Ambassador as of March 31, 1998. Certain reclassifications have been made
to Ambassador's historical balance sheet to conform to AIMCO's balance
sheet presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the issuance of 6,578,833 shares of AIMCO Common
Stock, valued at $249,996 (based on $38.00 per share, the average price
calculated in accordance with the Ambassador Merger Agreement), as
consideration to holders of Ambassador Common Stock outstanding as of the
date of the Ambassador Merger; (ii) the additional purchase price
consideration of $1,634 for the Ambassador Merger resulting from the
Ambassador Stock Options, which have been converted to options to purchase
shares of AIMCO Common Stock; and (iii) the allocation of the purchase
price of Ambassador based on the preliminary estimates of relative fair
market value of the assets and liabilities of Ambassador.
(E) As of March 31, 1998, AIMCO has an investment in Ambassador of $19,881,
comprised of 886,600 shares of Ambassador Common Stock. In connection with
the Ambassador Merger, AIMCO issued 6,578,833 shares of AIMCO Common Stock
valued at $249,996 (based on $38.00 per share, the average price calculated
in accordance with the Ambassador Merger Agreement) to acquire the shares
of Ambassador Common Stock owned by the Ambassador stockholders. AIMCO's
investment in Ambassador Common Stock of $268,171, is as follows:
<TABLE>
<S> <C>
Amount of Ambassador Common Stock at March 31, 1998......... $ 19,881
Less: Unrealized loss at March 31, 1998..................... (1,706)
Purchase of Ambassador Common Stock from public............. 249,996
--------
Total Investment.................................. $268,171
========
</TABLE>
The total purchase price of Ambassador is $743,285, as follows:
<TABLE>
<S> <C>
Cash paid for initial investment in Ambassador.............. $ 19,881
Issuance of 6,578,833 shares of AIMCO Common Stock in the
Ambassador Merger, at $38.00 per share.................... 249,996
Assumption of Ambassador liabilities and minority interest
in other partnerships..................................... 404,839
Transaction and loan assumption costs....................... 47,378
Buyout of limited partners in limited partnerships.......... 19,557
Consideration for Ambassador stock options outstanding...... 1,634
--------
Total............................................. $743,285
========
</TABLE>
This amount was allocated to the various assets of Ambassador acquired in
the Ambassador Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $ 743,285
Historical basis of Ambassador's assets acquired............ (554,420)
---------
Step-up to record the fair value of Ambassador's assets
acquired.................................................. $ 188,865
=========
</TABLE>
5
<PAGE> 6
This step-up was applied to Ambassador's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $199,326
Investment in real estate partnerships...................... 1,020
Reduction in value of deferred loan costs................... (10,619)
Reduction in value of other assets.......................... (862)
--------
Total............................................. $188,865
========
</TABLE>
As of March 31, 1998, Ambassador's minority interest in its operating
partnership was $7,424. This balance was eliminated upon the completion of
the Ambassador Merger.
As of March 31, 1998, Ambassador's shareholders' equity was $129,037, which
is detailed as follows:
<TABLE>
<S> <C>
Preferred stock............................................. $ 24,132
Common stock................................................ 107
Additional paid-in capital.................................. 148,930
Distributions in excess of accumulated earnings............. (44,132)
--------
Total............................................. $129,037
========
</TABLE>
Upon completion of the Ambassador Merger, the entire amount of
shareholders' equity is eliminated.
In addition, upon completion of the Ambassador Merger, $13,120 of minority
interest in other partnerships of Ambassador is eliminated in connection
with the buyout of limited partners in certain limited partnerships.
(F) Represents the issuance of 6,578,833 shares of AIMCO Common Stock, valued
at $249,996, to Ambassador stockholders, in exchange for all the shares of
Ambassador Common Stock and Ambassador Preferred Stock not owned by AIMCO.
(G) Represents the repayment of the Ambassador line of credit upon the
completion of the Ambassador Merger. AIMCO borrowed under its line of
credit in order to fund this repayment.
(H) Represents notes receivable from the Unconsolidated Subsidiaries of $50,000
and equity in the unconsolidated subsidiaries of $38,775. The combined
historical balance sheet of the Unconsolidated Subsidiaries as of March 31,
1998 is presented below. There were no pro forma adjustments to the balance
sheet as of March 31, 1998.
6
<PAGE> 7
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (PRE-MERGER)
AS OF MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
----------
<S> <C>
Real estate................................................. $ 20,908
Cash and cash equivalents................................... 4,354
Restricted cash............................................. 4,925
Management contracts........................................ 50,514
Deferred financing costs.................................... 3,194
Goodwill.................................................... 44,799
Other assets................................................ 31,011
--------
Total assets...................................... $159,705
========
Secured notes payable....................................... $ 72,269
Accounts payable, accrued and other liabilities............. 50,521
Security deposits and prepaid rents......................... 312
--------
123,102
Common stock................................................ 2,298
Preferred stock............................................. 38,775
Retained earnings........................................... (4,351)
Notes receivable on common stock purchases.................. (119)
--------
36,603
--------
Total liabilities and equity...................... $159,705
========
</TABLE>
7
<PAGE> 8
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AMBASSADOR
COMPLETED NHP AMBASSADOR PURCHASE PRICE PRO
HISTORICAL(A) TRANSACTIONS(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) FORMA
------------- --------------- --------------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues.................... $193,006 $ 95,828(F) $ 6,660 $ 93,329 $ -- $ 388,823
Property operating expenses... (76,168) (48,107)(F) (2,941) (36,088) -- (163,304)
Owned property management
expense..................... (6,620) (3,454)(F) (282) -- -- (10,356)
Depreciation.................. (37,741) (19,109)(F) (1,414) (18,979) (5,378)(J) (82,621)
-------- -------- ------- -------- -------- ---------
Income from property
operations.................. 72,477 25,158 2,023 38,262 (5,378) 132,542
-------- -------- ------- -------- -------- ---------
Management fees and other
income...................... 13,937 -- 7,813 -- -- 21,750
Management and other
expenses.................... (9,910) -- (5,394) -- -- (15,304)
Corporate overhead
allocation.................. (588) -- -- -- -- (588)
Amortization.................. (1,401) -- (5,800) -- -- (7,201)
-------- -------- ------- -------- -------- ---------
Income from service company
business.................... 2,038 -- (3,381) -- -- (1,343)
Minority interest in service
company business............ (10) -- -- -- -- (10)
-------- -------- ------- -------- -------- ---------
AIMCO's share of income from
service company business.... 2,028 -- (3,381) -- -- (1,353)
-------- -------- ------- -------- -------- ---------
General and administrative
expenses.................... (5,396) -- (1,025) (7,392) 7,392(K) (6,421)
Interest expense.............. (51,385) (1,497)(G) (5,462) (26,987) (221)(L) (85,552)(P)
Interest income............... 8,676 -- 1,900 -- -- 10,576
Minority interest in other
partnerships................ 1,008 779(H) 16 (851) 705(M) 1,657
Equity in losses of
unconsolidated
partnerships................ (1,798) (122)(I) (8,542) 405 -- (10,057)
Equity in earnings of
unconsolidated
subsidiaries................ 4,636 -- 5,790 -- -- 10,426(R)
-------- -------- ------- -------- -------- ---------
Income from operations........ 30,246 24,318 (8,681) 3,437 2,498 51,818
Gain on dispositions of
property.................... 2,720 (2,720) -- -- -- --
-------- -------- ------- -------- -------- ---------
Income before extraordinary
item and minority interest
in AIMCO Operating
Partnership................. 32,966 21,598 (8,681) 3,437 2,498 51,818
Extraordinary item -- early
extinguishment of debt...... (269) 269 -- -- -- --
-------- -------- ------- -------- -------- ---------
Income before minority
interest in AIMCO Operating
Partnership................. 32,697 21,867 (8,681) 3,437 2,498 51,818
Minority interest in AIMCO
Operating Partnership....... (4,064) 159(N) 1,722(N) (386)(N) (31)(N) (2,600)
-------- -------- ------- -------- -------- ---------
Net income.................... 28,633 22,026 (6,959) 3,051 2,467 49,218(P)
Income attributable to
preferred stockholders...... 2,315 27,109 -- 2,296 (2,296)(O) 29,424(Q)
-------- -------- ------- -------- -------- ---------
Income attributable to common
stockholders................ $ 26,318 $ (5,083) $(6,959) $ 755 $ 4,763 $ 19,794(P)
======== ======== ======= ======== ======== =========
Basic earnings per share...... $ 1.09 $ 0.42(P)
======== =========
Diluted earnings per share.... $ 1.08 $ 0.42(P)
======== =========
Weighted average shares
outstanding................. 24,055 46,685
======== =========
Weighted average shares and
equivalents outstanding..... 24,436 47,066
======== =========
</TABLE>
- ---------------
(A) Represents AIMCO's audited consolidated results of operations for the year
ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; and (vi) the 1998 Disposition.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
8
<PAGE> 9
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating expenses....... (2,941)(v) (8,411) -- 8,411(xvii) (2,941)
Owned property management
expense......................... (282)(v) (862) -- 862(xvii) (282)
Depreciation...................... (1,414)(vi) (2,527) (693)(xi) 3,220(xvii) (1,414)
------- -------- ------- -------- -------
Income from property operations... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income.......................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other expenses..... (2,263)(viii) (35,267) -- 32,136 (xviii) (5,394)
Corporate overhead allocation..... -- -- -- -- --
Amortization...................... -- (9,111) (4,432)(xii) 7,743(xix) (5,800)
------- -------- ------- -------- -------
Income from service company
business........................ (858) 27,798 (4,432) (25,889) (3,381)
Minority interest in service
company business................ -- -- -- -- --
------- -------- ------- -------- -------
AIMCO's share of income from
service company business........ (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses........................ -- (16,266) 8,668 (xiii) 6,573(xviii) (1,025)
Interest expense.................. (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income................... 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest in other
partnerships.................... 16(v) -- -- -- 16
Equity in losses of unconsolidated
partnerships.................... (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated subsidiaries..... -- -- (4,636)(xv) 10,426(xxii) 5,790
------- -------- ------- -------- -------
Income (loss) from operations..... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision.............. -- (3,502) 3,502(xvi) -- --
------- -------- ------- -------- -------
Income (loss) before minority
interest in Operating
Partnership..................... (7,266) 4,350 (2,222) (3,543) (8,681)
Minority interest in Operating
Partnership..................... 1,276 -- -- 446 1,722
------- -------- ------- -------- -------
Net income (loss)................. (5,990) 4,350 (2,222) (3,097) (6,959)
Income attributable to preferred
stockholders.................... -- -- -- -- --
------- -------- ------- -------- -------
Income (loss) attributable to
common stockholders............. $(5,990) $ 4,350 $(2,222) $ (3,097) $(6,959)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to the
date of acquisition, as if the acquisition of the NHP Real Estate
Companies had occurred on January 1, 1997. 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. 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.
