<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1998
REGISTRATION NO. 333-
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- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 84-1259577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
--------------------
<TABLE>
<S> <C>
1873 SOUTH BELLAIRE STREET, TERRY CONSIDINE
17TH FLOOR CHAIRMAN OF THE BOARD OF DIRECTORS
DENVER, COLORADO 80222 1873 SOUTH BELLAIRE STREET,
(303) 757-8101 17TH FLOOR
(Address, including zip code, and DENVER, COLORADO 80222
telephone number, including area (303)757-8101
code, of registrant's principal (Address, including zip code,
executive offices) and telephone number, including area
code, of registrant's principal executive
offices)
</TABLE>
--------------------
THOMAS C. JANSON, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If the Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF SHARES AMOUNT TO PROPOSED PROPOSED AMOUNT OF
TO BE REGISTERED BE MAXIMUM MAXIMUM REGISTRATION
REGISTERED OFFERING AGGREGATE FEE
PRICE PER OFFERING PRICE
UNIT (1) (1)
<S> <C> <C> <C> <C>
Class A Common Stock,
par value $.01 per
share . . . . . . . 563,152(2) $36.21875 $20,396,661.50 $6,017.02
</TABLE>
(1) Calculated pursuant to Rule 457(c) of the rules and regulations under the
Securities Act of 1933, as amended, based on the average of the high and low
prices on February 27, 1998.
(2) Plus such additional number of shares of Class A Common Stock as may be
issued pursuant to antidilution adjustment provisions in exchange for
Partnership Common Units of AIMCO Properties, L.P.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
2
<PAGE>
PROSPECTUS
563,152 SHARES
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CLASS A COMMON STOCK
This Prospectus relates to the offer and sale from time to time by certain
selling stockholders (collectively, the "Selling Stockholders") of up to 563,152
shares of Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), of Apartment Investment and Management Company, a Maryland corporation
("AIMCO"), as described herein under "Selling Stockholders." AIMCO will not
receive any proceeds from the sale of such shares of Class A Common Stock.
The Class A Common Stock is listed and traded on the New York Stock
Exchange (the "NYSE") under the symbol "AIV." On February 27, 1998, the last
reported sale price of the Class A Common Stock on the NYSE was $36-7/16 per
share.
The Selling Stockholders may sell the Class A Common Stock offered hereby
from time to time on the NYSE or such other national securities exchange or
automated interdealer quotation system on which shares of Class A Common Stock
are then listed, through negotiated transactions or otherwise at market prices
prevailing at the time of the sale or at negotiated prices. See "Plan of
Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE CLASS A COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is March 2, 1998
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<PAGE>
AVAILABLE INFORMATION
AIMCO is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by AIMCO with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549; 7 World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained at prescribed rates from the
Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material can also be inspected at the New York
Stock Exchange, 20 Broad Street, New York, New York 10005. The Commission
also maintains a site on the World Wide Web at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
AIMCO has filed with the Commission a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Class A Common Stock offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. Such additional information is available for
inspection and copying at the offices of the Commission. Statements contained in
this Prospectus, in any Prospectus Supplement or in any document incorporated by
reference herein or therein as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to, or incorporated by reference in, the Registration Statement, each
such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by AIMCO with the Commission
pursuant to the Exchange Act (File No. 1-13232), are incorporated herein by
reference:
(i) Annual Report on Form 10-K for the year ended December 31, 1996;
(ii) Amendment No. 2 to Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, filed March 10, 1997;
(iii) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 (and Amendments No. 1 and 2 thereto filed August 19, 1997
and October 6, 1997, respectively) and September 30, 1997;
(iv) Current Reports on Form 8-K dated December 19, 1996, February 19,
1997, April 16, 1997 (and Amendments No. 1, 2 and 3 thereto filed April 30,
1997, October 6, 1997, and October 22, 1997, respectively), May 5, 1997, June 3,
1997 (and Amendments No. 1, 2, 3, 4 and 5 thereto filed June 27, 1997, August
14, 1997, September 5, 1997, October 6, 1997, and October 22, 1997,
respectively), August 26, 1997, September 19, 1997, October 15, 1997 (and
Amendment No. 1 thereto filed October 22, 1997), December 15, 1997, January 9,
1998 and February 3, 1998 (and Amendment No. 1 thereto filed February 6, 1998);
and
(v) the description of the Class A Common Stock which is contained in a
Registration Statement on Form 8-A (File No. 1-13232) filed July 19, 1994,
including any amendment or reports filed for the purpose of updating such
description.
All documents filed by AIMCO pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement
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<PAGE>
contained herein (or in the applicable Prospectus Supplement) or in any other
subsequently filed document that is or is deemed to be incorporated by reference
herein modifies or supersedes such previous statement. Any statement so modified
or superseded shall not be deemed to constitute a part of this Prospectus,
except as so modified or superseded.
Copies of all documents which are incorporated herein by reference (other
than the exhibits to such documents, unless such exhibits are specifically
incorporated by reference herein), will be provided without charge to any person
to whom this Prospectus has been delivered, upon request. Requests for such
copies should be directed to Apartment Investment and Management Company, 1873
South Bellaire Street, 17th Floor, Denver, Colorado 80222, Attention: Corporate
Secretary, telephone number (303) 757-8101.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus or
any Prospectus Supplement and, if given or made, such information or
representation must not be relied upon as having been authorized by AIMCO or any
underwriter or agent. This Prospectus and any Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction where, or to any person to whom,
it is unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus or any Prospectus Supplement nor any sale made hereunder or
thereunder shall, under any circumstances, create any implication that the
information herein or therein is correct as of any time subsequent to their
respective dates.
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . 4
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SELLING STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . 19
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
5
<PAGE>
THE COMPANY
GENERAL
Apartment Investment and Management Company ("AIMCO" and, together with
its majority-owned subsidiaries and controlled entities, the "Company") is
the second largest owner and manager of multifamily apartment properties in
the United States, based on apartment unit data compiled by the National
Multi Housing Council as of January 1, 1997, with 192,910 apartment units
owned or under management as of December 31, 1997. As of December 31, 1997,
the Company owned or controlled a total of 39,839 units in 146 apartment
properties (the "Owned Properties"), had an equity interest in 83,484 units
in 516 apartment properties (the "Equity Properties"), and managed 69,587
units in 374 apartment properties (the "Managed Properties," and, together
with the Owned Properties and the Equity Properties, the "AIMCO Properties").
In addition to the Managed Properties, the Company manages all of the Owned
Properties and a majority of the Equity Properties. The AIMCO Properties are
located in 42 states, the District of Columbia and Puerto Rico. The Company
conducts its operations primarily through AIMCO Properties, L.P., a Delaware
limited partnership (the "Operating Partnership"), and its subsidiaries. As
of December 31, 1997, AIMCO held approximately an 88% interest in the
Operating Partnership. AIMCO has elected to be taxed as a real estate
investment trust ("REIT") for Federal income tax purposes.
ChaseMellon Shareholder Services L.L.C. serves as transfer agent and
registrar of the Class A Common Stock. AIMCO's headquarters are located at 1873
South Bellaire Street, 17th Floor, Denver, Colorado 80222, and its telephone
number is (303) 757-8101.
AMBASSADOR MERGER
On December 23, 1997, AIMCO entered into an Agreement and Plan of Merger
(the "Ambassador Merger Agreement") with Ambassador Apartments, Inc., a
Maryland corporation that has elected to be taxed as a REIT ("Ambassador"),
pursuant to which Ambassador will be merged with and into AIMCO with AIMCO
being the surviving corporation (the "Ambassador Merger"). The Ambassador
Merger Agreement also provides that, unless otherwise agreed by the parties,
Ambassador Apartments, L.P., the operating partnership of Ambassador (the
"Ambassador Operating Partnership"), will be merged with and into the
Operating Partnership (the "OP Reorganization") and all outstanding
Ambassador Operating Partnership interests will be converted into Partnership
Common Units of the Operating Partnership ("OP Units") at the "Conversion
Ratio." In the Ambassador Merger Agreement, the common stock, par value $0.01
per share, of Ambassador (the "Ambassador Common Stock") is valued at $21.00
per share. Holders of Ambassador Common Stock will receive for each share an
amount of AIMCO Class A Common Stock equal to the "Conversion Ratio." The
"Conversion Ratio" means the quotient determined by dividing $21.00 by the
"AIMCO Index Price," which is the aggregate of the average of the high and
low sales prices for Class A Common Stock on each of the twenty consecutive
NYSE trading days ending on the fifth NYSE trading day immediately preceding
the closing of the Ambassador Merger, divided by 20. If the AIMCO Index Price
is less than $36 (i.e., the Conversion Ratio is greater than 0.583), then
AIMCO may elect to fix the Conversion Ratio at 0.583 and pay to each holder
of Ambassador Common Stock cash sufficient to provide $21.00 in value for
each share of Ambassador Common Stock. Any outstanding options to purchase
Ambassador Common Stock may be converted, at the election of the option
holder, into cash or options to purchase Class A Common Stock at the
Conversion Ratio. The Ambassador Merger Agreement provides that Ambassador's
outstanding preferred stock, par value $0.01 per share (the "Ambassador
Preferred Stock"), shall be redeemed, subject to the right of holders of
shares of Ambassador Preferred Stock to convert such shares into Ambassador
Common Stock, immediately prior to the Ambassador Merger. Assuming a
conversion ratio of 0.583, AIMCO will issue up to an aggregate of 7,205,739
shares of Class A Common Stock in the Ambassador Merger, based upon the
number of shares of Ambassador Common Stock, options to purchase Ambassador
Common Stock and other securities currently convertible into shares of
Ambassador Common Stock outstanding as of December 31, 1997.
Ambassador is a self-administered, self-managed REIT engaged in the
ownership and management of garden-style apartment properties leased primarily
to middle income tenants. As of December 31, 1997, Ambassador owned 52 apartment
communities with a total of 15,728 units located in Arizona, Colorado, Florida,
Georgia, Illinois, Tennessee and Texas.
Consummation of the Ambassador Merger is subject to the affirmative vote of
the holders of at least two-
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<PAGE>
thirds of the outstanding shares of Ambassador Common Stock, the approval of all
appropriate governmental and regulatory authorities and other customary
conditions.
NHP MERGER
On December 8, 1997, AIMCO completed the acquisition by merger (the "NHP
Merger") of NHP Incorporated, a Delaware corporation ("NHP"). AIMCO issued
4,554,873 shares of Class A Common Stock and paid $0.3 million to NHP
stockholders (other than AIMCO's subsidiary, AIMCO/NHP Properties, Inc.
("ANHI")) as consideration in the NHP Merger. NHP stockholders also received
a distribution from NHP of one-third of a share of the common stock, par
value $.01 per share (the "WMF Common Stock"), of The WMF Group, Ltd., a
Delaware corporation and formerly a wholly-owned subsidiary of NHP ("WMF"),
for each share of NHP Common Stock (the "WMF Spin-Off"). Prior to the NHP
Merger, AIMCO and its subsidiaries acquired in a series of transactions
approximately 53.4% of the outstanding NHP Common Stock (the "NHP Stock
Purchase"). Prior to the NHP Merger, NHP and its subsidiaries provided a
broad array of real estate services nationwide including property management
and asset management. As of September 30, 1997, NHP's management portfolio
(which is included in the AIMCO Properties) included 732 properties
containing 79,208 conventional units and 55,102 "affordable" units (units
benefitting from some form of interest rate or rental subsidy or otherwise
subject to governmental programs aimed at providing low and moderate income
housing) located in 38 states, the District of Columbia and Puerto Rico. In
addition, NHP owned 12 properties containing 2,905 apartment units.