(ii) Represents the unaudited consolidated results of operations of NHP for the
period from January 1, 1997 through December 8, 1997 (date of NHP Merger).
9
<PAGE> 10
(iii) Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance costs,
pursuant to a restructuring plan; (ii) the incremental depreciation of the
purchase price adjustment related to real estate; (iii) the incremental
amortization of the purchase price adjustment related to the management
contracts, furniture, fixtures and equipment, and goodwill; (iv) the
reversal of equity in earnings of NHP during the pre-merger period when
AIMCO held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on the
purchase price adjustment related to real estate and an estimated average
life of 20 years.
(iv) Represents adjustments related to the NHP Reorganization, whereby AIMCO
will contribute or sell to the Unconsolidated Subsidiaries and the
Unconsolidated Partnership: (i) certain assets and liabilities of NHP,
primarily related to the management operations and other businesses owned
by NHP and (ii) 12 real estate properties containing 2,905 apartment
units. 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
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 the acquisition of the NHP Real Estate
Companies and the corresponding historical results of operations as if
they had occurred on January 1, 1997.
(vi) Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(vii) Represents the adjustment to record the revenues from ancillary businesses
purchased from the NHP Real Estate Companies as if the acquisition had
occurred on January 1, 1997.
(viii)Represents $4,878 related to the adjustment to record the expenses from
ancillary businesses purchased from the NHP Real Estate Companies as if
the acquisition had occurred on January 1, 1997, less $2,615 related to 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, 1997 and that the
restructuring plan was completed on January 1, 1997. 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 adjustments in the amount of $3,391 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, 1997, as well as the
increase in interest expense in the amount of $1,691 related to borrowings
on AIMCO's Credit Facility of $55,807 to finance the NHP Real Estate
Acquisition
(x) Represents adjustments in the amount of $2,432 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, 1997, as well as
amortization of $1,473 related to 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 20 years.
(xi) Represents incremental depreciation related to the real estate assets
purchased from NHP. Buildings and improvements are depreciated on the
straight-line method over a period of 20 years, and furniture and fixtures
are depreciated on the straight-line method over a period of 5 years.
(xii) 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 including
amortization of management contracts of $3,782, depreciation of furniture,
fixtures and equipment of $2,018 and amortization of goodwill of $7,743,
less NHP's historical depreciation and amortization of $9,111. Management
contracts are amortized using the straight-line method over the weighted
average life of the contracts estimated to be approximately 15 years.
10
<PAGE> 11
Furniture, fixtures and equipment are depreciated using the straight-line
method over the estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)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, 1997 and that the restructuring plan was completed on January 1, 1997.
(xiv) 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 20 years.
(xv) 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.
(xvi) Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)Represents the contribution of NHP's 12 real estate properties containing
2,905 apartment units to the Unconsolidated Partnership pursuant to the
NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with certain
assets and liabilities of NHP that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations and other businesses owned by NHP.
(xix) Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on AIMCO's new basis resulting
from the allocation of the purchase price of NHP, that will be contributed
or sold to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xx) Represents interest expense of $6,020 related to the contribution of NHP's
12 real estate properties containing 2,905 apartment units to the
Unconsolidated Partnership and interest expense of $4,285 related to the
certain assets and liabilities that will be contributed or sold to the
Unconsolidated Subsidiaries pursuant to the NHP Reorganization.
(xxi) Represents the interest income of $5,000 earned on notes payable of
$50,000 to AIMCO issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by AIMCO, net of the
elimination of AIMCO's share of the related interest expense of $4,750
reflected in the equity in earnings of the Unconsolidated Subsidiaries
operating results, offset by $853 in interest income primarily related to
the management operations and other businesses owned by NHP contributed or
sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)Represents AIMCO's equity in earnings of the Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical Statement of Operations to conform to AIMCO's
Statement of Operations presentation. The Ambassador historical Statement
of Operations excludes extraordinary loss of $1,384 and a loss on sale of
an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt; and
(iv) the elimination of the minority interest associated with Jupiter I,
L.P.
(F) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Disposition as
if they had occurred on January 1, 1997. 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.
11
<PAGE> 12
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITION TOTAL
------------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues....... $ 88,589 $(4,081) $13,425 $(2,105) $ 95,828
Property operating expense............... (44,109) 1,944 (6,725) 783 (48,107)
Owned property management expense........ (3,233) 133 (429) 75 (3,454)
Depreciation............................. (16,839) 452 (3,076) 354 (19,109)
</TABLE>
(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 1997 Property
Acquisitions.............................................. $(29,427)
Repayments on AIMCO's Credit Facility and other indebtedness
with proceeds from the 1997 Dispositions and the 1997
Stock Offerings........................................... 19,505
Repayments on AIMCO's Credit Facility with proceeds from a
dividend received from one of the Unconsolidated
Subsidiaries.............................................. 1,889
Borrowings on AIMCO's Credit Facility and other loans and
mortgages assumed in connection with the 1998
Acquisitions.............................................. (4,700)
Repayments on AIMCO's Credit Facility and other indebtedness
with proceeds from the 1998 Disposition and the 1998 Stock
Offering.................................................. 11,236
--------
$ (1,497)
========
</TABLE>
(H) Represents income related to limited partners in consolidated partnerships
acquired in connection with the 1997 Property Acquisitions.
(I) Represents the reduction in AIMCO's earnings in unconsolidated partnerships
as a result of the consolidation of additional partnerships resulting from
additional ownership acquired through tender offers.
(J) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(K) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring plan,
approved by AIMCO senior management, assuming that the Ambassador Merger
had occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. 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 date of completion.
(L) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation of
the Ambassador Merger, offset by an increase in interest expense of $3,833
related to borrowings under the AIMCO line of credit.
(M) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(N) Represents adjustments to Minority Interest in AIMCO Operating Partnership
assuming the Completed Transactions, the NHP Transactions, and the
Ambassador Merger had occurred as of January 1, 1997. On a pro forma
12
<PAGE> 13
basis, without giving effect to the NHP Transactions, as of December 31,
1997, the minority interest percentage is approximately 15.5%. On a pro
forma basis, without giving effect to the Ambassador Merger, as of December
31, 1997, the minority interest percentage is approximately 13.3%. On a pro
forma basis, giving effect to the Ambassador Merger, as of December 31,
1997, the minority interest percentage is approximately 11.6%.
(O) Represents the elimination of the preferred stock dividends of Ambassador
upon the conversion of the Ambassador Preferred Stock to AIMCO Common
Stock.
(P) On a pro forma basis, AIMCO has no variable rate debt. Therefore, an
increase in the interest rate per annum of 0.25% has no effect on net
income or net income per share.
(Q) Represents the net income attributable to holders of the AIMCO Class B
Preferred Stock, the AIMCO Class C Preferred Stock, the AIMCO Class D
Preferred Stock, and the AIMCO Class G Preferred Stock as if these stock
offerings had occurred as of January 1, 1997.
(R) Represents AIMCO's equity in earnings in the Unconsolidated Subsidiaries of
$5,676, plus the elimination of intercompany interest expense of $4,750.
The combined Pro Forma Statement of Operations (Pre-Merger) of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger, the
NHP Merger and the NHP Reorganization as if these transactions had occurred
as of January 1, 1997.
13
<PAGE> 14
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION
HISTORICAL(i) ADJUSTMENTS(ii) PRO FORMA
------------- --------------- ---------
<S> <C> <C> <C>
Rental and other property revenues.................... $ 6,194 $ 6,371(iii) $ 12,565
Property operating expenses........................... (3,355) (3,531)(iii) (6,886)
Owned property management expense..................... (147) (478)(iii) (625)
Depreciation expense.................................. (1,038) (767)(iii) (1,805)
-------- --------- --------
Income from property operations....................... 1,654 1,595 3,249
-------- --------- --------
Management fees and other income...................... 23,776 41,992(iv) 65,768
Management and other expenses......................... (11,733) (20,403)(iv) (32,136)
Amortization.......................................... (3,726) (4,017)(iv) (7,743)
-------- --------- --------
Income from service company........................... 8,317 17,572 25,889
Minority interest in service company.................. -- -- --
-------- --------- --------
Company's share of service company.................... 8,317 17,572 25,889
-------- --------- --------
General and administrative expense.................... -- (6,573)(iv) (6,573)
Interest expense...................................... (6,058) (5,849)(v) (11,907)
Interest income....................................... 1,001 (148)(iv) 853
Minority interest in other partnerships............... (2,819) 2,198(vii) (621)
Equity in losses of unconsolidated partnerships....... (1,028) 1,028(iii) --
Equity in earnings of Unconsolidated Subsidiaries..... 2,943 (2,943)(vi) --
-------- --------- --------
Income from operations................................ 4,010 6,880 10,890
Income tax provision.................................. (1,902) (3,013)(viii) (4,915)
-------- --------- --------
Net income............................................ $ 2,108 $ 3,867 $ 5,975
======== ========= ========
Income attributable to preferred stockholders......... $ 2,003 $ 3,673 $ 5,676
======== ========= ========
Income attributable to common stockholders............ $ 105 $ 194 $ 299
======== ========= ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries, as
well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii)Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12 real
estate properties contributed or sold to the Unconsolidated Partnership,
with additional depreciation recorded related to AIMCO's new basis
resulting from the allocation of purchase price of NHP and the NHP Real
Estate Companies.
(iv) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(v) Represents adjustments of $6,058 to reverse the historical interest expense
of the Unconsolidated Subsidiaries, which resulted from its original
purchase of NHP Common Stock, offset by $2,622 related to the contribution
or sale of the 14 real estate properties, $4,285 related to assets and
liabilities
14
<PAGE> 15
transferred from AIMCO to the Unconsolidated Subsidiaries and $5,000
related to a note payable to AIMCO.
(vi) Represents the reversal of the historical equity in earnings of NHP for the
period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(vii)Represents the minority interest in the operations of the 14 real estate
properties.
(viii)
Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
15
<PAGE> 16
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AMBASSADOR
COMPLETED AMBASSADOR PURCHASE PRICE
HISTORICAL(A) TRANSACTIONS(B) HISTORICAL(C) ADJUSTMENTS(D) PRO FORMA
------------- --------------- ------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues.......................... $ 71,336 $ 2,866(E) $ 24,882 $ -- $ 99,084
Property operating expenses......... (26,309) (1,183)(E) (9,513) -- (37,005)
Owned property management expense... (2,132) (93)(E) -- -- (2,225)
Depreciation........................ (13,977) (663)(E) (5,113) (976)(G) (20,729)
------------- --------------- ------------- --------------- ---------
Income from property operations..... 28,918 927 10,256 (976) 39,125
------------- --------------- ------------- --------------- ---------
Management fees and other income.... 4,821 -- -- -- 4,821
Management and other expenses....... (1,961) -- -- -- (1,961)
Corporate overhead allocation....... (147) -- -- -- (147)
Amortization........................ (1,720) -- -- -- (1,720)
------------- --------------- ------------- --------------- ---------
Income from service company
business.......................... 993 -- -- -- 993
Minority interest in service company
business.......................... (1) -- -- -- (1)
------------- --------------- ------------- --------------- ---------
AIMCO's share of income from service
company business.................. 992 -- -- -- 992
------------- --------------- ------------- --------------- ---------
General and administrative
expenses.......................... (1,974) -- (2,438) 2,438(H) (1,974)
Interest expense.................... (15,441) (1,255)(F) (6,888) 137(I) (20,937)(M)
Interest income..................... 6,076 -- -- -- 6,076
Minority interest in other
partnerships...................... (582) -- (345) 292(J) (635)
Equity in losses of unconsolidated
partnerships...................... (653) -- (30) -- (683)
Equity in earnings of unconsolidated
subsidiaries...................... 4,068 -- -- -- 4,068(O)
------------- --------------- ------------- --------------- ---------
Income from operations.............. 21,404 2,182 555 1,891 26,032
Gain on dispositions of property.... 2,526 (2,526) -- -- --
------------- --------------- ------------- --------------- ---------
Income before minority interest in
Operating Partnership............. 23,930 (344) 555 1,891 26,032
Minority interest in Operating
Partnership....................... (2,288) 215(K) (87) 68(K) (2,092)(K)
------------- --------------- ------------- --------------- ---------
Net income.......................... 21,642 (129) 468 1,959 23,940(M)
Income attributable to preferred
stockholders...................... 3,681 3,606 584 (584)(L) 7,287(N)
------------- --------------- ------------- --------------- ---------
Income attributable to common
stockholders...................... $ 17,961 $ (3,735) $ (116) $ 2,543 $ 16,653(M)
============= =============== ============= =============== =========
Basic earnings per share............ $ 0.44 $ 0.35(M)
============= =========
Diluted earnings per share.......... $ 0.43 $ 0.35(M)
============= =========
Weighted average shares
outstanding....................... 41,128 47,675
============= =========
Weighted average shares and
equivalents outstanding........... 41,310 47,773
============= =========
</TABLE>
- ---------------
(A) Represents AIMCO's unaudited consolidated results of operations for the
three months ended March 31, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997: (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
and (iii) the 1998 Disposition.
(C) Represents the unaudited historical statement of operations of Ambassador
for the three months ended March 31, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform to
AIMCO's Statement of Operations presentation. The Ambassador historical
Statement of Operations excludes an extraordinary loss of $323.
16
<PAGE> 17
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt; and
(iv) the elimination of the minority interest associated with Jupiter I,
L.P.
(E) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Disposition as if they had occurred on January 1, 1997. 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.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITION TOTAL
------------ ----------- -------
<S> <C> <C> <C>
Rental and other property revenues........... $ 2,964 $(98) $ 2,866
Property operating expense................... (1,274) 91 (1,183)
Owned property management expense............ (99) 6 (93)
Depreciation................................. (681) 18 (663)
</TABLE>
(F) 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 1998
Acquisitions.............................................. (1,016)
Repayments on AIMCO's Credit Facility and other indebtedness
with proceeds from the 1998 Disposition and the 1998 Stock
Offerings................................................. 2,271
-------
$(1,255)
=======
</TABLE>
(G) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(H) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 317
Reduction in salaries and benefits.......................... 1,108
Merger related costs........................................ 436
Other....................................................... 577
------
$2,438
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring plan,
approved by AIMCO senior management, assuming that the Ambassador Merger
had occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. 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 date of completion.
(I) Represents the decrease in interest expense of $1,081 related to the
repayment of the Ambassador revolving lines of credit upon consummation of
the Ambassador Merger, offset by an increase in interest expense of $944
related to borrowings under the AIMCO line of credit.
(J) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(K) Represents adjustments to Minority Interest in AIMCO Operating Partnership
assuming the Completed Transactions and the Ambassador Merger had occurred
as of January 1, 1997. On a pro forma
17
<PAGE> 18
basis, without giving effect to the Ambassador Merger, as of March 31,
1998, the minority interest percentage is approximately 12.7%. On a pro
forma basis, giving effect to the Ambassador Merger, as of March 31, 1998,
the minority interest percentage is approximately 11.2%.
(L) Represents the elimination of the preferred stock dividends of Ambassador
upon the conversion of the preferred stock to AIMCO Common Stock.
(M) On a pro forma basis, AIMCO has no variable rate debt. Therefore, an
increase in the interest rate per annum of 0.25% has no effect on net
income or net income per share.
(N) Represents the net income attributable to holders of the AIMCO Class B
Preferred Stock, the AIMCO Class C Preferred Stock, the AIMCO Class D
Preferred Stock, and the AIMCO Class G Preferred Stock as if these stock
offerings had occurred as of January 1, 1997.
(O) Represents AIMCO's equity in earnings in the Unconsolidated Subsidiaries of
$4,068. The combined historical statement of operations of the
unconsolidated subsidiaries for the three months ended March 31, 1998 is
presented below. There were no pro forma adjustments to the statement of
operations for the three months ended March 31, 1998.
18
<PAGE> 19
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS (PRE-MERGER)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
----------
<S> <C>
Rental and other property revenues.......................... $ 3,353
Property operating expenses................................. (1,771)
Owned property management expense .......................... (115)
Depreciation expense........................................ (295)
--------
Income from property operations............................. 1,172
--------
Management fees and other income............................ 21,837
Management and other expenses............................... (12,335)
Amortization................................................ (695)
--------
Income from service company................................. 8,807
--------
Interest expense............................................ (1,649)
Interest income............................................. 272
Minority interest in other partnerships..................... (1,275)
--------
Income from operations...................................... 7,327
Income tax provision........................................ (3,045)
--------
Net income.................................................. $ 4,282
========
Income attributable to preferred stockholders............... $ 4,068
========
Income attributable to common stockholders.................. $ 214
========
</TABLE>
19
<PAGE> 20
PRO FORMA FINANCIAL INFORMATION OF AIMCO
(MERGER)
INTRODUCTION
On March 17, 1998, AIMCO entered into Merger Agreement pursuant to which
Insignia will be merged with and into AIMCO with AIMCO as the survivor. The
Merger Agreement provides that prior to the Merger, Insignia will complete the
Distribution to its stockholders of all of the Holdings Common Stock. Pursuant
to the Indemnification Agreement, Holdings will provide indemnification for
certain liabilities arising under the Merger Agreement.
In the Merger, the Insignia Common Stock will be converted, assuming the
stockholders of AIMCO and Insignia approve the Merger, into the right to receive
an aggregate number of shares of Class E Preferred Stock approximately equal to
$303 million divided by the AIMCO Index Price. In addition to receiving the same
dividends as holders of AIMCO Common Stock, holders of AIMCO Class E Preferred
Stock will be entitled to the Special Dividend of $50 million in the aggregate.
When the Special Dividend is paid in full, the AIMCO Class E Preferred Stock
will automatically convert into AIMCO Common Stock on a one-for-one basis,
subject to antidilution adjustments, if any. In addition, there will remain
outstanding approximately $308 million in indebtedness and other liabilities of
Insignia and its subsidiaries and subsidiaries of AIMCO will assume
approximately $149.5 million of Convertible Securities for a total transaction
value of approximately $811 million. Also, the Merger Agreement provides that
AIMCO is required to propose to acquire (by merger) the outstanding shares of
beneficial interest in IPT (the "IPT Merger"), at a price of at least $13.25 per
IPT share and use its reasonable best efforts to consummate the IPT Merger after
the closing of the Merger, but not earlier than August 15, 1998. IPT is an
approximately 61% owned subsidiary of Insignia; the 39% of the shares of IPT not
owned by Insignia are valued at an aggregate of approximately $152 million,
after considering the effect of the proposed merger of IPT and AMIT (the
"IPT-AMIT Merger"), assuming a value of $13.25 per share. If the Merger is
consummated, AIMCO will assume property management of approximately 192,000
multifamily units which consist of general and limited partnership investments
in 115,000 units and third party management of 77,000 units. IPT owns a 32%
weighted average general and limited partnership interest in approximately
51,000 units.
The following Pro Forma Consolidated Balance Sheet (Merger) of AIMCO as of
March 31, 1998 has been prepared as if each of the following transactions had
occurred as of March 31, 1998: (i) all the transactions discussed in the Pro
Forma Financial Statements (Pre-Merger), appearing elsewhere herein; (ii) the
Merger; (iii) the Distribution, (iv) the IPT-AMIT Merger, (v) the IPT Merger;
and (vi) the transfer of certain assets and liabilities of Insignia to the
Unconsolidated Subsidiaries following the Merger (the "Insignia
Reorganization").
The following Pro Forma Consolidated Statement of Operations (Merger) of
AIMCO for the year ended December 31, 1997 has been prepared as if each of the
following transactions had occurred as of January 1, 1997: (i) all the
transactions discussed in the Pro Forma Financial Statements (Pre-Merger),
appearing elsewhere herein; (ii) the Merger; (iii) the Distribution, (iv) the
IPT-AMIT Merger, (v) the IPT Merger; and (vi) the Insignia Reorganization.
The following Pro Forma Consolidated Statement of Operations (Merger) of
AIMCO for the three months ended March 31, 1998 has been prepared as if each of
the following transactions had occurred as of January 1, 1997: (i) all the
transactions discussed in the Pro Forma Financial Statements (Pre-Merger),
appearing elsewhere herein; (ii) the Merger; (iii) the Distribution, (iv) the
IPT-AMIT Merger, (v) the IPT Merger; and (vi) the Insignia Reorganization.