Immediately following the NHP Merger, AIMCO reorganized the assets and
operations of NHP (the "NHP Reorganization"). As a result of the NHP
Reorganization, NHP was liquidated and its subsidiaries were contributed (or
otherwise transferred) to the Operating Partnership or its subsidiaries. As a
result of the NHP Reorganization, most of the former NHP subsidiaries are now
owned by one or more unconsolidated subsidiaries of AIMCO in which certain
officers and/or directors of AIMCO have a controlling interest (with an
economic interest of 5%) (each, an "Unconsolidated Subsidiary"). Ownership of
the 12 properties referred to above that were owned by NHP prior to the NHP
Merger was transferred to AIMCO/NHP Partners, L.P., a limited partnership in
which the Company has a 99% limited partnership interest and an entity owned
by certain officers of AIMCO has a controlling 1% general partnership
interest (the "Unconsolidated Partnership").
NHP REAL ESTATE ACQUISITION
In June 1997, the Company acquired a group of companies (the "NHP Real
Estate Companies") previously owned by NHP that hold general and limited
partnership interests in partnerships that own 534 conventional and
affordable apartment properties (the "NHP Properties") containing 87,659
units, a captive insurance subsidiary and certain related assets (the "NHP
Real Estate Acquisition" and, together with the NHP Stock Purchase and the
NHP Merger, the "NHP Acquisition"). The Company paid aggregate consideration
of $54.8 million in cash and warrants to purchase 399,999 shares of Class A
Common Stock at an exercise price of $36 per share.
The Company is engaged in a reorganization (the "NHP Real Estate
Reorganization") of its interests in the NHP Real Estate Companies, which
will result in the vast majority of the NHP Properties being owned by the
Unconsolidated Partnership. As a consequence of the NHP Real Estate
Reorganization, the results of the NHP Properties transferred to the
Unconsolidated Partnership will not be consolidated with AIMCO's results.
7
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RISK FACTORS
An investment in shares of Class A Common Stock involves various risks. In
addition to general investment risks and those factors set forth elsewhere, or
incorporated by reference, in this Prospectus, potential investors should
consider, among other things, the following factors:
RISKS ASSOCIATED WITH INTEGRATING NHP, AMBASSADOR AND OTHER ACQUIRED BUSINESSES.
The NHP Acquisition constitutes the largest acquisition ever undertaken
by the Company, involving an aggregate purchase price in excess of $450
million. In connection with the Ambassador Merger, the Company will acquire
15,728 units and related assets with an aggregate book value in excess of
$500 million. In addition to the risks typically associated with acquisitions
generally, the integration of NHP's and Ambassador's respective businesses
with the Company's business may place a significant burden on the Company's
management and its systems. See "--Risks of Acquisition and Development
Activities". Such integration is subject to risks commonly encountered in
making such acquisitions, including, among others, loss of key personnel of
NHP or Ambassador, the difficulty associated with assimilating the personnel
and operations of NHP and Ambassador, the disruption of the Company's ongoing
business and acquisition strategy, the difficulty in maintaining uniform
standards, controls, procedures and policies and the impairment of the
Company's reputation. No assurance can be given that the anticipated benefits
from the Ambassador Merger, the NHP Acquisition and the NHP Real Estate
Acquisition will be realized, that the Company will be able to integrate such
businesses successfully or that the Company will not be required to make
expenditures to enhance its systems. Failure of the Company to integrate such
businesses successfully could have a material adverse effect on the Company's
results of operations. Substantial growth in the Company's portfolio as a
result of recent and possible future acquisitions of businesses may involve
similar burdens and risks.
POSSIBLE CONFLICT OF INTERESTS; TRANSACTIONS WITH AFFILIATES
The Company presently manages the Managed Properties through Property Asset
Management Services, L.P., a Delaware limited partnership ("PAMS LP"), Property
Asset Management Services, Inc., a Delaware corporation ("PAMS Inc. and,
together with PAMS LP and former subsidiaries of NHP, the "Management
Subsidiaries"). In order to satisfy certain REIT requirements, the ownership of
PAMS Inc. and certain other Management Subsidiaries consists of the Operating
Partnership holding non-voting preferred stock that represents a 95% economic
interest, and certain officers and/or directors of the Company holding, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. In addition, PAMS LP provides property management services with
respect to certain Managed Properties in which certain officers and/or directors
of the Company have separate ownership interests. The fees for these services
have been negotiated on an individual basis and typically range from 3% to 6% of
gross receipts for the particular property. Although these arrangements were not
negotiated on an arm's-length basis, the Company believes, based on comparisons
to the fees charged by other real estate companies and by PAMS LP with respect
to unaffiliated Managed Properties in comparable locations, that the terms of
such arrangements are fair to the Company.
Upon completion of the NHP Real Estate Reorganization, certain assets of
the NHP Real Estate Companies will be owned by the Unconsolidated
Partnership, in which certain officers and/or directors of AIMCO will have a
controlling interest (with a 1% economic interest). As a result of the NHP
Acquisition, the former operations of NHP are now conducted by the
Unconsolidated Subsidiaries, in which certain officers and/or directors of
AIMCO have a controlling interest (with an economic interest of 5%). As a
result of the ownership interest held by certain officers and/or directors of
AIMCO in PAMS Inc., the Unconsolidated Partnership, the Unconsolidated
Subsidiaries and certain other Management Subsidiaries, certain conflicts of
interest may arise with respect to such persons in transactions involving
such entities or the assets held by such entities. For example, in order to
acquire an interest in such entities, such persons were required to
contribute assets (including promissory notes) to such entities in exchange
therefor. Although the Company believes that such contributions, and any
additional contributions that have been made to maintain a particular
percentage interest, have been made on terms that were fair to the Company
and such entities, such transactions were not made at arm's-length, the
Company in some instances did not obtain independent valuations of such
entities and there can be no assurance that contributions by such individuals
to such entities were made in amounts which reflected the market value of the
associated economic interest. In addition, because AIMCO does not have
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voting control over PAMS Inc., the Unconsolidated Partnership, the
Unconsolidated Subsidiaries, or certain other Management Subsidiaries, AIMCO may
not be able to cause such entities to take actions that would be in the interest
of AIMCO and its stockholders or prevent other actions that are not in the
interest of AIMCO and its stockholders.
On January 31, 1998 AIMCO entered into a Contribution Agreement (the
"Contribution Agreement") with CK Services, Inc. ("CK") and the stockholders of
CK to cause certain assets of AIMCO to be contributed to CK. CK is a corporation
wholly-owned by Terry Considine, AIMCO's Chairman and Chief Executive Officer,
and Peter Kompaniez, AIMCO's President and Vice Chairman. It is AIMCO's intent
to use CK as a vehicle for holding property and performing services that AIMCO
is limited or prohibited from holding or providing due to AIMCO's election to be
taxed as a REIT. AIMCO is finalizing which assets will be contributed to CK. Any
transfer of assets or services to CK will be at market rates and approved by the
independent members of the Board of Directors, and if market rates are difficult
to ascertain, the pricing will favor AIMCO.
SIGNIFICANT INDEBTEDNESS; REFINANCING RISKS
The Company has significant amounts of debt outstanding and,
accordingly, is subject to the risks normally associated with debt financing,
including the risk that its cash flow from operations will be insufficient to
make required payments of principal and interest, the risk that existing
indebtedness, including secured indebtedness, may not be refinanced or that
the terms of any refinancing will not be as favorable as the terms of
existing indebtedness. As of December 31, 1997, 96% of the Company's Owned
Properties and 67% of its total assets, were encumbered by debt, and the
Company had total outstanding indebtedness of $808.5 million, all of which
was secured by Owned Properties and other assets. In January 1998, the
Company replaced the Previous Credit Facility with a new unsecured $50
million revolving credit facility (the "New Credit Facility") with Bank of
America and BankBoston, N.A. In February 1998, the Company entered into a
five-year secured credit facility agreement (the "WMF Credit Facility") with
Washington Mortgage Financial Group, Ltd., which provides for a $50 million
revolving credit facility and conversion of all or a portion of such
revolving credit facility to a base loan facility. (The New Credit Facility
and the WMF Credit Facility, collectively, the "Credit Facility"). The New
Credit Facility restricts, among other things, AIMCO's ability to effect
certain mergers, business consolidations and asset sales, and to incur
indebtedness or liens, imposes minimum net worth requirements, and requires
the Company to comply with certain financial covenants, including maintaining
a ratio of debt to gross asset value of no more than 0.55 to 1, an interest
coverage ratio of at least 2.25 to 1 and a debt service coverage ratio of at
least 2.0 to 1. Additionally, the New Credit Facility limits AIMCO from
distributing more than 80% of funds from operations to AIMCO stockholders,
including holders of Class A Common Stock, or from making any distributions
to stockholders if an event of default exists as a result of a breach of
financial covenants. The WMF Credit Facility, contains similar financial
covenants to the New Credit Facility. Failure to comply with these covenants
could result in adverse consequences to holders of Class A Common Stock by
rendering the Company unable to pay dividends or make redemptions or
resulting in an event of default that may terminate or accelerate the Credit
Facility. Failure by AIMCO to make payments in respect of certain recourse
indebtedness or payments exceeding $15 million under any other debt agreement
(except intracompany agreements), failure to perform or observe covenants or
conditions under an intracompany subordination agreement entered into in
connection with the Credit Facility or under AIMCO's other credit agreements
that results in acceleration or default, among other events, are considered
defaults under the Credit Facility. General Motors Acceptance Corporation has
made 89 loans (the "GMAC Loans"), with an aggregate outstanding principal
balance of $398.6 million at December 31, 1997, to property owning
partnerships of the Company, each of which is secured by the underlying Owned
Property of such partnership. Certain GMAC Loans are cross-collateralized
with certain other GMAC Loans. Other than certain GMAC Loans, none of the
Company's debt is subject to cross-collateralization provisions. AIMCO's
Charter (the "AIMCO Charter") does not limit the amount of indebtedness which
may be incurred by AIMCO and its subsidiaries. If the Company does not have
sufficient funds to repay its indebtedness at maturity, it may be necessary
to refinance such indebtedness through additional debt financing, private or
public offerings of debt securities or additional equity offerings. If, at
the time of any such refinancing, prevailing interest rates or other factors
result in higher interest rates on refinancings, increases in interest
expense could adversely affect cash flow, and consequently, cash available
for required dividends on shares of the Class A Common Stock. If the Company
is unable to refinance its indebtedness on acceptable terms, it might be
forced to dispose of properties or other assets on disadvantageous terms,
potentially resulting in losses and adverse effects on cash flow from
operating activities. If the Company is unable to make required payments of
principal and interest on indebtedness secured by Owned Properties, such
properties could be foreclosed upon by
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the lender with a consequent loss of income and asset value to the Company.