The following Pro Forma Financial Information (Merger) is based, in part,
on: (i) the audited Consolidated Financial Statements of Insignia for the year
ended December 31, 1997; (ii) the audited Consolidated Financial Statements of
AMIT for the year ended December 31, 1997; (iii) the unaudited Consolidated
Financial Statements of Insignia for the three months ended March 31, 1998; and
(iv) the unaudited Consolidated Financial Statements of AMIT for the three
months ended March 31, 1998. The following Pro Forma Financial Information of
AIMCO (Merger) is also based, in part, on the Pro Forma Financial
20
<PAGE> 21
Information of AIMCO (Pre-Merger), included elsewhere herein. Such pro forma
information is based in part upon: (i) the audited Consolidated Financial
Statements of Ambassador for the year ended December 31, 1997; (ii) the audited
Consolidated Financial Statements of AIMCO for the year ended December 31, 1997;
(iii) the unaudited Consolidated Financial Statements of Ambassador for the
three months ended March 31, 1998; (iv) the unaudited Consolidated Financial
Statements of AIMCO for the three months ended March 31, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, and December 1, 1997.
The following Pro Forma Financial Information of AIMCO (Merger) should be read
in conjunction with such financial statements and notes thereto.
The unaudited Pro Forma Financial Information of AIMCO (Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of Insignia 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
of AIMCO (Merger) may differ from the amounts ultimately determined.
The unaudited Pro Forma Financial Information of AIMCO (Merger) has been
prepared under the assumption that the AIMCO stockholders approved the Merger,
the AIMCO Class E Preferred Stock has been converted to AIMCO Common Stock, the
IPT-AMIT Merger occurs, and the IPT Merger was consummated.
If the stockholders of AIMCO do not approve the Merger, the Merger may
nonetheless be consummated. However, instead of receiving a number of shares of
AIMCO Class E Preferred Stock approximately equal to $303 million divided by the
AIMCO Index price holders of Insignia Common Stock would receive a number of
shares of AIMCO Class E Preferred Stock approximately equal to $203 million
divided by the AIMCO Index Price, and a number of shares of AIMCO Class F
Preferred Stock approximately equal to $100 million divided by the AIMCO Index
Price. In either case, holders of AIMCO Class E Preferred Stock would be
entitled to the Special Dividend. Holders of AIMCO Class F Preferred Stock will
be entitled to receive the greater of (i) the dividends received by holders of
AIMCO Common Stock and (ii) preferred distributions of 10% of the liquidation
value of the AIMCO Class F Preferred Stock, with the preferred return rate
escalating by 1% each year until a 15% annual return is achieved. Upon the
approval by stockholders of AIMCO, the AIMCO Class F Preferred Stock will
convert into AIMCO Common Stock on a one-for-one basis, subject to antidilution
adjustments, if any. The AIMCO Index Price will be the average market price of
AIMCO Common Stock during the 20 NYSE trading days ending five business days
prior to the Merger, subject to a maximum average price of $38.00 per share.
The AIMCO Index Price is not intended to and will not necessarily represent the
fair market value of the AIMCO Class E Preferred Stock or the AIMCO Class F
Preferred Stock.
The following 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.
21
<PAGE> 22
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (MERGER)
AS OF MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
INSIGNIA AIMCO BEFORE INSIGNIA
PRE-MERGER INSIGNIA MERGER INSIGNIA REORGANIZATION AIMCO
PRO FORMA(A) AS ADJUSTED(B) ADJUSTMENTS(C) REORGANIZATION(D) ADJUSTMENTS(E) PRO FORMA
------------ -------------- -------------- ----------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Real estate.................... $2,248,294 $ 31,592 $ 21,153(F) $2,301,039 $ -- $2,301,039
Property held for sale......... 35,824 -- -- 35,824 -- 35,824
Investments in securities...... 5,584 -- 292,297(F)
(292,297)(G) 5,584 -- 5,584
Investments in and notes
receivable from
unconsolidated
subsidiaries................. 88,775 -- -- 88,775 14,206(H) 102,981(J)
Investments in and notes
receivable from
unconsolidated
partnerships................. 247,972 219,036 448,177(F) 915,185 -- 915,185
Mortgage notes receivable...... -- 29,884 -- 29,884 -- 29,884
Cash and cash equivalents...... 41,432 68,952 -- 110,384 (34,754)(I) 75,630
Restricted cash................ 62,134 -- -- 62,134 -- 62,134
Accounts receivable............ 25,782 23,419 -- 49,201 (22,803)(I) 26,398
Deferred financing costs....... 18,744 764 -- 19,508 -- 19,508
Goodwill....................... 123,634 20,171 (8,543)(F) 135,262 -- 135,262
Property management
contracts.................... -- 94,779 17,270(F) 112,049 (77,410)(H) 34,639
Other assets................... 62,151 30,116 (632)(F) 91,635 (15,904)(I) 75,731
---------- -------- --------- ---------- --------- ----------
$2,960,326 $518,713 $ 477,425 $3,956,464 $(136,665) $3,819,799
========== ======== ========= ========== ========= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Secured notes payable.......... $ 735,387 $ 29,463 $ -- $ 764,850 $ -- $ 764,850
Secured tax-exempt bond
financing.................... 391,957 -- -- 391,957 -- 391,957
Secured short-term financing... 6,777 202,276 (272,325)(F)
152,000(F)
50,000(F)
308,434(F) 447,162 (50,000)(H) 397,162
Accounts payable, accrued and
other liabilities............ 137,073 37,120 20,000(F) 194,193 (69,995)(I) 124,198
Deferred tax liability......... -- 18,802 (18,802)(F)
13,204(F) 13,204 (13,204)(H) --
Security deposits and deferred
income....................... 12,555 3,466 -- 16,021 (3,466)(I) 12,555
---------- -------- --------- ---------- --------- ----------
1,283,749 291,127 252,511 1,827,387 (136,665) 1,690,722
Minority interest in other
partnerships................. 43,768 64,727 (64,727)(F) 43,768 -- 43,768
Minority interest in Operating
Partnership.................. 126,423 -- -- 126,423 -- 126,423
Company-obligated mandatorily
redeemable convertible
securities of a subsidiary
trust........................ -- 144,137 5,363(F) 149,500 -- 149,500
Class A common stock, $.01 par
value........................ 477 353 (353)(F)
77(G) 554 -- 554
Class B common stock, $.01 par
value........................ 2 -- -- 2 -- 2
Class B Cumulative Convertible
Preferred Stock, $.01 par
value........................ 75,000 -- -- 75,000 -- 75,000
Class C Cumulative Preferred
Stock, $.01 par value........ 60,000 -- -- 60,000 -- 60,000
Class D Cumulative Preferred
Stock, $.01 par value........ 105,000 -- -- 105,000 -- 105,000
Class G Cumulative Preferred
Stock, $.01 par value........ 101,250 -- -- 101,250 -- 101,250
Additional paid in capital..... 1,240,302 (6,467) 6,467(F)
292,173(G)
10,750(F) 1,543,225 -- 1,543,225
Notes receivable on common
stock purchases.............. (41,608) -- -- (41,608) -- (41,608)
Distributions in excess of
earnings..................... (33,900) 24,836 (24,836)(F) (33,900) -- (33,900)
Accumulated other comprehensive
losses....................... (137) -- -- (137) -- (137)
---------- -------- --------- ---------- --------- ----------
1,506,386 18,722 284,278 1,809,386 -- 1,809,386
---------- -------- --------- ---------- --------- ----------
$2,960,326 $518,713 $ 477,425 $3,956,464 $(136,665) $3,819,799
========== ======== ========= ========== ========= ==========
</TABLE>
- ---------------
(A) Represents AIMCO's pro forma consolidated financial position as of March
31, 1998, which gives effect to the purchase of two properties for an
aggregate purchase price of $14.7 million, the Ambassador Merger, and the
Class G Preferred Stock Offering. See "Pro Forma Financial Information
(Pre-Merger)."
22
<PAGE> 23
(B) Represents adjustments to reflect the Merger, including the IPT-AMIT
Merger, and the Distribution, as if these transactions had occurred on
March 31, 1998. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
INSIGNIA IPT-AMIT HOLDINGS INSIGNIA AS
HISTORICAL(i) MERGER(ii) DISTRIBUTION(iii) ADJUSTED
------------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Real estate................................... $ 26,003 $ 5,589 $ -- $ 31,592
Property held for sale........................ -- -- -- --
Investments in securities..................... -- -- -- --
Investments in and notes receivable from
unconsolidated subsidiaries................. -- -- -- --
Investments in and notes receivable from
unconsolidated partnerships................. 238,673 -- (19,637) 219,036
Mortgage notes receivable..................... -- 29,884 -- 29,884
Cash and cash equivalents..................... 73,143 10,860 (15,051) 68,952
Restricted cash............................... -- -- -- --
Accounts receivable........................... 151,919 615 (129,115) 23,419
Deferred financing costs...................... 764 -- -- 764
Goodwill...................................... 230,118 -- (209,947) 20,171
Property management contracts................. 141,604 -- (46,825) 94,779
Other assets.................................. 60,586 (138) (30,332) 30,116
-------- ------- --------- --------
$922,810 $46,810 $(450,907) $518,713
======== ======= ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Secured notes payable......................... $ 24,938 $ 4,525 $ -- $ 29,463
Secured tax-exempt bond financing............. -- -- -- --
Secured short-term financing.................. 233,484 -- (31,208) 202,276
Accounts payable, accrued and other
liabilities................................. 166,007 1,737 (130,624) 37,120
Deferred tax liability........................ 18,802 -- -- 18,802
Security deposits and deferred income......... 3,466 -- -- 3,466
-------- ------- --------- --------
446,697 6,262 (161,832) 291,127
Minority interest in other partnerships....... 65,082 -- (355) 64,727
Minority interest in Operating Partnership.... -- -- -- --
Company-obligated mandatorily redeemable
convertible securities of a subsidiary
trust....................................... 144,137 -- -- 144,137
Class A common stock, $.01 par value.......... 313 40 -- 353
Class B common stock, $.01 par value.......... -- -- -- --
Class B Cumulative Convertible Preferred
Stock, $.01 par value....................... -- -- -- --
Class C Cumulative Preferred Stock, $.01 par
value....................................... -- -- -- --
Class D Cumulative Preferred Stock, $.01 par
value....................................... -- -- -- --
Additional paid in capital.................... 228,648 40,508 (275,623) (6,467)
Notes receivable on common stock purchases.... -- -- -- --
Distributions in excess of earnings........... 37,933 -- (13,097) 24,836
Accumulated other comprehensive losses........ -- -- -- --
-------- ------- --------- --------
266,894 40,548 (288,720) 18,722
-------- ------- --------- --------
$922,810 $46,810 $(450,907) $518,713
======== ======= ========= ========
</TABLE>
23
<PAGE> 24
- ---------------
(i) Represents the unaudited consolidated financial position of Insignia as of
March 31, 1998, as reported in Insignia's Quarterly Report on Form 10-Q.
Certain reclassifications have been made to Insignia's historical balance
sheet to conform to AIMCO's balance sheet presentation.
(ii) Represents the historical balance sheet of AMIT, as well as pro forma
adjustments related to the IPT-AMIT Merger. The IPT-AMIT Merger is expected
to close prior to the Merger.
(iii)Represents the distribution of two shares of Holdings Common Stock for each
three shares of Insignia Common Stock to holders of Insignia Common Stock.
(C) Represents the following adjustments occurring as a result of the Merger:
(i) the issuance of 7,690,784 shares of AIMCO Common Stock, based on an
AIMCO Index Price of $38.00 per share, as consideration to holders of
Insignia common stock outstanding as of the date of the Merger; (ii) the
additional purchase price consideration of $10,750 for the Merger resulting
from the Insignia stock options, which will be converted to options to
purchase shares of AIMCO Common Stock; (iii) the IPT Merger; (iv) the
payment of the Special Dividend of $50,000; (v) the assumption of $149,500
of the Convertible Debentures; and (vi) the allocation of the combined
purchase price of Insignia based on the preliminary estimates of relative
fair market value of the assets and liabilities of Insignia.
(D) Represents the effects of AIMCO's acquisition of Insignia immediately after
the Merger. These amounts do not give effect to the Insignia
Reorganization, which includes the transfers of certain assets and
liabilities of Insignia to the combined Unconsolidated Subsidiaries. The
Insignia Reorganization must occur immediately after the Merger in order
for AIMCO to maintain its qualification as a REIT. This column is included
as an intermediate step to assist the reader in understanding the entire
nature of the Merger and related transactions.
(E) Represents adjustments related to the Insignia Reorganization, whereby,
following the Merger, AIMCO will contribute to the combined Unconsolidated
Subsidiaries certain assets and liabilities of Insignia, primarily
management contracts and related working capital assets and liabilities
related to Insignia's third party property management operations. The
adjustments reflect the transfer of assets valued at AIMCO's new basis
resulting from the allocation of the purchase price of Insignia. AIMCO will
receive non-voting preferred stock as consideration in exchange for the net
assets contributed. The net deferred tax liability is assumed by the
Unconsolidated Subsidiaries as it resulted from the assets and liabilities
transferred to the Unconsolidated Subsidiaries.
(F) In connection with the Merger, AIMCO will issue 7,690,784 shares of AIMCO
Common Stock based on an AIMCO Index Price of $38.00 per share, to acquire
the shares of Insignia Common Stock owned by the Insignia stockholders.
The total purchase price of Insignia is $996,138, as follows:
<TABLE>
<S> <C>
Issuance of 7,690,784 shares of AIMCO Common Stock in the
Merger, at $38.00 per share............................ $ 292,250
IPT Merger............................................... 152,000
Assumption of Convertible Debentures..................... 149,500
Assumption of Insignia liabilities as indicated in the
Merger Agreement....................................... 308,434
Transaction costs........................................ 20,000
Generation of deferred tax liability..................... 13,204
Special Dividend......................................... 50,000
Consideration for Insignia Stock Options outstanding..... 10,750
----------
Total.......................................... $ 996,138
==========
</TABLE>
24
<PAGE> 25
The Insignia Stock Options will be assumed by AIMCO in the Merger. The
consideration for the Insignia stock options was calculated based on the
exercise of Insignia Stock Options at a value of $25 per share.
The purchase price was allocated to the various assets of Insignia acquired
in the Merger, as follows:
<TABLE>
<S> <C>
Purchase price........................................... $ 996,138
Historical basis of Insignia's assets acquired, adjusted
for the IPT -- AMIT Merger and the Distribution........ (518,713)
----------
Step-up to record the fair value of Insignia's assets
acquired............................................... $ 477,425
==========
</TABLE>
This step-up was applied to Insignia's assets as follows:
<TABLE>
<S> <C>
Real estate............................................... $ 21,153
Investment in real estate partnerships.................... 448,177
Management contracts...................................... 17,270
Reduction in value of goodwill............................ (8,543)
Reduction in value of other assets........................ (632)
--------
Total........................................... $477,425
========
</TABLE>
The fair value of Insignia's assets, primarily the real estate and
management contracts, was calculated based on estimated future cash flows
of the underlying assets.
As of March 31, 1998, Insignia's stockholder's equity, as adjusted for the
IPT -- AMIT Merger and the Distribution, was $18,722, which is detailed as
follows:
<TABLE>
<S> <C>
Common stock............................................... $ 353
Additional paid-in capital................................. (6,467)
Retained earnings.......................................... 24,836
-------
Total............................................ $18,722
=======
</TABLE>
Upon completion of the Merger, the entire amount of the stockholder's
equity is eliminated.
The increase of $5,363 in Convertible Debentures relates to the elimination
of unamortized issuance discount.
In addition, the minority interest in other partnerships of Insignia of
$64,727 will be eliminated upon the IPT Merger.
(G) Represents the issuance of 7,690,784 shares of AIMCO Common Stock to
Insignia Stockholders, in exchange for all the shares of Insignia Common
Stock.
In accordance with the Merger Agreement, AIMCO will issue a number of
shares of AIMCO Class E Preferred Stock, approximately equal to $303
million divided by the AIMCO Index Price, provided that the AIMCO
Stockholders approve the Merger. Each share of AIMCO Class E Preferred
Stock will automatically convert to one share of AIMCO Common Stock upon
the payment of the Special Dividend. As such, for the purpose of preparing
the pro forma financial statements, AIMCO's management believes that the
AIMCO Class E Preferred Stock is substantially the same as AIMCO Common
Stock, and that the fair value of the AIMCO Class E Preferred Stock
approximates the fair value of the AIMCO Common Stock. Upon the payment of
the Special Dividend and the conversion of the AIMCO Class E Preferred
Stock to AIMCO Common Stock, the former Insignia stockholders will own
approximately 14.5% of the AIMCO Common Stock. The Special Dividend is
intended to represent a distribution in an amount at least equal to the
earnings and profits of Insignia at the time of the Merger, to which AIMCO
succeeds.
In the event that the AIMCO stockholders do not approve the Merger, AIMCO
will issue a number of shares of AIMCO Class E Preferred Stock
approximately equal to $203 million divided by the AIMCO Index Price and a
number of shares of AIMCO Class F Preferred Stock approximately equal to
$100 million divided by the AIMCO Index Price. The terms and rights of the
AIMCO Class E Preferred Stock are the same as those stated above. The
holders of the AIMCO Class F Preferred Stock will be entitled to receive
the greater of (i) the same dividends as holders of AIMCO Common Stock and
(ii) preferred cash dividends of 10% of the liquidation value of the AIMCO
Class F Preferred Stock, with the preferred dividend rate escalating by 1%
each year until a 15% dividend rate is achieved. AIMCO's management
believes that
25
<PAGE> 26
the preferred dividend will compensate the holders of the AIMCO Class F
Preferred Stock for the lack of convertibility to AIMCO Common Stock, the
lack of voting rights, and the uncertainty as to the liquidity of the AIMCO
Class F Preferred Stock. For the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the fair value of
the AIMCO Class F Preferred Stock approximates the fair value of the AIMCO
Common Stock.
The AIMCO Index Price will be the average market price of AIMCO Common
Stock during the 20 NYSE trading days ending five business days prior to
the Merger, subject to a maximum average price of $38.00 per share. The
AIMCO Index Price is not intended to and will not necessarily represent the
fair market value of the AIMCO Class E Preferred Stock or the AIMCO Class F
Preferred Stock.
(H) Represents the increase in AIMCO's investment in Unconsolidated
Subsidiaries to reflect the contribution of property management contracts,
including the related deferred tax liability, and notes payable to the
Unconsolidated Subsidiaries. These assets and liabilities are valued at
AIMCO's new basis resulting from the allocation of the purchase price of
Insignia.
(I) Represents certain assets and liabilities of Insignia, primarily related to
the management operations of Insignia, contributed by AIMCO to the
Unconsolidated Subsidiaries, valued at AIMCO's new basis resulting from the
allocation of the purchase price of Insignia.
(J) Amount represents notes receivable from the Unconsolidated Subsidiaries of
$50,000 and equity in the Unconsolidated Subsidiaries of $52,981. The
combined pro forma balance sheet of the Unconsolidated Subsidiaries as of
March 31, 1998 is presented below, which reflects the effects of the
Merger, the IPT Merger and the Insignia Reorganization as if such
transactions had occurred as of March 31, 1998.
26
<PAGE> 27
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (MERGER)
AS OF MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRE-MERGER INSIGNIA INSIGNIA
PRO FORMA(i) REORGANIZATION(ii) PRO FORMA
------------ ------------------ ---------
<S> <C> <C> <C>
ASSETS
Real estate........................................... $ 20,908 $ -- $ 20,908
Cash and cash equivalents............................. 4,354 34,754 (iii) 39,108
Restricted cash....................................... 4,925 -- 4,925
Management contracts.................................. 50,514 77,410(iv) 127,924
Accounts receivable................................... -- 22,803 (iii) 22,803
Deferred financing costs.............................. 3,194 -- 3,194
Goodwill.............................................. 44,799 -- 44,799
Other assets.......................................... 31,011 15,904 (iii) 46,915
-------- -------- --------
$159,705 $150,871 $310,576
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable................................. $ 72,269 $ -- $ 72,269
Secured short-term financing.......................... -- 50,000(iv) 50,000
Accounts payable, accrued and other liabilities....... 50,521 69,995 (iii) 120,516
Security deposits and deferred income................. 312 3,466 (iii) 3,778
Deferred tax liability................................ -- 13,204(iv) 13,204
-------- -------- --------
123,102 136,665 259,767
Common stock.......................................... 2,298 748(v) 3,046
Preferred stock....................................... 38,775 14,206(iv) 52,981
Retained earnings..................................... (4,351) -- (4,351)
Notes receivable on common stock purchases............ (119) (748)(v) (867)
-------- -------- --------
36,603 14,206 50,809
-------- -------- --------
$159,705 $150,871 $310,576
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries pro forma consolidated financial
position after giving effect to the Ambassador Merger. See "Pro Forma
Financial Information of AIMCO (Pre-Merger)."