RISK OF RISING INTEREST RATES
Certain of the Company's borrowings, including borrowings under the Credit
Facility, bear interest at a variable rate. As of December 31, 1997,
approximately 92% of the Company's total indebtedness was subject to fixed
interest rates and 8% (approximately $66.5 million) was subject to variable
interest rates. Although, as described below, the Company has certain hedging
arrangements in place, increases in interest rates could increase the Company's
interest expense and adversely affect cash flow.
RISKS RELATED TO INTEREST RATE HEDGING ARRANGEMENTS
The Company from time to time enters into agreements to reduce the risks
associated with increases in short term interest rates. Although these
agreements provide the Company with some protection against rising interest
rates, these agreements also reduce the benefits to the Company when interest
rates decline. In March 1997, the Company entered into an interest rate hedging
agreement (the "March Hedge") with an investment banking company in anticipation
of refinancing certain indebtedness. The March Hedge had a notional amount of
$100 million and fixed the interest rate of the anticipated refinancing at
7.053%. The indebtedness was refinanced in December 1997, at which time the
Company realized a loss on the March Hedge of approximately $10.9 million, which
will be amortized over the life of the refinanced debt, resulting in an
effective interest rate of 7.8%. In addition, in September 1997, the Company
entered into a second interest rate agreement (the "September Hedge"), with the
same investment banking company, having a notional amount of $75 million, in
anticipation of refinancing certain other indebtedness. The September Hedge
matures on March 19, 1998 and fixes the interest rate of the anticipated
refinancing at 6.211%. Based on the fair value of the September Hedge at
December 31, 1997, the Company has an unrealized loss of approximately $2.6
million. This loss, when amortized, will result in an effective interest rate of
7.0%, over the life of the refinanced debt. There can be no assurance that the
above described indebtedness will be refinanced or that the Company will be able
to enter into other hedging arrangements to replace the September Hedge.
Interest rate hedging arrangements may expose the Company to certain risks.
Interest rate movements during the term of interest rate hedging arrangements
may result in a gain or loss on the Company's investment in the hedging
arrangement. In addition, if a hedging arrangement is not indexed to the same
rate as the indebtedness that is hedged, the Company may be exposed to losses to
the extent that the rate governing the indebtedness and the rate governing the
hedging arrangement change independently of each other. Finally, nonperformance
by the other party to the hedging arrangement may result in credit risks to the
Company. In order to minimize counterparty credit risk, the Company's policy is
to enter into hedging arrangements only with large financial institutions that
maintain an investment grade credit rating.
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RISKS RELATED TO INVESTMENT IN AND MANAGEMENT OF REAL ESTATE
GENERAL. Real property investments are subject to varying degrees of risk.
The yields available from equity investments in real estate depend on the amount
of income generated and expenses incurred. The Company's income from its Owned
Properties and Equity Properties may be adversely affected by the general
economic climate, local conditions such as oversupply of apartments or a
reduction in demand for apartments in the area, the attractiveness of the
properties to tenants, competition from other available apartments, the ability
of the Company to provide adequate maintenance and insurance, and increases in
operating costs (including real estate taxes). The Company's income from its
Owned Properties and Equity Properties would also be adversely affected if a
significant number of tenants were unable to meet their rent payment obligations
when due or if apartments could not be rented on favorable terms. Certain
significant expenditures associated with real property investments (such as debt
service, real estate taxes and maintenance costs) generally are not reduced when
circumstances cause a reduction in income from the investments. In addition,
income from properties and real estate values are also affected by such factors
as applicable laws, including tax laws, interest rate levels and the
availability of financing. If the Company's Owned Properties and Equity
Properties do not generate income sufficient to meet operating expenses,
including debt service and capital expenditures, the Company's income, and
AIMCO's ability to pay dividends to holders of Class A Common Stock , will be
adversely affected. Many of the factors that could adversely affect the
Company's income from its Owned Properties and Equity Properties could also
adversely affect the Company's income from its Managed Properties by reducing
gross receipts for such properties.
ILLIQUIDITY OF REAL ESTATE. Investments in real estate or partnerships
which own real estate may be illiquid. As a result, the Company may be unable to
vary its portfolio promptly in response to changes in economic or other
conditions. In addition, the Code limits the ability of AIMCO, as a REIT, to
sell properties held for fewer than four years.
OPERATING RISKS. The AIMCO Properties are subject to operating risks common
to apartment properties in general. These risks may adversely affect the
Company's cash flow from operations. For example, increases in unemployment in
the areas in which the AIMCO Properties are located may adversely affect
apartment occupancy or rental rates and it may not be possible to offset
increases in operating costs due to inflation and other factors by increased
rents. Local rental market characteristics also limit the extent to which rents
may be increased without decreasing occupancy rates.
COMPETITION. There are numerous housing alternatives that compete with the
AIMCO Properties in attracting residents. Such properties compete directly with
other rental apartments and single family homes that are available for rent in
the markets in which such properties are located. Such properties also compete
for residents with new and existing homes and condominiums. The ability of the
Company to lease apartment units and the level of rents charged is determined in
large part by the number of competitive properties in the local market. Numerous
real estate companies compete with the Company in each of its market areas in
acquiring, developing and managing apartment properties and seeking tenants to
occupy their properties and the Company's market share is small in each of its
market areas. In addition, numerous property management companies compete with
the Company in the markets where the Managed Properties are located.
CHANGE IN LAWS. Changes in laws increasing the potential liability for
environmental conditions existing on properties or increasing the restrictions
on discharges or other conditions, as well as changes in laws affecting
development, construction and safety requirements, may result in significant
unanticipated expenditures which would adversely affect the Company's cash flow
from operating activities. In addition, future enactment of rent control or rent
stabilization laws or other laws regulating multifamily housing may reduce, or
limit the ability of the Company to increase, rental revenue or increase
operating costs in particular markets.
POSSIBLE ENVIRONMENTAL LIABILITIES. Under Federal, state and local
environmental laws and regulations, a current or previous owner or operator of
real property may be required to investigate and clean up a
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release of hazardous substances at such property, and may, under such laws and
common law, be held liable for property damage and other costs incurred by third
parties in connection with such releases. The liability under certain of these
laws has been interpreted to be joint and several unless the harm is divisible
or there is a reasonable basis for allocation of responsibility. The failure to
remediate the property properly may also adversely affect the owner's ability to
sell or rent the property or to borrow using the property as collateral. In
connection with its ownership, operation or management of the AIMCO Properties,
the Company could be potentially liable for environmental liabilities or costs
associated with its properties or properties it may in the future acquire or
manage.
Certain Federal, state and local laws and regulations govern the removal,
encapsulation or disturbance of asbestos-containing materials ("ACMs") when
those materials are in poor condition or in the event of building remodeling,
renovation or demolition, impose certain worker protection and notification
requirements and govern emissions of and exposure to asbestos fibers in the air.
These laws also impose liability for a release of ACMs and may enable third
parties to seek recovery from owners or operators of real properties for
personal injury associated with ACMs. In connection with the ownership,
operation or management of properties, the Company could be potentially liable
for those costs. There are ACMs at certain of the Owned Properties, and there
may be ACMs at certain of the other AIMCO Properties. AIMCO has developed and
implemented operations and maintenance programs, as appropriate, that establish
operating procedures with respect to the ACMs at most of the Owned Properties,
and intends to develop and implement, as appropriate, such programs at AIMCO
Properties that do not have such programs.
Certain of the Owned Properties, and some of the other AIMCO Properties,
are located on or near properties that contain or have contained underground
storage tanks or on which activities have occurred which could have released
hazardous substances into the soil or groundwater. There can be no assurances
that such hazardous substances have not been released or have not migrated, or
in the future will not be released or will not migrate onto the AIMCO
Properties. Such hazardous substances have been released at certain Owned
Properties and, in at least one case, have migrated from an off-site location
onto the Company's property. In addition, the Company's Montecito property in
Austin, Texas, is located adjacent to, and may be partially on, land that was
used as a landfill. Low levels of methane and other landfill gas have been
detected at Montecito. The City of Austin (the "City"), the former landfill
operator, has assumed responsibility for conducting all investigation and
remedial activities to date associated with the methane and other landfill gas.
The remediation of the landfill gas is now substantially complete, and the Texas
Natural Resources Conservation Commission (the "TNRCC") has preliminarily
approved the methane gas remediation efforts. Final approval of the site and the
remediation process is contingent upon the results of continued methane gas
monitors to confirm the effectiveness of the remediation efforts. Should further
actionable levels of methane gas be detected, a proposed contingency plan of
passive methane gas venting may be implemented by the City. The City has also
conducted testing on the Company's Montecito property to determine whether, and
to what extent, groundwater has been impacted. Based on test reports received to
date by the Company, the groundwater does not appear to be contaminated at
actionable levels. The Company has not incurred and does not expect to incur
liability for the landfill investigation and remediation; however, the Company
has relocated some of its tenants and has installed a venting system according
to the TNRCC's specifications under the building slabs, in connection with its
present raising of four of its buildings, in order to install stabilizing piers
thereunder, at a total cost of approximately $550,000, which cost is primarily
for the restabilization. The restabilization was substantially completed as of
January 1998. The City will be responsible for monitoring the conditions at the
Montecito property.
All of the Owned Properties were subject to Phase I or similar
environmental audits by independent environmental consultants prior to
acquisition. The audits did not reveal, nor is the Company aware of, any
environmental liability relating to such properties that the Company believes
would have a material adverse effect on the Company's business, assets or
results of operations. However, such audits involve a number of judgments and it
is possible that such audits did not reveal all environmental liabilities or
that there are material environmental liabilities of which the Company is
unaware. In addition, the Managed Properties may not have been, and certain of
the NHP Properties have not been, subject to Phase I or similar environmental
audits by independent environmental consultants. While the Company is not aware
of any environmental liability that it believes would have a material adverse
effect on its business, financial condition or results of operations relating to
either the Managed Properties or the NHP Properties for which audits are not
available, there can be no assurance that material environmental liabilities of
which the Company is unaware do not exist at such properties.
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In October 1997, NHP received a letter (the "EPA Letter") from the U.S.
Department of Justice ("DOJ") which stated that the U.S. Environmental
Protection Agency ("EPA") had requested that DOJ file a lawsuit against NHP
alleging, among other things, that NHP violated the Clean Air Act, the National
Recycling and Emissions Reduction Program and associated regulations in
connection with the employment of certain unlicensed personnel, maintenance and
disposal of certain refrigerants, and record-keeping practices at two
properties. A settlement in principal between NHP and the EPA has been reached
whereby NHP has agreed to pay a fine of less than $100,000, permit the EPA to
audit 40 NHP properties with respect to their use and disposal of such
refrigerants, and continue to provide training to all maintenance workers with
respect to the disposal of such refrigerants. A formal settlement agreement is
expected to be executed in the near future. It is possible that the future EPA
audits agreed to in the settlement could result in additional allegations by EPA
of violations at such properties; however, based on the terms of the settlement
agreement with DOJ, the Company anticipates that the fines, if any, resulting
from such audits will be nominal.
RESTRICTIONS IMPOSED BY LAWS BENEFITTING DISABLED PERSONS. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all places of public
accommodation are required to meet certain Federal requirements related to
access and use by disabled persons. These requirements became effective in 1992.