(ii) Represents adjustments related to the Insignia Reorganization, whereby,
following the Merger, AIMCO will contribute to the combined Unconsolidated
Subsidiaries certain assets and liabilities of Insignia, primarily related
to the management operations owned by Insignia. The adjustments reflect the
transfer of assets valued at AIMCO's new basis resulting from the
allocation of the purchase price of Insignia. AIMCO will receive non-voting
preferred stock as consideration in exchange for the net assets
contributed. The net deferred tax liability is assumed by the
Unconsolidated Subsidiaries as it resulted from the assets and liabilities
transferred to the Unconsolidated Subsidiaries.
(iii)Represents certain assets and liabilities of Insignia, primarily related to
the management operations of Insignia, contributed by AIMCO to the
Unconsolidated Subsidiaries, valued at AIMCO's new basis resulting from the
allocation of the purchase price of Insignia.
(iv) Represents the transfer of management contracts, and the establishment of
the related 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 of the Unconsolidated Subsidiaries. The primary
component of the deferred tax liability is the difference between the new
basis of the property management contracts, as a result of the allocation
of the purchase price of Insignia, and the historical tax basis.
(v) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
27
<PAGE> 28
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INSIGNIA INSIGNIA
PRE-MERGER INSIGNIA AS MERGER REORGANIZATION AIMCO
PRO FORMA(A) ADJUSTED(B) ADJUSTMENTS(C) ADJUSTMENTS(D) PRO FORMA
------------ ----------- -------------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $ 388,823 $ 6,912 $ -- $ -- $ 395,735
Property operating expenses....... (163,304) (3,307) -- -- (166,611)
Owned property management
expense......................... (10,356) -- -- -- (10,356)
Depreciation...................... (82,621) (966) (1,321)(E) -- (84,908)
--------- -------- -------- -------- ---------
Income from property operations... 132,542 2,639 (1,321) -- 133,860
--------- -------- -------- -------- ---------
Management fees and other
income.......................... 21,750 94,330 -- (74,404)(K) 41,676
Management and other expenses..... (15,304) (57,615) -- 49,236(K) (23,683)
Corporate overhead allocation..... (588) -- -- -- (588)
Amortization...................... (7,201) (16,768) (24,548)(F) 28,922(L) (19,595)
--------- -------- -------- -------- ---------
Income from service company
business........................ (1,343) 19,947 (24,548) 3,754 (2,190)
Minority interest in service
company business................ (10) -- -- -- (10)
--------- -------- -------- -------- ---------
AIMCO's share of income from
service company business........ (1,353) 19,947 (24,548) 3,754 (2,200)
--------- -------- -------- -------- ---------
General and administrative
expenses........................ (6,421) (21,199) -- 6,392(K) (21,228)
Interest expense.................. (85,552) (9,035) (17,737)(G) 3,725(K) (108,599)(O)
Interest income................... 10,576 10,967 -- -- 21,543
Minority interest in other
partnerships.................... 1,657 (12,871) 1,170(H) -- (10,044)(P)
Equity in income (losses) of
unconsolidated partnerships..... (10,057) 12,515 (25,357)(I) -- (22,899)
Equity in earnings of
Unconsolidated Subsidiaries..... 10,426 -- -- (8,082)(M) 2,344(R)
--------- -------- -------- -------- ---------
Income (loss) from operations..... 51,818 2,963 (67,793) 5,789 (7,223)
Income tax provision.............. -- 1,701 (1,701)(J) -- --
Gain on sale of property.......... -- 80 (80) -- --
--------- -------- -------- -------- ---------
Income (loss) before minority
interest in AIMCO Operating
Partnership..................... 51,818 4,744 (69,574) 5,789 (7,223)
Minority interest in AIMCO
Operating Partnership........... (2,600)(N) -- 6,314(N) -- 3,714(O)
--------- -------- -------- -------- ---------
Net income (loss)................. 49,218 4,744 (63,260) 5,789 (3,509)(O)
Income (loss) allocable to
preferred stockholders.......... 29,424 -- -- -- 29,424(Q)
--------- -------- -------- -------- ---------
Income (loss) allocable to common
stockholders.................... $ 19,794 $ 4,744 $(63,260) $ 5,789 $ (32,933)(O)
========= ======== ======== ======== =========
Basic earnings (loss) per common
share........................... $ 0.42 $ (0.61)(O)
========= =========
Diluted earnings per common
share........................... $ 0.42 $ (0.61)(O)
========= =========
Weighted average shares
outstanding..................... 46,685 54,377
========= =========
Weighted average shares and
equivalents outstanding......... 47,066 55,221
========= =========
</TABLE>
- ---------------
(A) Represents AIMCO's pro forma consolidated statement of operations for the
year ended December 31, 1997, which gives effect to (i) the 1997
Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the 1998 Stock Offerings; (v) the 1998 Acquisitions; (vi) the 1998
Disposition; (vii) the NHP Real Estate Companies Purchase; (viii) the NHP
Merger; (ix) the NHP Reorganization; and (x) the Ambassador Merger, as if
these transactions had occurred on January 1, 1997. See "Pro Forma
Financial Information of AIMCO (Pre-Merger)."
28
<PAGE> 29
(B) Represents adjustments to reflect the Merger, the IPT-AMIT Merger and the
Distribution as if these transactions had occurred on January 1, 1997.
These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
INSIGNIA IPT-AMIT HOLDINGS INSIGNIA
HISTORICAL(i) MERGER(ii) DISTRIBUTION(iii) AS ADJUSTED
------------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues......................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses................................ (3,251) (56) -- (3,307)
Owned property management expense.......................... -- -- -- --
Depreciation............................................... (966) -- -- (966)
--------- ------- --------- --------
Income from property operations............................ 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other income........................... 389,626 -- (295,296) 94,330
Management and other expenses.............................. (315,653) -- 258,038 (57,615)
Corporate overhead allocation.............................. -- -- -- --
Amortization............................................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company business....................... 42,264 (303) (22,014) 19,947
Minority interest in service company business.............. -- -- -- --
--------- ------- --------- --------
AIMCO's share of income from service company business...... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative expenses........................ (20,435) (1,351) 587 (21,199)
Interest expense........................................... (9,353) -- 318 (9,035)
Interest income............................................ 4,571 6,853 (457) 10,967
Minority interest in other partnerships.................... (12,448) (382) (41) (12,871)
Equity in income (losses) of unconsolidated partnership.... 10,027 2,639 (151) 12,515
Equity in earnings of Unconsolidated
Subsidiary............................................... -- -- -- --
--------- ------- --------- --------
Income (loss) from operations.............................. 17,055 7,666 (21,758) 2,963
Income tax provision....................................... (6,822) (180) 8,703 1,701
Gain on sale of property................................... -- 80 -- 80
--------- ------- --------- --------
Income (loss) before minority interest in Operating
Partnership.............................................. 10,233 7,566 (13,055) 4,744
Minority interest in Operating Partnership................. -- -- -- --
--------- ------- --------- --------
Net income (loss).......................................... 10,233 7,566 (13,055) 4,744
Income (loss) allocable to preferred stockholders.......... -- -- -- --
--------- ------- --------- --------
Income (loss)allocable to common stockholders.............. $ 10,233 $ 7,566 $ (13,055) $ 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of Insignia for
the year ended December 31, 1997, as reported in Insignia's Annual Report
on Form 10-K. Certain reclassifications have been made to Insignia's
historical statement of operations to conform to AIMCO's statement of
operations presentation.
(ii) Represents the historical statement of operations of AMIT, as well as pro
forma adjustments related to the IPT-AMIT Merger. The IPT-AMIT Merger is
expected to close prior to the Merger.
(iii)Represents the distribution of two shares of Holdings Common Stock for each
three shares of Insignia Common Stock to holders of Insignia Common Stock.
(C) Represents the following adjustments occurring as a result of the Merger:
(i) the incremental depreciation of the purchase price adjustment related
to consolidated real estate and investments in real estate partnerships;
(ii) the amortization of goodwill and property management contracts
resulting from the Merger; (iii) the increase in interest expense resulting
from the net increase in debt; (iv) the elimination of the income tax
provision; and (v) the elimination of the minority interest associated with
IPT.
(D) Represents adjustments related to the Insignia Reorganization, whereby,
following the Merger, AIMCO will contribute to the Unconsolidated
Subsidiaries certain assets and liabilities of Insignia, primarily
management contracts and related working capital assets and liabilities
related to Insignia's third party management operations. The adjustments
reflect the related revenues and expenses primarily related to the
management operations owned by Insignia, with additional
29
<PAGE> 30
amortization recorded related to AIMCO's new basis resulting from the
allocation of the purchase price of Insignia.
(E) Represents incremental depreciation related to the consolidated real estate
assets purchased in connection with the Merger, based on AIMCO's new basis
resulting from the allocation of the purchase price of Insignia. Buildings
and improvements are depreciated on the straight-line method over a period
of 20 years, and furniture and fixtures are depreciated on the
straight-line method over a period of 5 years.
(F) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of Insignia,
based on AIMCO's new basis resulting from the allocation of the purchase
price of Insignia, including amortization of property management contracts
of $37,350, amortization of goodwill of $544 and depreciation of furniture,
fixtures, and equipment of $3,119, less Insignia's historical depreciation
and amortization of $16,465. Property management contracts are amortized
using the straight-line method over a period of three years. Furniture,
fixtures, and equipment are depreciated using the straight-line method over
a period of three years. Goodwill is amortized using the straight-line
method over 20 years. The allocation of the purchase price of Insignia is
preliminary; therefore the amount and life of goodwill are subject to
change as additional information is obtained and the purchase price
allocation is finalized.
(G) Represents the increase in interest expense of $3,725 related to borrowings
to pay the Special Dividend of $50 million to holders of the AIMCO Class E
Preferred Stock; $11,324 related to borrowings of $152 million to
consummate the IPT Merger; and (iii) $2,688 related to borrowings of
$36,109 for the additional liabilities of Insignia assumed by AIMCO. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%
(H) Represents elimination of minority interest in IPT resulting from the IPT
Merger.
(I) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of Insignia, based on an estimated average life of 20 years, and
based on AIMCO's new basis resulting from the allocation of the purchase
price of Insignia.
(J) Represents the reversal of Insignia's income tax provision.
(K) Represents the historical income and expenses associated with certain
assets and liabilities of Insignia that will be contributed to the
Unconsolidated Subsidiaries, primarily related to the management operations
of Insignia.
(L) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that will be contributed
to the Unconsolidated Subsidiaries, primarily related to the management
operations of Insignia, based on AIMCO's new basis resulting from the
allocation of the purchase price of Insignia.
(M) Represents AIMCO's equity in earnings of the Unconsolidated Subsidiaries.
(N) Represents adjustments to Minority Interest in Operating Partnership
assuming the Merger had occurred as of January 1, 1997. On a pro forma
basis, without giving effect to the Merger, as of December 31, 1997, the
minority interest percentage is approximately 11.6%. On a pro forma basis,
giving effect to the Insignia Merger, as of December 31, 1997, the minority
interest percentage is approximately 10.1%.
30
<PAGE> 31
(O) The following table presents the net impact to pro forma net loss
applicable to holders of AIMCO Common Stock and net loss per share of AIMCO
Common Stock assuming the interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense.............................. $ 1,098
========
Loss before minority interest in Operating Partnership.... $ (8,321)
Minority interest in Operating Partnership................ 3,825
--------
Net loss.................................................. $ (4,496)
========
Net loss attributable to common stockholders.............. $(33,920)
========
Basic loss per share...................................... $ (0.62)
========
Diluted loss per share.................................... $ (0.62)
========
</TABLE>
(P) This amount includes distributions of $10,003 related to be Convertible
Debentures. The holders of the Convertible Debentures have the right to
convert each debenture into 1.8868 shares of Insignia Common Stock. In the
event that all of the holders of the $149,500 principal amount of
Convertible Debentures converted to Insignia Common Stock prior to the
Merger, the total number of shares of AIMCO Class E Preferred Stock and
AIMCO Class F Preferred Stock issued in the Merger would be approximately
equal to $452,500 ($303,000 for outstanding Insignia Common Stock and
$149,500 for the conversion of the debentures) divided by the AIMCO Index
Price. If the conversion were to occur, the net loss attributable to common
stockholders would decrease to $(24,109) and the net loss per share would
decrease to $(0.41).
(Q) Represents the net income attributable to holders of the AIMCO Class B
Preferred Stock, the AIMCO Class C Preferred Stock, the AIMCO Class D
Preferred Stock and the AIMCO Class G Preferred Stock as if these stock
offerings had occurred as of January 1,1997. In the event the AIMCO
stockholders do not approve the Merger, AIMCO will issue a number of shares
of AIMCO Class F Preferred Stock approximately equal to $100 million
divided by the AIMCO Index Price. The holders of the AIMCO Class F
Preferred Stock will be entitled to receive the greater of (i) the same
dividends as holders of AIMCO Common Stock and (ii) preferred cash
dividends of 10% of the liquidation value of the AIMCO Class F Preferred
Stock, with the preferred dividend rate escalating by 1% each year until a
15% dividend rate is achieved. If the AIMCO Class F Preferred Stock is
issued, dividends attributable to the holders of the AIMCO Class F
Preferred Stock will be $10,000 for 1997, the net loss attributable to
common stockholders will increase to $(41,920) and the net loss per common
share will increase to $(0.81).
(R) Represents AIMCO's equity in losses in the Unconsolidated Subsidiaries of
$(2,406), offset by the elimination of intercompany interest expense of
$4,750. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the NHP Merger, the NHP
Reorganization, the Ambassador Merger, the Merger, the IPT Merger and the
Insignia Reorganization as if these transactions had occurred as of January
1, 1997.
31
<PAGE> 32
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRE-MERGER INSIGNIA INSIGNIA
PRO FORMA(i) REORGANIZATION(ii) PRO FORMA
------------ ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................ $ 12,565 $ -- $ 12,565
Property operating expenses....................... (6,886) -- (6,886)
Owned property management expense................. (625) -- (625)
Depreciation...................................... (1,805) -- (1,805)
-------- -------- --------
Income from property operations................... 3,249 -- 3,249
-------- -------- --------
Management fees and other income.................. 65,768 74.404(iii) 140,172
Management and other expenses..................... (32,136) (49,236)(iii) (81,372)
Amortization...................................... (7,743) (28,922)(iv) (36,665)
-------- -------- --------
Income from service company business.............. 25,889 (3,754) 22,135
-------- -------- --------
General and administrative expenses............... (6,573) (6,392)(iii) (12,965)
Interest expense.................................. (11,907) (3,725)(iii) (15,632)
Interest income................................... 853 -- 853
Minority interest in other partnerships........... (621) -- (621)
-------- -------- --------
Income (loss) from operations..................... 10,890 (13,871) (2,981)
Income tax provision.............................. (4,915) 5,364(v) 449
-------- -------- --------
Net income (loss)................................. $ 5,975 $ (8,507) $ (2,532)
======== ======== ========
Income (loss) allocable to preferred
stockholders.................................... $ 5,676 $ (8,082) $ (2,406)
======== ======== ========
Income (loss) allocable to common stockholders.... $ 299 $ (425) $ (126)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries pro forma consolidated results
of operations after giving effect to the Ambassador Merger. See "Pro Forma
Financial Information of AIMCO (Pre-Merger)."
(ii) Represents adjustments related to the Insignia Reorganization, whereby,
following the Merger, AIMCO will contribute to the Unconsolidated
Subsidiaries certain assets and liabilities of Insignia, primarily related
to the management operations owned by Insignia. The adjustments reflect the
related revenues and expenses primarily related to the management
operations owned by Insignia, with additional amortization recorded related
to AIMCO's new basis resulting from the allocation of the purchase price of
Insignia.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of Insignia that were contributed to the
Unconsolidated Subsidiaries, primarily related to the management operations
of Insignia.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that will be contributed
to the Unconsolidated Subsidiaries, primarily related to the management
operations of Insignia, based on AIMCO's new basis resulting from the
allocation of the purchase price of Insignia.
(v) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
32
<PAGE> 33
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE QUARTER ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INSIGNIA INSIGNIA
PRE-MERGER INSIGNIA MERGER REORGANIZATION AIMCO
PRO FORMA(A) AS ADJUSTED(B) ADJUSTMENTS(C) ADJUSTMENTS(D) PRO FORMA
------------ -------------- -------------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues..... $ 99,084 $ 1,858 $ -- $ -- $ 100,942
Property operating expenses............ (37,005) (890) -- -- (37,895)
Owned property management expense...... (2,225) -- -- -- (2,225)
Depreciation........................... (20,729) (271) (378)(E) -- (21,378)
-------- -------- -------- -------- ---------
Income from property operations........ 39,125 697 (378) -- 39,444
-------- -------- -------- -------- ---------
Management fees and other income....... 4,821 24,826 -- (19,845)(L) 9,802
Management and other expenses.......... (1,961) (15,888) -- 9,257(L) (8,592)
Corporate overhead allocation.......... (147) -- -- (147)
Amortization........................... (1,720) (4,846) (5,428)(F) 7,231(M) (4,763)
-------- -------- -------- -------- ---------
Income from service company business... 993 4,092 (5,428) (3,357) (3,700)
Minority interest in service company
business............................. (1) -- -- -- (1)
-------- -------- -------- -------- ---------
AIMCO's share of income from service
company business..................... 992 4,092 (5,428) (3,357) (3,701)
-------- -------- -------- -------- ---------
General and administrative expenses.... (1,974) (3,134) 2,036(G) 690(L) (2,382)
Interest expense....................... (20,937) (4,096) (4,435)(H) 931(L) (28,537)(P)
Interest income........................ 6,076 2,033 -- 8,109
Minority interest in other
partnerships......................... (635) (3,808) 804(I) (3,639)
Equity in losses of unconsolidated
partnerships......................... (683) 3,669 (5,125)(J) (2,139)(Q)
Equity in earnings of Unconsolidated
Subsidiaries......................... 4,068 -- -- 780(N) 4,848(S)
-------- -------- -------- -------- ---------
Income (loss) from operations.......... 26,032 (547) (12,526) (956) 12,003
Income tax provision................... -- 688 (688)(K) --
Income (loss) before minority interest
in AIMCO Operating Partnership....... 26,032 141 (13,214) (956) 12,003
Minority interest in AIMCO Operating
Partnership.......................... (2,092)(O) -- 1,632(O) (460)(P)
-------- -------- -------- -------- ---------
Net income (loss)...................... 23,940 141 (11,582) (956) 11,543(P)
Income (loss) attributable to preferred
stockholders......................... 7,287 -- -- 7,287(R)
-------- -------- -------- -------- ---------
Income (loss) attributable to common
stockholders......................... $ 16,653 $ 141 $(11,582) $ (956) $ 4,256(P)
======== ======== ======== ======== =========
Basic earnings per share............... $ 0.35 $ 0.08(P)
======== =========
Diluted earnings per share............. $ 0.35 $ 0.08(P)
======== =========
Weighted average shares outstanding.... 47,675 55,367
======== =========
Weighted average shares and equivalents
outstanding.......................... 47,773 55,928
======== =========
</TABLE>
- ---------------
(A) Represents AIMCO's pro forma consolidated statement of operations for the
three months ended March 31, 1998, which gives effect to (i) the 1998 Stock
Offerings; (ii) the 1998 Acquisitions; (iii) the 1998 Disposition; and (iv)
the Ambassador Merger, as if these transactions had occurred on January 1,
1997. See "Pro Forma Financial Information of AIMCO (Pre-Merger)."
33
<PAGE> 34
(B) Represents adjustments to reflect the Merger, the IPT-AMIT Merger, and
the Distribution as if these transactions had occurred on January 1,
1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
INSIGNIA IPT-AMIT HOLDINGS INSIGNIA
HISTORICAL(I) MERGER(II) DISTRIBUTION(III) AS ADJUSTED
------------- ---------- ----------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues............ $ 1,771 $ 87 $ -- $ 1,858
Property operating expenses................... (890) -- -- (890)
Owned property management expense............. -- -- -- --
Depreciation.................................. (271) -- -- (271)
--------- ---- --------- --------
Income from property operations............... 610 87 -- 697
--------- ---- --------- --------
Management fees and other income.............. 127,345 -- (102,519) 24,826
Management and other expenses................. (106,846) -- 90,958 (15,888)
Corporate overhead allocation................. -- -- -- --
Amortization.................................. (10,010) (20) 5,184 (4,846)
--------- ---- --------- --------
Income from service company business.......... 10,489 (20) (6,377) 4,092
Minority interest in service company
business.................................... -- -- -- --
--------- ---- --------- --------
AIMCO's share of income from service company
business.................................... 10,489 (20) (6,377) 4,092
--------- ---- --------- --------
General and administrative expenses........... (3,896) (56) 818 (3,134)
Interest expense.............................. (4,478) -- 382 (4,096)
Interest income............................... 1,342 973 (282) 2,033
Minority interest in other partnerships....... (3,774) -- (34) (3,808)
Equity in losses of unconsolidated
partnerships................................ 3,193 476 3,669
--------- ---- --------- --------
Income (loss) from operations................. 3,486 984 (5,017) (547)
Income tax provision.......................... (1,569) -- 2,257 688
--------- ---- --------- --------
Income (loss) before minority interest in
Operating Partnership....................... 1,917 984 (2,760) 141
Minority interest in Operating Partnership.... -- -- -- --
--------- ---- --------- --------
Net income (loss)............................. 1,917 984 (2,760) 141
Income (loss) attributable to preferred
stockholders................................ -- -- -- --
--------- ---- --------- --------
Income (loss) attributable to common
stockholders................................ $ 1,917 $984 $ (2,760) $ 141
========= ==== ========= ========
</TABLE>
- ---------------
(i) Represents the unaudited consolidated results of operations of Insignia for
the three months ended March 31, 1998, as reported in Insignia's Quarterly
Report on Form 10-Q. Certain reclassifications have been made to Insignia's
historical statement of operations to conform to AIMCO's statement of
operations presentation.