A number of additional Federal, state and local laws exist which also may
require modifications to the Owned Properties, or restrict certain further
renovations thereof, with respect to access thereto by disabled persons. For
example, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment
properties first occupied after March 13, 1990 to be accessible to the
handicapped. Noncompliance with the ADA or the FHAA could result in the
imposition of fines or an award of damages to private litigants and also could
result in an order to correct any non-complying feature, which could result in
substantial capital expenditures. Although management of AIMCO believes that the
Owned Properties are substantially in compliance with present requirements, if
the Owned Properties are not in compliance, the Company is likely to incur
additional costs to comply with the ADA and FHAA.
RISK OF LOSS OF REVENUE DUE TO TERMINATION OR OTHER LOSS OF PROPERTY
MANAGEMENT AGREEMENTS. The Company is dependent upon revenue received for
services performed under property management agreements relating to properties
owned by third parties. For the year ended December 31, 1997, the Company
derived approximately 1.0% of its gross revenues from management of properties
owned by third parties. Risks associated with the management of properties owned
by third parties include risks that management contracts will be terminated by
the property owner or will be lost in connection with a sale of the property,
contracts may not be renewed upon expiration or may not be renewed on terms
consistent with current terms, and rental revenues upon which management fees
are based will decline as a result of general real estate market conditions or
other factors and result in decreases in management fees. If significant numbers
of contracts are terminated or are not renewed, net income from fee management
operations could be adversely affected. Contracts with unaffiliated third
parties are for terms ranging from 30 days to 5 years, with most contracts being
terminable within one year or less. In general, management contracts may be
terminated or otherwise lost as a result of a number of factors, many of which
are beyond the control of the Company, including: (i) disposition of the
property by the owner in the ordinary course or as a result of financial
distress of the property owner; (ii) the property owner's determination that the
Company's management of the property is unsatisfactory; (iii) willful
misconduct, gross negligence or other conduct by the manager that constitutes
grounds for termination under such contracts; and (iv) with respect to certain
affordable properties, termination of such contracts by the U.S. Department of
Housing and Urban Development ("HUD") or state housing finance agencies,
generally at their discretion.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. As of December 31,
1997, the Managed Properties included 68,820 affordable units in 468 properties.
In addition, the NHP Real Estate Companies own interests in 59,072 affordable
units. A substantial portion of the affordable properties, and some conventional
properties in which the NHP Real Estate Companies own interests, were built or
acquired by the owners with the assistance of programs administered by HUD that
provide mortgage insurance, favorable financing terms, or rental assistance
payments to the owners. As a condition to the receipt of assistance under these
and other HUD programs, the properties must comply with various HUD
requirements, which typically include limits on rents to amounts approved by
HUD. HUD approval is required before the Company may be appointed as manager of
additional HUD-assisted properties. There can be no assurance that HUD approval
will be received with respect to any particular action for which it is required.
In addition to the effects of HUD regulation on the Company as a manager of
affordable properties, the business of the Company may be indirectly affected by
regulations generally
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applicable to the entities owning affordable properties. In particular, HUD
limits the rents that may be charged on certain HUD-assisted properties to
approved amounts. If permitted rents on a property are insufficient to cover
costs, a sale of the property may become necessary, which would result in a loss
of management fee revenue. As of December 31, 1997, and in addition to the 422
HUD-assisted properties, the Company managed 52 properties that receive
assistance from agencies other than HUD or are subject to regulation by agencies
other than HUD. Such revenues comprise less than 9% of the Company's revenues.
RISKS RELATED TO HUD ENFORCEMENT AND LIMITED DENIALS. Under its
regulations, HUD has the authority to suspend or deny property owners and
managers from participation in HUD programs with respect to additional
assistance within a geographic region through imposition of a limited denial of
participation ("LDP") by any HUD office or nationwide for violations of HUD
regulatory requirements. In March 1997, HUD announced its intention to step up
enforcement against property owners and managers who violate their agreements
with HUD, and in July 1997, HUD announced the creation of a new department-wide
enforcement division. Three HUD field offices have recently issued LDPs to NHP
as a result of physical inspections and mortgage defaults at four properties
owned by the NHP Real Estate Companies, two of which are managed by the Company.
One LDP was subsequently withdrawn and another was terminated in December 1997
after a reinspection of the property. The one remaining LDP, unless lifted,
suspends the Company's ability to manage or acquire additional HUD-assisted
properties in eastern Missouri until June 24, 1998. In 1996, NHP obtained
approximately $1 million in management revenues from affordable properties in
the affected regions. The Company has requested that HUD terminate the one
remaining LDP, but HUD has so far refused to do so, and the Company cannot
determine whether HUD will reverse that decision with respect to the affected
region. Because an LDP is prospective, existing HUD agreements are not affected,
so an LDP is not expected to result in the loss of management service revenue
from or otherwise to affect properties that the Company currently manages in the
subject regions. If HUD were to disapprove the Company as property manager for
one or more affordable properties, the Company's ability to obtain property
management revenues from new affordable properties may be impaired.
HUD monitors the performance of properties with HUD-insured mortgage loans.
HUD also monitors compliance with applicable regulations, and takes performance
and compliance into account in approving management of HUD-assisted properties.
In this regard, since July 1988, 29 HUD-assisted properties owned or managed by
the NHP Real Estate Companies or NHP have defaulted on non-recourse HUD-insured
mortgage loans. Eight of these 29 properties are also currently managed by the
Company. An additional six properties owned or managed by the Company have
received unsatisfactory performance ratings. As a result of the defaults and
unsatisfactory ratings, a national HUD office must review any field office
approval of the Company to act as property manager for a HUD-assisted property.
The national HUD office has consistently approved NHP's applications to manage
new properties, and the Company received HUD clearance to acquire its interests
in NHP and the NHP Real Estate Companies. The Company believes that it enjoys a
good working relationship with HUD and that the national office will continue to
apply the clearance process to large management portfolios such as the
Company's, including NHP's, with discretion and flexibility. While there can be
no assurance, the Company believes that the unsatisfactory reviews and the
mortgage defaults will not have a material impact on its results of operations
or financial condition.
In October 1997, NHP received a subpoena from the Inspector General of HUD
requesting documents relating to any arrangement whereby NHP or any of its
affiliates provides or has provided compensation to owners of HUD multifamily
projects in exchange for or in connection with management of a HUD project. The
Company believes that other owners and managers of HUD projects have received
similar subpoenas. Documents relating to certain of the Company's acquisitions
of property management rights for HUD projects, may be responsive to the
subpoena. The Company is in the process of complying with the subpoena and has
provided certain documents to the Inspector General, without conceding that they
are responsive to the subpoena. The Company believes that its operations are in
compliance, in all material respects, with all laws, rules and regulations
relating to HUD-assisted or HUD-insured properties. Although the Inspector
General has not initiated any action against the Company or, to the Company's
knowledge, any owner of a HUD property managed by the Company, if any such
action is taken in the future, it could ultimately affect existing arrangements
with respect to HUD projects or otherwise have a material adverse effect on the
results of operations of the Company.
RISKS RELATING TO UNCERTAINTY REGARDING STATUS OF FEDERAL SUBSIDIES. The
Company owns and/or manages approximately 44,000 units that are subsidized under
Section 8 of the United
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States Housing Act of 1937, as amended ("Section 8"). These subsidies are
generally provided pursuant to project-based contracts, Housing Assistance
Payment Contracts ("HAP Contracts") between HUD and the owners of the properties
or, with respect to a limited number of units managed by the Company, pursuant
to vouchers received by tenants. On October 27, 1997, the President signed into
law the Multifamily Assisted Housing Reform and Affordability Act of 1997 (the
"1997 Housing Act"). Under the 1997 Housing Act, the mortgage financing and HAP
Contracts of certain properties assisted under Section 8, with rents above
market levels and financed with HUD-insured mortgage loans, will be restructured
by reducing subsidized rents to market levels, thereby reducing rent subsidies,
and lowering required debt service costs as needed to ensure financial viability
at the reduced rents and rent subsidies. The 1997 Housing Act retains
project-based subsidies for most properties (properties in rental markets with
limited supply, properties serving the elderly and certain other properties).
The 1997 Housing Act phases out project-based subsidies on selected properties
serving families not located in rental markets with limited supply, converting
such subsidies to a tenant-based subsidy. Under a tenant-based system, rent
vouchers would be issued to qualified tenants who then could elect to reside at
properties of their choice, provided such tenants have the financial ability to
pay the difference between the selected properties' monthly rent and the value
of the vouchers, which would be established based on HUD's regulated fair market
rent for the relevant geographic areas. The 1997 Housing Act provides that
properties will begin the restructuring process in Federal fiscal year 1999
(beginning October 1, 1998), and that HUD will issue final regulations
implementing the 1997 Housing Act on or before October 27, 1998. Congress has
elected to renew HAP Contracts expiring before October 1, 1998 for one year
terms, generally at existing rents, so long as the properties remain in
compliance with the HAP Contracts. While the Company does not expect the
provisions of the 1997 Housing Act to result in a significant number of tenants
relocating from properties managed by the Company, there can be no assurance
that the provisions would not significantly affect the Company's management
portfolio. Furthermore, there can be no assurance that other changes in Federal
housing subsidy policy will not occur. Any such changes could have a material
adverse effect on the Company's property management revenues.
RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES
The Company has engaged in, and intends to continue to engage in, the
selective acquisition, development and expansion of multi-family apartment
properties. In the ordinary course of business, the Company engages in
discussions and negotiations regarding the acquisition of apartment properties
(including interests in entities that own apartment properties). The Company
frequently enters into contracts and nonbinding letters of intent with respect
to the purchase of properties. These contracts are typically subject to certain
conditions and permit the Company to terminate the contract in its sole and
absolute discretion if it is not satisfied with the results of its due diligence
investigation of the properties. The Company believes that such contracts
essentially result in the creation of an option on the subject properties and
give the Company greater flexibility in seeking to acquire properties. As of
February 13, 1998, the Company had under contract or letter of intent an
aggregate of 28 multi-family apartment properties with a maximum aggregate
purchase price of $283 million, including estimated capital improvements, which,
in some cases, may be paid in the form of assumption of existing debt. All such
contracts are subject to termination by the Company as described above. No
assurance can be given that any of these possible acquisitions will be completed
or, if completed, that they will be accretive on a per share basis.
In addition to general investment risks associated with any new investment,
acquisitions entail risks that such investments will fail to perform in
accordance with expectations, including projected occupancy and rental rates,
management fees and the costs of property improvements, along with integration
related risks. Risks associated with redevelopment and expansion of properties
include the risks that development opportunities may be abandoned; that
construction costs of a property may exceed original estimates, possibly making
the property uneconomical; that occupancy rates and rents at a newly completed
property may not be sufficient to make the property profitable; that
construction and permanent financing may not be available on favorable terms;
and that construction and lease-up may not be completed on schedule, resulting
in increased debt service expense and construction costs. Development activities
are also subject to risks relating to any inability to obtain, or delays in
obtaining, necessary zoning, land-use, building, occupancy, and other
governmental permits and authorizations. See also "--Risks Associated with
Integrating NHP, Ambassador and Other Acquired Businesses."
The Company also has engaged in, and intends to continue to engage in, the
selective acquisition of, or investment in, companies that own or manage
apartment properties or own general or limited partnership or other interests
therein, including tender offers for limited partnership interests. Risks
associated with the Company's past and future acquisitions of general
partnership interests, and tender offers for outstanding limited partnership
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interests, include the risks that the general partner will be subject to
allegations (including legal actions) of, or will be otherwise liable for,
breaches of fiduciary duty to the limited partners of such partnership and that
the assets of the general partner may be subject to claims by creditors of the
partnership if the partnership becomes insolvent. See "--Risks Relating to
English Litigation."
RISKS RELATING TO ENGLISH LITIGATION
In November 1996, the Company acquired (the "English Acquisition") certain
partnership interests, real estate and related assets from J.W. English, a
Houston, Texas-based real estate syndicator and developer, and certain
affiliated entities (collectively, the "J.W. English Companies"). In the English
Acquisition, the Company purchased all of the general and limited partnership
interests owned by the J.W. English Companies in 22 limited partnerships which
act as the general partner to q31 limited partnerships (the "English
Partnerships") that own 22 multifamily apartment properties and other assets and
interests related to the J.W. English Companies, and assumed management of the
properties owned by the English Partnerships. The Company made separate tender
offers (the "English Tender Offers") to the limited partners of 25 of the
English Partnerships (the "Tender Offer English Partnerships").
In November 1996, purported limited partners of certain of the Tender Offer
English Partnerships filed a purported class action lawsuit against the Company
and J.W. English in the U.S. District Court for the Northern District of
California (the "Federal Action"), alleging, among other things, that the
Company conspired with J.W. English to breach his fiduciary duty to the
plaintiffs, and that the offering materials used by the Company in connection
with the English Tender Offers contained misleading statements or omissions. The
Federal Action was voluntarily dismissed, without prejudice, in favor of another
purported class action filed in May 1997 by limited partners of certain of the
Tender Offer English Partnerships and six additional English Partnerships. Two
complaints were filed in Superior Court of the State of California (the
"California Actions") against the Company and the J.W. English Companies,
alleging, among other things, that the consideration the Company offered in the
English Tender Offers was inadequate and designed to benefit the J.W. English
Companies at the expense of the limited partners, that certain
misrepresentations and omissions were made in connection with the English Tender
Offers, that the Company receives excessive fees in connection with its
management of the properties owned by the English Partnerships, that the Company
continues to refuse to liquidate the English Partnerships and that the English
Acquisition violated the partnership agreements governing the English
Partnerships and constituted a breach of fiduciary duty.
In addition to unspecified compensation and exemplary damages, the original
complaints in the California Actions sought an accounting, a constructive trust
on the assets and monies acquired by the English defendants in connection with
the English Acquisition, a court order removing the Company from management of
the English Partnerships and/or ordering disposition of the properties and
attorneys fees, expert fees and other costs. The Company intends to vigorously
defend itself in connection with these actions. The Company believes it is
entitled to indemnity from the J.W. English Companies, subject to certain
exceptions. Failure by the Company to prevail in the California Actions or to
receive indemnification could have a material adverse effect on the Company's
financial condition and results of operations.
On August 4, 1997, the Company filed demurrers to both complaints in the
California Actions. At a hearing on the demurrers on January 9, 1998, the court
granted the Company's demurrers to each of the three causes of action against it
in the two complaints, with leave to amend. Plaintiffs are expected to file a
consolidated amended complaint on February 25, 1998.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS
Although each of Messrs. Terry Considine, Peter K. Kompaniez and Steven D.
Ira, officers and/or directors of the Company, has entered into an employment
agreement with the Company, the loss of any of their services could have an
adverse effect on the operations of the Company.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
Qualification as a REIT involves the application of highly technical and
complex provisions of the Code, for which there are only limited judicial or
administrative interpretations, and the determination of various factual
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matters and circumstances not entirely within AIMCO's control. Although AIMCO
believes that it has operated since July 29, 1994, the date of AIMCO's initial
public offering, in a manner so as to qualify as a REIT, no assurance can be
given that AIMCO is or will remain so qualified. See "Certain Federal Income Tax
Consequences."
In March 1998, AIMCO received an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, tax counsel to AIMCO, concerning the qualification of
AIMCO as a REIT. In rendering this opinion, Skadden, Arps, Slate, Meagher &
Flom LLP relied on certain assumptions and representations by AIMCO
(including the value of the Management Subsidiaries and the Unconsolidated
Subsidiaries, and of the Operating Partnership's ownership interests therein
and other items regarding AIMCO's ability to meet the various requirements
for qualification as a REIT). The opinion is expressed based upon facts,
representations and assumptions as of its date, and Skadden, Arps, Slate,
Meagher & Flom LLP has no obligation to advise the holders of Class A Common
Stock of any subsequent change in the matters stated, represented or assumed
or any subsequent change in applicable law. No assurance can be given that
AIMCO will meet these requirements in the future, and a legal opinion is not
binding on the Internal Revenue Service (the "IRS").
If, in any taxable year, AIMCO fails to qualify as a REIT, AIMCO would not
be allowed a deduction for dividends paid to stockholders in computing taxable
income and would be subject to Federal income tax on its taxable income at
corporate rates. As a result of the additional tax liability, the Company might
need to borrow funds or liquidate certain investments on terms that may be
disadvantageous to the Company in order to pay the applicable tax and AIMCO
would not be required to make distributions under the Code. Unless entitled to
relief under certain statutory provisions, AIMCO would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. Although AIMCO currently intends to operate in a manner
designed to qualify as a REIT, it is possible that future economic, market,
legal, tax or other considerations may cause AIMCO to fail to qualify as a REIT
or may cause the Board of Directors of AIMCO to revoke the REIT election. See
"--Significant Indebtedness; Refinancing Risks," "--Risks Related to Investment
in and Management of Real Estate" and "Certain Federal Income Tax
Consequences."
Certain requirements for REIT qualification may in the future limit AIMCO's
ability to conduct or increase the property management and asset management
operations of the Management Subsidiaries without jeopardizing AIMCO's
qualification as a REIT. See "Certain Federal Income Tax Consequences."
In addition, if AIMCO fails to qualify as a REIT, the agreement pursuant to
which AIMCO issued its Class B Preferred Stock provides that the original
purchaser may require AIMCO to repurchase such investor's Class B Preferred
Stock, in whole or in part, at a price of $105 per share, plus accrued and
unpaid dividends to the date of repurchase. Such investor acquired and currently
owns 750,000 shares of Class B Preferred Stock.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITs
The rules dealing with Federal income taxation are constantly under review
by persons involved in the legislative process and by the IRS and the U.S.
Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect the tax consequences of an investment in AIMCO. For
example, a proposal issued by President Clinton on February 2, 1998, if enacted
into law, may adversely affect the ability of AIMCO to expand the present
activities of its Management Subsidiaries. It cannot be predicted whether, when,
in what forms, or with what effective dates, the tax laws applicable to AIMCO or
an investment in AIMCO will be changed.
OWNERSHIP LIMIT
In order for AIMCO to maintain its qualification as a REIT, not more than
50% of the value of its outstanding capital stock may be owned, directly or
constructively, by five or fewer individuals or entities (as set forth in the
Code). The AIMCO Charter limits direct or constructive ownership of shares of
Class A Common Stock by any person such that the sum of (i) the aggregate value
of the Class A Common Stock , and (ii) the aggregate value of all shares of any
other Equity Stock owned by such person may not exceed 8.7% (or 15% in the case
of certain pension trusts, registered investment companies and Mr. Considine) of
the aggregate value of all outstanding shares of Equity Stock. The constructive
ownership rules are complex and may cause shares of AIMCO's Equity Stock owned
directly or constructively by a group of related individuals or entities to be
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constructively owned by one individual or entity. A transfer of shares to a
person who, as a result of the transfer, violates the limit on ownership
described above may be void under some circumstances or may be transferred to a
trust, for the benefit of one or more qualified charitable organizations
designated by AIMCO, with the intended transferee having only a right to share
(to the extent of the transferee's original purchase price for such shares) in
proceeds from the trust's sale of such shares.
SHARES AVAILABLE FOR FUTURE SALE.
As of December 31, 1997, there were outstanding options and warrants to
purchase Class A Common Stock, and shares of Class B Preferred Stock and
Class B Common Stock convertible into Class A Common Stock, that, if
exercised or converted, would result in the issuance of approximately 3.8
million shares of Class A Common Stock. In addition, as of December 31, 1997,
there were outstanding approximately 5.4 million OP Units which, upon tender
for redemption by the holders, may be acquired by AIMCO in exchange for an
equal number of shares of Class A Common Stock. Sales of substantial amounts
of shares of Class A Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market price for shares of Class
A Common Stock. No prediction can be made, however, as to the effect, if any,
of future sales of such shares, or the availability of such shares for future
sale, on the market price of Class A Common Stock prevailing from time to
time.
USE OF PROCEEDS
The Selling Stockholders will receive all of the net proceeds from the sale
of shares of Class A Common Stock offered hereby. The Company will not receive
any proceeds from the sale of such shares.
SELLING STOCKHOLDERS
This Prospectus relates to periodic offers and sales of up to 563,152
shares of Class A Common Stock by the selling stockholders named below and their
respective pledgees, donees and other successors in interest (collectively, "the
Selling Stockholders"). The shares of Class A Common Stock that may be offered
and sold by the Selling Stockholders include shares that may be issued in
exchange for Partnership Common Units ("OP Units") of the Operating Partnership.
The holders of OP Units have the right, subject to the terms of the agreement of
limited partnership of the Operating Partnership (the "Limited Partnership
Agreement"), to redeem some or all of their OP Units for cash, subject to
AIMCO's right to acquire any OP Units tendered for redemption in exchange for
shares of AIMCO's Class A Common Stock at an exchange ratio of one share of
Class A Common Stock for each OP Unit (subject to certain specified
adjustments). Pursuant to certain Registration Rights Agreements, AIMCO is
obligated to register under the Securities Act the resale of shares of Class A
Common Stock that may be issued to the Selling Stockholders in exchange for OP
Units. As of the date of this Prospectus, 63,152 OP Units are held by the
Selling Stockholders named below, all of which OP Units may be acquired from
time to time by AIMCO in exchange for 63,152 shares of Class A Common Stock
(subject to adjustment). All of such shares of Class A Common Stock may be
offered pursuant to this Prospectus.
The following table sets forth certain information with respect to the
Selling Stockholders and their beneficial ownership of shares of Class A Common
Stock as of the date hereof. Except as indicated below, none of the Selling
Stockholders holds any position, office or has had any other material
relationship with the Company, or any of its predecessors or affiliates, during
the past three years.
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<TABLE>
<CAPTION>
SHARES OWNED PRIOR
SELLING STOCKHOLDER TO OFFERING(1)
------------------- ------------------
<S> <C>
Leo E. Zickler 125,000(2)
Frances P. Lavin 125,000(2)
Robert B. Downing 73,865(2)
Mark E. Schifrin 73,865(2)
Marc B. Abrams 55,400(2)
Richard P. Singleton 46,870(2)
Stephen A. Ross & Carol F. Ross 17,988
Saul Skoler 27,569
Edward T. Tokar 5,865
Joseph A. Goldblum 3,910
Goldblum Trust FBO Libby DelGuidice 3,910
Goldblum Trust FBO Georgeanne T. Goldblum 3,910
</TABLE>
(1) Unless otherwise indicated, the number of shares owned prior to this
offering reflects the number of OP Units owned by the Selling Stockholder, each
of which may be acquired from time to time by AIMCO in exchange for one share of
Class A Common Stock (subject to adjustment) upon the tender of such OP Unit for
redemption pursuant to the Limited Partnership Agreement.