(ii) Represents the historical statement of operations of AMIT, as well as pro
forma adjustments related to the IPT-AMIT Merger. The IPT-AMIT Merger is
expected to close prior to the Merger.
(iii)Represents the distribution of two shares of Holdings Common Stock for each
three shares of Insignia Common Stock to holders of Insignia Common Stock.
(C) Represents the following adjustments occurring as a result of the Merger:
(i) the incremental depreciation of the purchase price adjustment related
to consolidated real estate and investments in real estate partnerships;
(ii) the amortization of goodwill and property management contracts
resulting from the Merger; (iii) the increase in interest expense resulting
from the net increase in debt; (iv) the
34
<PAGE> 35
elimination of the income tax provision; and (v) the elimination of the
minority interest associated with IPT.
(D) Represents adjustments related to the Insignia Reorganization, whereby,
following the Merger, AIMCO will contribute to the combined Unconsolidated
Subsidiaries certain assets and liabilities of Insignia, primarily
management contracts and related working capital assets and liabilities
related to Insignia's third party management operations. The adjustments
reflect the related revenues and expenses primarily related to the
management operations owned by Insignia, with additional amortization
recorded related to AIMCO's new basis resulting from the allocation of the
purchase price of Insignia.
(E) Represents incremental depreciation related to the consolidated real estate
assets purchased in connection with the Merger, based on AIMCO's new basis
resulting from the allocation of the purchase price of Insignia. Buildings
and improvements are depreciated on the straight-line method over a period
of 20 years, and furniture and fixtures are depreciated on the
straight-line method over a period of 5 years.
(F) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of Insignia,
based on AIMCO's new basis resulting from the allocation of the purchase
price of Insignia, including amortization of property management contracts
of $9,337, amortization of goodwill of $137 and depreciation of furniture,
fixtures, and equipment of $780, less Insignia's historical depreciation
and amortization of $4,826. Property management contracts are amortized
using the straight-line method over a period of three years. Furniture,
fixtures, and equipment are depreciated using the straight-line method over
a period of three years. Goodwill is amortized using the straight-line
method over 20 years. The allocation of the purchase price of Insignia is
preliminary; therefore the amount and life of goodwill are subject to
change as additional information is obtained and the purchase price
allocation is finalized.
(G) Represents the elimination of merger related expenses recorded by Insignia
during the three months ended March 31, 1998. In connection with the
Merger, certain Insignia executives will receive one-time lump-sum payments
in connection with the termination of their employment and option
agreements. The total of these lump sum payments is estimated to be
approximately $50,000.
(H) Represents the increase in interest expense of $931 related to borrowings
to pay the Special Dividend to holders of the AIMCO Class E Preferred
Stock; $2,831 related to borrowings of $152 million to consummate the IPT
Merger; and (iii) $673 related to borrowings of $36,109 for the additional
liabilities of Insignia assumed by AIMCO. The interest rate used in the
calculation of interest expense was LIBOR plus 1.75%.
(I) Represents elimination of minority interest in IPT resulting from the IPT
Merger.
(J) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of Insignia, based on an estimated average life of 20 years, and
based on AIMCO's new basis resulting from the allocation of the purchase
price of Insignia.
(K) Represents the reversal of Insignia's income tax provision.
(L) Represents the historical income and expenses associated with certain
assets and liabilities of Insignia that will be contributed to the
Unconsolidated Subsidiaries, primarily related to the management operations
of Insignia.
(M) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that will be contributed
to the Unconsolidated Subsidiaries, primarily related to the management
operations of Insignia, based on AIMCO's new basis resulting from the
allocation of the purchase price of Insignia.
(N) Represents AIMCO's equity in earnings of the Unconsolidated Subsidiaries.
(O) Represents adjustments to Minority Interest in AIMCO Operating Partnership
assuming the Merger had occurred as of January 1, 1997. On a pro forma
basis, without giving effect to the Merger, as of March 31, 1998, the
minority interest percentage is approximately 11.2%. On a pro forma basis,
giving effect to the Merger, as of March 31, 1998, the minority interest
percentage is approximately 9.8%.
35
<PAGE> 36
(P) 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>
<S> <C>
Increase in interest........................................ $ 271
=======
Income before minority interest in AIMCO Operating
Partnership............................................... $11,732
=======
Minority interest in AIMCO Operating Partnership............ (434)
=======
Net income.................................................. $11,298
=======
Net income attributable to common stockholders.............. $ 4,011
=======
Basic income per share...................................... $ 0.07
=======
Diluted income per share.................................... $ 0.07
=======
</TABLE>
(Q) This amount includes distributions of $2,510 related to the Convertible
Debentures. The holders of the Convertible Debentures have the right to
convert each debenture into 1.8868 shares of Insignia Common Stock. In the
event that all of the holders of $149,500 principal amount of Convertible
Debentures converted to Insignia Common Stock prior to the Merger the total
number of shares of AIMCO Class E Preferred Stock and AIMCO Class F
Preferred Stock issued in the Merger would be approximately equal to
$452,500 ($303,000 for outstanding Insignia Common Stock and $149,500 for
the conversion of the debentures) divided by the AIMCO Index Price. If
this conversion were to occur, the net income attributable to common
stockholders would increase to $6,563 and the net income per common share
would increase to $0.11.
(R) Represents the net income attributable to holders of the AIMCO Class B
Preferred Stock, the AIMCO Class C Preferred Stock, the AIMCO Class D
Preferred Stock and the AIMCO Class G Preferred Stock as if these stock
offerings had occurred as of January 1, 1997. In the event the AIMCO
stockholders do not approve the Merger, AIMCO will issue a number of shares
of AIMCO Class F Preferred Stock approximately equal to $100 million
divided by the AIMCO Index Price. The holders of the AIMCO Class F
Preferred Stock will be entitled to receive the greater of (i) the same
dividends as holders of AIMCO Common Stock and (ii) preferred cash
dividends of 10% of the liquidation value of the AIMCO Class F Preferred
Stock, with the preferred dividend rate escalating by 1% each year until a
15% dividend rate is achieved. If the AIMCO Class F Preferred Stock is
issued, the dividends attributable to the holders of the AIMCO Class F
Preferred Stock will be $2,750 for the three months ended March 31, 1998,
the net income attributable to common stockholders will decrease to $1,774
and the net income per common share will decrease to $0.03.
(S) Represents AIMCO's equity in earnings in the Unconsolidated Subsidiaries of
$4,848. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the three months ended March 31, 1998 is
presented below, which represents the effects of the Ambassador Merger, the
Insignia Merger, the IPT Merger and the Insignia Reorganization as if these
transactions had occurred as of January 1, 1997.
36
<PAGE> 37
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (MERGER)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRE-MERGER INSIGNIA INSIGNIA
PRO FORMA(i) REORGANIZATION(ii) PRO FORMA
------------ ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues.................... $ 3,353 $ -- $ 3,353
Property operating expenses........................... (1,771) -- (1,771)
Owned property management expense .................... (115) -- (115)
Depreciation expense.................................. (295) -- (295)
-------- ------- --------
Income from property operations....................... 1,172 -- 1,172
-------- ------- --------
Management fees and other income...................... 21,837 19,845 (iii 41,682
Management and other expenses......................... (12,335) (9,257)(iii) (21,592)
Amortization.......................................... (695) (7,231)(iv) (7,926)
-------- ------- --------
Income from service company........................... 8,807 3,357 12,164
-------- ------- --------
General and administrative expense.................... -- (690)(iii) (690)
Interest expense...................................... (1,649) (931)(iii) (2,580)
Interest income....................................... 272 -- 272
Minority interest in other partnerships............... (1,275) -- (1,275)
-------- ------- --------
Income from operations................................ 7,327 1,736 9,063
Income tax provision.................................. (3,045) (915)(v) (3,960)
-------- ------- --------
Net income............................................ $ 4,282 $ 821 $ 5,103
======== ======= ========
Income attributable to preferred stockholders......... $ 4,068 $ 780 $ 4,848
======== ======= ========
Income attributable to common stockholders............ $ 214 $ 41 $ 255
======== ======= ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries pro forma consolidated results
of operations after giving effect to the Ambassador Merger. See "Pro Forma
Financial Information of AIMCO (Pre-Merger)."
(ii) Represents adjustments related to the Insignia Reorganization, whereby,
following the Merger, AIMCO will contribute to the combined Unconsolidated
Subsidiaries certain assets and liabilities of Insignia, primarily related
to the management operations owned by Insignia. The adjustments reflect the
related revenues and expenses primarily related to the management
operations owned by Insignia, with additional amortization recorded related
to AIMCO's new basis resulting from the allocation of the purchase price of
Insignia.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of Insignia that were contributed to the
Unconsolidated Subsidiaries, primarily related to the management operations
of Insignia.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that will be contributed
to the Unconsolidated Subsidiaries, primarily related to the management
operations of Insignia, based on AIMCO's new basis resulting from the
allocation of the purchase price of Insignia.
(v) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
37