(2) Reflects the maximum number of shares of Class A Common Stock
(subject to adjustment upon the occurrence of certain dilutive events) that
such Selling Stockholder may be entitled to purchase from AIMCO pursuant to a
warrant. The warrant has an exercise price of $41 per share.
Because the Selling Stockholders may sell some or all of the shares of
Class A Common Stock offered hereby, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
such shares, no estimate can be given as to the number of shares of Class A
Common Stock that will be held by the Selling Stockholders upon termination of
any offering made hereby. If all of the shares offered hereby are sold, the
Selling Stockholders will not own any of the outstanding shares of Class A
Common Stock.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the
Selling Stockholders of up to 563,152 shares of Class A Common Stock. The
Class A Common Stock may be sold from time to time by the Selling
Stockholders. Such sales may be made in underwritten offerings or in open
market or block transactions or otherwise on the NYSE, or such other national
securities exchange or automated interdealer quotation system on which shares
of Class A Common Stock are then listed, in the over-the-counter market, in
private transactions or otherwise at prices related to prevailing market
prices at the time of the sale or at negotiated prices. Some or all of the
shares of Class A Common Stock may be sold through brokers acting on behalf
of the Selling Stockholders or to dealers for resale by such dealers. In
connection with such sales, such brokers and dealers may receive compensation
in the form of discounts or commissions from the Selling Stockholders and may
receive commissions from the purchasers of such shares for whom they act as
broker or agent (which discounts and commissions are not
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<PAGE>
anticipated to exceed those customary in the types of transactions involved).
The Selling Stockholders may offer to sell and may sell shares of the Class A
Common Stock in options transactions or deliver such shares to cover short sales
"against the box." If necessary, a supplemental or amended Prospectus will
describe the method of sale in greater detail. In effecting sales, brokers or
dealers engaged by the Selling Stockholders and/or purchasers of the Class A
Common Stock may arrange for other brokers or dealers to participate. In
addition, any of the Class A Common Stock covered by this prospectus which
qualifies for sale pursuant to Rule 144 under the Securities Act may be sold
under Rule 144 rather than pursuant to this Prospectus.
If shares of Class A Common Stock are sold in an underwritten offering, the
shares will be acquired by the underwriters for their own accounts and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or prices at the time of the sale
or at negotiated prices. Any initial public offering price and any discounts or
commissions allowed or reallowed or paid to dealers may be changed from time to
time. Underwriters may sell shares to or through brokers or dealers, and such
brokers and dealers may receive compensation in the form of discounts,
commissions or commissions from the underwriters and may receive commissions
from the purchasers of such shares for whom they act as broker or agent (which
discounts and commissions are not anticipated to exceed those customary in the
types of transactions involved).
The Company has agreed to pay all expenses in connection with the
registration of the Class A Common Stock being offered hereby. Selling
Stockholders are responsible for paying any other selling expenses, including
underwriting discounts and brokers' commissions, and expenses of Selling
Stockholders' counsel.
The Selling Stockholders and any underwriter, broker or dealer who acts in
connection with the sale of the Class A Common Stock hereunder may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any compensation received by them and any profit on any resale of the Class A
Common Stock as principals may be deemed to be underwriting discounts and
commissions under the Securities Act.
In order to comply with the securities laws of certain jurisdictions, the
securities offered hereby will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the securities offered hereby may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
Pursuant to registration rights agreements between AIMCO and the Selling
Stockholders, AIMCO has agreed to indemnify the Selling Stockholders, each of
their respective officers and directors and any person who controls such Selling
Stockholders, against certain liabilities and expenses arising out of or based
upon the information set forth or incorporated by reference in this Prospectus,
and the Registration Statement of which this Prospectus is a part, including
liabilities under the Securities Act.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences to the Company and a prospective holder of Class A Common Stock.
This discussion is based upon the Code, the regulations promulgated by the
U.S. Treasury Department thereunder (the "Treasury Regulations"), rulings
issued by the IRS, and judicial decisions, all in effect as of the date of
this Prospectus and which are subject to change, possibly retroactively. This
discussion is for general information only. This discussion does not purport
to discuss all aspects of federal income taxation which may be important to a
particular investor in light of his individual investment or tax
circumstances, or to certain types of investors subject to special tax rules
(including insurance companies, financial institutions or broker-dealers,
foreign investors and, except to the extent discussed below, tax-exempt
organizations). No advance ruling has been or will be sought from the IRS
regarding any matter discussed herein.
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EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND
SALE OF CLASS A COMMON STOCK AND OF AIMCO'S ELECTION TO BE SUBJECT TO TAX, FOR
FEDERAL INCOME TAX PURPOSES, AS A "REAL ESTATE INVESTMENT TRUST."
TAXATION OF AIMCO
GENERAL. The REIT provisions of the Code are highly technical and
complex. The following sets forth the material aspects of the provisions of
the Code that govern the Federal income tax treatment of a REIT and its
stockholders. This summary is qualified in its entirety by the applicable
Code provisions, rules and the Treasury Regulations, and administrative and
judicial interpretations thereof, all of which are subject to change,
possibly retroactively.
AIMCO has elected to be taxed as a REIT under the Code commencing with its
taxable year ending December 31, 1994, and AIMCO intends to continue to operate
in such a manner. AIMCO believes that it was organized in conformity with the
requirements for qualification as a REIT, and that its method of operation since
formation and proposed method of future operation will enable it to meet the
requirements for qualification and taxation as a REIT under the Code. Such
qualification and taxation as a REIT depends upon AIMCO's ability to meet,
through actual annual operating results, distribution levels and diversity of
stock ownership, the various qualification tests imposed under the Code as
discussed below. Accordingly, no assurance can be given that the actual results
of AIMCO's operations for any one taxable year will satisfy such requirements.
See "--Failure to Qualify." No assurance can be given that the IRS will not
challenge AIMCO's eligibility for taxation as a REIT.
If AIMCO qualifies for taxation as a REIT, it generally will not be
subject to Federal corporate income tax on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the
"double taxation" (at the corporate and stockholder levels) that generally
results from investment in a corporation. However, AIMCO will be subject to
Federal income tax as follows: First, AIMCO will be taxed at regular
corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, AIMCO
may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if AIMCO has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property held
primarily for sale to customers in the ordinary course of business other than
foreclosure property), such income will be subject to a 100% tax. Fourth, if
AIMCO should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which AIMCO fails the 75% or 95%
test multiplied by (b) a fraction intended to reflect AIMCO's profitability.
Fifth, if AIMCO should fail to distribute during each calendar year at least
the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its
REIT capital gain net income for such year (other than certain long-term
capital gains that AIMCO elects to retain and pay the tax thereon), and (iii)
any undistributed taxable income from prior periods, AIMCO would be subjected
to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed. Sixth, if during the ten-year period beginning
on the day on which an asset acquired by AIMCO from a subchapter C
corporation in a transaction in which the adjusted tax basis of the asset in
the hands of AIMCO is determined by reference to the adjusted basis of such
asset in the hands of the subchapter C corporation, AIMCO recognizes gain on
the disposition of such asset, under Treasury regulations not yet
promulgated, AIMCO will be required to recognize any net built-in gain that
would have been realized if the corporation had liquidated at the end of its
last taxable year before it qualifies as a REIT, or in the case of a transfer
of assets to AIMCO by a subchapter C corporation, on the last day before the
date of the transfer. Pursuant to IRS Notice 88-19, AIMCO may elect, in lieu
of the treatment described above, to be subject to tax at the highest regular
corporate tax rate on the excess, if any, of the fair market value over the
adjusted basis of any such asset as of the beginning of the ten-year period
("Built-in Gain"). AIMCO intends to make such an election and, therefore,
will be taxed at the highest regular corporate rate on such Built-in Gain if
and to the extent such assets are sold within the specified ten-year period.
REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association (1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation, but for the special Code provisions applicable to REITs;
(4) that is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (5) the beneficial ownership of which is held by
100 or more persons; (6) in which, during the last half of each taxable year,
not more than 50% in
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value of the outstanding stock is owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities); and
(7) which meets certain other tests described below (including with respect
to the nature of its income and assets). The Code provides that conditions
(1) through (4) must be met during the entire taxable year, and that
condition (5) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12
months. The AIMCO Charter provides certain restrictions regarding transfers
of its shares, which provisions are intended to assist AIMCO in satisfying
the share ownership requirements described in conditions (5) and (6) above.
To monitor AIMCO's compliance with the share ownership requirements, AIMCO
is required to maintain records regarding the actual ownership of its shares. To
do so, AIMCO must demand written statements each year from the record holders of
certain percentages of its stock in which the record holders are to disclose the
actual owners of the shares (i.e., the persons required to include in gross
income the REIT dividends). A list of those persons failing or refusing to
comply with this demand must be maintained as part of AIMCO's records. A
stockholder who fails or refuses to comply with the demand must submit a
statement with its tax return disclosing the actual ownership of the shares and
certain other information.
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. AIMCO satisfies this requirement.
OWNERSHIP OF PARTNERSHIP INTERESTS. In the case of a REIT that is a partner
in a partnership, regulations provide that the REIT is deemed to own its
proportionate share of the partnership's assets and to earn its proportionate
share of the partnership's income. In addition, the assets and gross income of
the partnership retain the same character in the hands of the REIT for purposes
of the gross income and asset tests applicable to REITs as described below.
Thus, AIMCO's proportionate share of the assets, liabilities and items of income
of the Subsidiary Partnerships will be treated as assets, liabilities and items
of income of AIMCO for purposes of applying the REIT requirements described
herein. A summary of certain rules governing the federal income taxation of
partnerships and their partners is provided below in "Tax Aspects of AIMCO's
Investments in Partnerships."
INCOME TESTS. In order to maintain qualification as a REIT, AIMCO annually
must satisfy two gross income requirements. First, at least 75% of AIMCO's
gross income (excluding gross income from "prohibited transactions," i.e.,
certain sales of property held primarily for sale to customers in the ordinary
course of business) for each taxable year must be derived directly or indirectly
from investments relating to real property or mortgages on real property
(including "rents from real property" and, in certain circumstances, interest)
or from certain types of temporary investments. Second, at least 95% of AIMCO's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived from such real property investments, and from
dividends, interest and gain from the sale or disposition of stock or securities
(or from any combination of the foregoing).
Rents received by AIMCO through the Subsidiary Partnerships will qualify
as "rents from real property" in satisfying the gross income requirements
described above, only if several conditions are met, including the following.
If rent attributable to personal property leased in connection with a lease
of real property is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will
not qualify as "rents from real property." Moreover, for rents received to
qualify as "rents from real property," the REIT generally must not operate or
manage the property or furnish or render services to the tenants of such
property, other than through an "independent contractor" from which the REIT
derives no revenue. However, AIMCO (or its affiliates) are permitted to, and
do directly perform services that are "usually or customarily rendered" in
connection with the rental of space for occupancy only and otherwise
considered rendered to the occupant of the property. In addition, AIMCO (or
its affiliates) may provide non-customary services to tennants of its
properties without disqualifying all of the rent from the property if the
payment for such services does not exceed 1% of the total gross income from
the property. For purposes of this test, the income received from such
non-customary services is deemed to be at least 150% of the direct cost of
providing the services.
The Management Subsidiaries, ANHI and the other Unconsolidated
Subsidiaries will receive management fees and other income. A portion of such
fees and other income will accrue to AIMCO through the Operating
Partnership's general partnership interest in PAMS LP. Such fee and other
income generally will not qualify under the 95% gross income test. AIMCO also
expects to indirectly receive distributions from the Management Subsidiaries,
ANHI and the other Unconsolidated Subsidiaries that will be classified
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as dividend income to the extent of the earnings and profits of such
entities. Such distributions will qualify under the 95% gross income test but
not under the 75% gross income test.
If AIMCO fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such
year if it is entitled to relief under certain provisions of the Code. These
relief provisions will be generally available if AIMCO's failure to meet such
tests was due to reasonable cause and not due to willful neglect, AIMCO
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to
evade tax. It is not possible, however, to state whether in all circumstances
AIMCO would be entitled to the benefit of these relief provisions. If these
relief provisions are inapplicable to a particular set of circumstances
involving AIMCO, AIMCO will not qualify as a REIT. As discussed above in
"--General," even where these relief provisions apply, a tax is imposed with
respect to the excess net income.
ASSET TESTS. AIMCO, at the close of each quarter of its taxable year, must
also satisfy three tests relating to the nature of its assets. First, at least
75% of the value of AIMCO's total assets must be represented by real estate
assets (including its allocable share of real estate assets held by the
Subsidiary Partnerships), stock or debt instruments held for not more than one
year purchased with the proceeds of a stock offering or long-term (at least five
years) debt offering of AIMCO, cash, cash items and U.S. government securities.
Second, not more than 25% of AIMCO's total assets may be represented by
securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class, the value of any one issuer's securities owned
by AIMCO may not exceed 5% of the value of AIMCO's total assets, and AIMCO may
not own more than 10% of any one issuer's outstanding voting securities.
AIMCO indirectly owns interests in the Management Subsidiaries, ANHI and
the other Unconsolidated Subsidiaries. As set forth above, the ownership of
more than 10% of the voting securities of any one issuer by a REIT is
prohibited by the asset tests. In addition, the value of any one issuer's
securities owned by AIMCO may not exceed 5% of the value of AIMCO's total
assets. AIMCO believes that its indirect ownership interest in the Management
Subsidiaries, ANHI and the other Unconsolidated Subsidiaries qualifies under
these rules. However, no independent appraisals have been obtained to support
AIMCO's conclusions as to the value of the Operating Partnership's total
assets and the value of the Operating Partnership's interest in the
Management Subsidiaries, ANHI and the other Unconsolidated Subsidiaries and
these values are subject to change in the future. Accordingly, there can be
no assurance that the IRS will not contend that the Operating Partnership's
ownership interest in the Management Subsidiaries, ANHI and the other
Unconsolidated Subsidiaries disqualifies AIMCO from treatment as a REIT.
Immediately following completion of the NHP Merger, AIMCO restructured
its ownership of NHP by transferring the stock or assets of NHP to ANHI
and/or other Unconsolidated Subsidiaries. AIMCO intends that its indirect
ownership interest in any Unconsolidated Subsidiary will comply with the REIT
rules described above.
AIMCO's indirect interests in the Operating Partnership and other
Subsidiary Partnerships are held through wholly owned corporate subsidiaries of
AIMCO organized and operated as "qualified REIT subsidiaries" within the meaning
of the Code. Qualified REIT subsidiaries are not treated as separate entities
from their parent REIT for federal income tax purposes. Instead, all assets,
liabilities and items of income, deduction and credit of each qualified REIT
subsidiary are treated as assets, liabilities and items of AIMCO. Each qualified
REIT subsidiary therefore will not be subject to Federal corporate income
taxation, although it may be subject to state or local taxation. In addition,
AIMCO's ownership of the voting stock of each qualified REIT subsidiary does not
violate the general restriction against ownership of more than 10% of the voting
securities of any issuer.
ANNUAL DISTRIBUTION REQUIREMENTS. AIMCO, in order to qualify as a REIT, is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (A) the sum of (i) 95% of AIMCO's
"REIT taxable income" (computed without regard to the dividends paid deduction
and AIMCO's net capital gain) and (ii) 95% of the net income (after tax), if
any, from foreclosure property, minus (B) the sum of certain items of noncash
income. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before AIMCO timely files
its tax return for such year and if paid with or before the first regular
dividend payment after such declaration. To the extent that AIMCO does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax
thereon at the capital gains or ordinary corporate tax rates, as the case may
be.
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Furthermore, if AIMCO should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95%
of its REIT capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, AIMCO would be subject to a 4% excise tax
on the excess of such required distribution over the amounts actually
distributed. In addition, AIMCO may elect to retain, rather than distribute,
all or a portion of its net long-term capital gains and pay the tax on such
undistributed gains, in which case AIMCO's stockholders would include their
proportionate share of such undistributed long-term capital gains in income
and receive a credit for their share of the tax paid by AIMCO. For purposes
of the 4% excise tax described above, any such retained amounts would be
treated as having been distributed. AIMCO believes that it has made, and
intends to make, timely distributions sufficient to satisfy this annual
distribution requirement.
It is possible that AIMCO, from time to time, may not have sufficient cash
or other liquid assets to meet the 95% distribution requirement due to timing
differences between (i) the actual receipt of income (including receipt of
distributions from the Operating Partnership) and actual payment of deductible
expenses and (ii) the inclusion of such income and deduction of such expenses in
arriving at taxable income of AIMCO. In the event that such timing differences
occur, in order to meet the 95% distribution requirement, AIMCO may find it
necessary to arrange for short-term, or possibly long-term, borrowings or to pay
dividends in the form of taxable distributions of property.
Under certain circumstances, AIMCO may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in AIMCO's deduction for
dividends paid for the earlier year. Thus, AIMCO may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, AIMCO will be
required to pay interest based on the amount of any deduction taken for
deficiency dividends.
FAILURE TO QUALIFY. If AIMCO fails to qualify for taxation as a REIT in any
taxable year, and the relief provisions do not apply, AIMCO will be subject to
tax (including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which
AIMCO fails to qualify will not be deductible by AIMCO nor will they be required
to be made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to stockholders will be taxable as ordinary income,
and, subject to certain limitations of the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, AIMCO will also be disqualified from taxation as
a REIT for the four taxable years following the year during which qualification
was lost. It is not possible to state whether in all circumstances AIMCO would
be entitled to such statutory relief.
TAX ASPECTS OF AIMCO'S INVESTMENTS IN PARTNERSHIPS
GENERAL. Most of AIMCO's investments are held indirectly through the
Operating Partnership. In general, partnerships are "pass-through" entities that
are not subject to Federal income tax. Rather, partners are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit of
a partnership, and are potentially subject to tax thereon, without regard to
whether the partners receive a distribution from the partnership. AIMCO will
include in its income its proportionate share of the foregoing partnership items
for purposes of the various REIT income tests and in the computation of its REIT
taxable income. Moreover, for purposes of the REIT asset tests, AIMCO will
include its proportionate share of assets held by the Subsidiary Partnerships.
See "--Taxation of AIMCO--Ownership of Partnership Interests."
ENTITY CLASSIFICATION. AIMCO's direct and indirect investment in
partnerships involves special tax considerations, including the possibility of a
challenge by the IRS of the status of any of the Subsidiary Partnerships as a
partnership (as opposed to an association taxable as a corporation) for federal
income tax purposes. If any of these entities were treated as an association for
federal income tax purposes, it would be taxable as a corporation and therefore
subject to an entity-level tax on its income. In such a situation, the character
of AIMCO's assets and items of gross income would change and could preclude
AIMCO from satisfying the asset tests and the income tests (see "--Taxation of
AIMCO--Asset Tests" and "--Taxation of AIMCO--Income Tests"), and in turn could
prevent AIMCO from qualifying as a REIT. See "--Taxation of AIMCO--Failure to
Qualify" above for a discussion of the effect of AIMCO's failure to meet such
tests for a taxable year. In addition, any change in the status of any of the
Subsidiary Partnerships for tax purposes might be treated as a taxable event, in
which case AIMCO might incur a tax liability without any related cash
distributions.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. Pursuant to the Code and
the regulations thereunder, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated in a manner such
that the contributing partner is charged with, or benefits from, respectively,
the unrealized gain or unrealized loss
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associated with the property at the time of the contribution. The amount of such
unrealized gain or unrealized loss is generally equal to the difference between
the fair market value of contributed property at the time of contribution, and
the adjusted tax basis of such property at the time of contribution (a "Book-Tax
Difference"). Such allocations are solely for Federal income tax purposes and do
not affect the book capital accounts or other economic or legal arrangements
among the partners. The Operating Partnership was formed by way of contributions
of appreciated property (including certain of the Owned Properties).
Consequently, allocations must be made in a manner consistent with these
requirements. Where a partner contributes cash to a partnership that holds
appreciated property, the Treasury Regulations provide for a similar allocation
of such items to the other partners. These rules apply to the contribution by
AIMCO to the Operating Partnership of the cash proceeds received in any
offerings of its stock.
In general, certain holders of Partnership Common Units ("OP Units") issued
by the Operating Partnership will be allocated lower amounts of depreciation
deductions for tax purposes and increased taxable income and gain on sale by the
Operating Partnership or other Subsidiary Partnerships of the contributed Owned
Properties. This will tend to eliminate the Book-Tax Difference over the life of
these partnerships. However, the special allocations do not always entirely
rectify the Book-Tax Difference on an annual basis or with respect to a specific
taxable transaction such as a sale. Thus, the carryover basis of the contributed
Owned Properties in the hands of the Subsidiary Partnerships may cause AIMCO to
be allocated lower depreciation and other deductions, and possibly greater
amounts of taxable income in the event of a sale of such contributed assets in
excess of the economic or book income allocated to it as a result of such sale.
This may cause AIMCO to recognize taxable income in excess of cash proceeds,
which might adversely affect AIMCO's ability to comply with the REIT
distribution requirements. See "--Taxation of AIMCO--Annual Distribution
Requirements."
With respect to any property purchased or to be purchased by any of the
Subsidiary Partnerships (other than through the issuance of OP Units) subsequent
to the formation of AIMCO, such property will initially have a tax basis equal
to its fair market value and the special allocation provisions described above
will not apply.
SALE OF THE PROPERTIES. AIMCO's share of any gain realized by the Operating
Partnership or another Subsidiary Partnership on the sale of any property held
as inventory or primarily for sale to customers in the ordinary course of
business will be treated as income from a prohibited transaction that is subject
to a 100% penalty tax. See "--Requirements for Qualification--Income Tests."
Under existing law, whether property is held as inventory or primarily for sale
to customers in the ordinary course of a partnership's trade or business is a
question of fact that depends on all the facts and circumstances with respect to
the particular transaction. The Operating Partnership and the other Subsidiary
Partnerships intend to hold the Owned Properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating the Owned Properties (and other apartment properties) and
to make such occasional sales of the Owned Properties, including peripheral
land, as are consistent with AIMCO's investment objectives.
TAXATION OF MANAGEMENT SUBSIDIARIES AND UNCONSOLIDATED SUBSIDIARIES
A portion of the amounts to be used to fund distributions to
stockholders is expected to come from the Management Subsidiaries, ANHI and
the other Unconsolidated Subsidiaries, through dividends paid on the
non-voting preferred stock of the Management Subsidiaries, ANHI and the other
Unconsolidated Subsidiaries held by the Operating Partnership, distributions
paid to the Operating Partnership as the general partner of PAMS LP, and
interest paid by on certain installment notes held by the Operating
Partnership. Each of the Management Subsidiaries, ANHI and the other
Unconsolidated Subsidiaries will not qualify as a REIT and will pay federal,
state and local income taxes on its taxable income at normal corporate rates.
Any federal, state or local income taxes that the Management Subsidiaries,
ANHI and the other Unconsolidated Subsidiaries are required to pay will
reduce AIMCO's cash flow from operating activities and its ability to make
payments to holders of its securities.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
GENERAL. Provided AIMCO qualifies as a REIT, distributions made to
AIMCO's taxable domestic stockholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income and will not be eligible for the dividends
received deduction for
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corporations. Distributions that are designated as capital gain dividends
will be taxed as long-term capital gains (to the extent that they do not
exceed AIMCO's actual net capital gain for the taxable year) without regard
to the period for which the stockholder has held its stock. However,
corporate stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. Distributions in excess of current and
accumulated earnings and profits will not be taxable to a stockholder to the
extent that they do not exceed the adjusted basis of the stockholder's
shares, but rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a stockholder's
shares, they will be included in income as long-term capital gain (or
short-term capital gain if the shares have been held for one year or less)
provided that the shares are a capital asset in the hands of the stockholder.
In addition, any dividend declared by AIMCO in October, November or December
of any year and payable to a stockholder of record on a specified date in any
such month shall be treated as both paid by AIMCO and received by the
stockholder on December 31 of such year, provided that the dividend is
actually paid by AIMCO during January of the following calendar year.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses of AIMCO.
AIMCO may elect to retain and pay income tax on its net long-term
capital gains. If AIMCO makes this election, AIMCO's stockholders would
include in their income as long-term capital gain their proportionate share
of the long-term capital gain as designated by AIMCO. Each stockholder will
be deemed to have paid the stockholder's share of the tax, which could be
credited or refunded to the stockholder. The basis of the stockholder's
shares would be increased by the amount of the undistributed long-term
capital gains (less the amount of capital gains tax paid).
In general, any gain or loss realized upon a taxable disposition of the
Class A Common Stock by a stockholder who is not a dealer in securities will
be treated as long-term capital gain or loss if the Class A Common Stock has
been held for more than one year and otherwise as short-term capital gain or
loss. However, any loss upon a sale or exchange of Class A Common Stock by a
stockholder who has held such shares for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss to
the extent of distributions from AIMCO required to be treated by such
stockholder as long-term capital gain. All or portion of any loss realized
upon a taxable disposition of the Class A Common Stock may be disallowed if
other shares of Class A Common Stock are purchased within 30 days before or
after the disposition.
The highest marginal individual income tax rate (which applies to
ordinary income and gain from the sale or exchange of capital assets held for
one year or less) is 39.6%. The maximum regular income tax rate on capital
gains derived by non-corporate taxpayers is 28% for sales and exchanges of
capital assets held for more than one year but not more than eighteen months,
and 20% for sales and exchanges of capital assets held for more than eighteen
months. However, any long-term capital gains from the sale or exchange of
depreciable real property that would be subject to ordinary income taxation
(i.e., "depreciation recapture") if treated as personal property will be
subject to a maximum tax rate of 25% instead of the 20% maximum rate. With
respect to distributions designated by AIMCO as capital gain dividends and
any retained capital gains that AIMCO is deemed to distribute, AIMCO may
designate (subject to certain limits) whether such a distribution is taxable
to its individual stockholders at a federal income tax rate of 20%, 25% or
28%. In addition, the characterization of income as capital gain or ordinary
income may affect the deductibility of capital losses. Capital losses not
offset by capital gains may be deducted against a non-corporate taxpayer's
ordinary income only up to a maximum annual amount of $3,000. Unused capital
losses may be carried forward indefinitely by non-corporate taxpayers. All
net capital gain of a corporate taxpayer is subject to tax at ordinary
corporate income tax rates. A corporate taxpayer can deduct capital losses
only to the extent of capital gains, with unused losses being carried back
three years and forward five years.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain material U.S. federal income
and estate tax consequences of the ownership and disposition of Class A
Common Stock applicable to Non- U.S. Holders of such stock. A "Non-U.S.
Holder" is any person other than (i) a citizen or resident of the United
States, (ii) a corporation or partnership created or organized in the United
States or under the laws of the United States or of any state thereof, (iii)
an estate whose income is includable in gross income for U.S. Federal income
tax purposes regardless of its source or, (iv) a trust if a United States
court is able to exercise primary supervision over the administration of such
trust and one or more United States fiduciaries have the authority to control
all substantial decisions of such trust. The discussion is based on current
law and is for general information only.
ORDINARY DIVIDENDS. The portion of dividends received by Non-U.S. Holders
payable out of AIMCO's earnings and profits which are not attributable to
capital gains of AIMCO and which are not effectively connected with a U.S. trade
or business of the Non-U.S. Holder will be subject to U.S. withholding tax at
the rate of 30% (unless reduced by treaty). In general, Non-U.S. Holders will
not be considered engaged in a U.S. trade or business solely as a result of
their ownership of Class A Common Stock. In cases where the dividend income from
a Non-U.S. Holder's investment in Class A Common Stock is (or is treated as)
effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or
business, the Non-U.S. Holder generally will be subject to U.S. tax at graduated
rates, in the same manner as U.S. stockholders are taxed with respect to such
dividends (and may also be subject to the 30% branch profits tax in the case of
a Non-U.S. Holder that is a corporation).
NON-DIVIDEND DISTRIBUTIONS. Unless Class A Common Stock constitutes a
United States Real Property Interest (a "USRPI"), distributions by AIMCO which
are not dividends out of the earnings and profits of AIMCO will not be subject
to U.S. income or withholding tax. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the distribution will be subject
to withholding at the rate applicable to dividends. However, the Non-U.S. Holder
may seek a refund of such amounts from the IRS if it is subsequently determined
that such distribution was, in fact, in excess of current and accumulated
earnings and profits of AIMCO. If Class A Common Stock constitutes a USRPI, such
distributions will be subject to 10% withholding and taxed pursuant to the
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") at a rate of 35%
to the extent such distributions exceed a stockholder's basis in his or her
Class A Common Stock
CAPITAL GAIN DIVIDENDS. Under FIRPTA, a distribution made by AIMCO to a
Non-U.S. Holder, to the extent attributable to gains from dispositions of USRPIs
such as the properties beneficially owned by AIMCO
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("USRPI Capital Gains"), will be considered effectively connected with a U.S.
trade or business of the Non-U.S. Holder and subject to U.S. income tax at the
rate applicable to U.S. individuals or corporations, without regard to whether
such distribution is designated as a capital gain dividend. In addition, AIMCO
will be required to withhold tax equal to 35% of the amount of dividends to the
extent such dividends constitute USRPI Capital Gains. Distributions subject to
FIRPTA may also be subject to a 30% branch profits tax in the hands of a foreign
corporate stockholder that is not entitled to treaty exemption.
DISPOSITION OF STOCK OF AIMCO. Unless Class A Common Stock constitutes a
USRPI, a sale of such stock by a Non-U.S. Holder generally will not be subject
to U.S. taxation under FIRPTA. The stock will not constitute a USRPI if AIMCO is
a "domestically controlled REIT." A domestically controlled REIT is a REIT in
which, at all times during a specified testing period, less than 50% in value of
its shares is held directly or indirectly by Non-U.S. Holders. AIMCO believes
that it is, and it expects to continue to be a domestically controlled REIT, and
therefore that the sale of Class A Common Stock will not be subject to taxation
under FIRPTA. Because the Class A Common Stock is publicly traded, however, no
assurance can be given that AIMCO will continue to be a domestically controlled
REIT.
If AIMCO does not constitute a domestically controlled REIT, a Non-U.S.
Holder's sale of stock generally will still not be subject to tax under FIRPTA
as a sale of a USRPI provided that (i) the stock is "regularly traded" (as
defined by applicable Treasury Regulations) on an established securities market
(e.g., the NYSE, on which the Class A Common Stock is listed) and (ii) the
selling Non-U.S. Holder held 5% or less of AIMCO's outstanding stock at all
times during a specified testing period.
If gain on the sale of stock of AIMCO were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and the purchaser of the stock could be required to withhold 10% of
the purchase price and remit such amount to the IRS.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Holder in two cases: (i) if the Non-U.S. Holder's
investment in the Class A Common Stock is effectively connected with a U.S.
trade or business conducted by such Non-U.S. holder, the Non-U.S. Holder will be
subject to the same treatment as a U.S. stockholder with respect to such gain,
or (ii) if the Non-U.S. Holder is a nonresident alien individual who was present
in the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, the nonresident alien individual will be subject to
a 30% tax on the individual's capital gain.
ESTATE TAX. Class A Common Stock owned or treated as owned by an individual
who is not a citizen or resident (as specially defined for U.S. federal estate
tax purposes) of the United States at the time of death will be includable in
the individual's gross estate for U.S. federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise. Such individual's estate may be
subject to U.S. federal estate tax on the property includable in the estate for
U.S. federal estate tax purposes.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
AIMCO will report to its U.S. stockholders and to the IRS the amount of
distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a stockholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid
unless such holder (i) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with the applicable requirements
of the backup withholding rules. A stockholder who does not provide AIMCO
with his correct taxpayer identification number also may be subject to
penalties imposed by the IRS. Any amount paid as backup withholding will be
creditable against the stockholder's income tax liability. In addition, AIMCO
may be required to withhold a portion of capital gain distribution to any
Non-U.S. Holders who fail to certify their non-foreign status to AIMCO. The
IRS has issued final Treasury Regulations regarding the back up withholding
rules as applied to Non-U.S. Holders. Those final Treasury Regulations alter
the current system of backup withholding compliance and will be effective for
payments made after December 31, 1998. Prospective investors in Class A
Common Stock should consult their tax advisors regarding the application of
the final Treasury Regulations.
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TAXATION OF TAX-EXEMPT STOCKHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject
to taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has ruled that dividend
distributions from a REIT to an exempt employee pension trust do not
constitute UBTI, provided that the shares of the REIT are not otherwise used
in an unrelated trade or business of the exempt employee pension trust. Based
on that ruling, amounts distributed by AIMCO to Exempt Organizations
generally should not constitute UBTI. However, if an Exempt Organization
finances its acquisition of the Common Stock with debt, a portion of its
income from the Company will constitute UBTI pursuant to the "debt-financed
property" rules. Furthermore, social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts, and qualified group
legal services plans that are exempt from taxation under paragraphs (7), (9),
(17) and (20), respectively, of Code Section 501(c) are subject to different
UBTI rules, which generally will require them to characterize distributions
from the Company as UBTI. In addition, in certain circumstances, a pension
trust that owns more than 10% of AIMCO's stock is required to treat a
percentage of the dividends from AIMCO as UBTI (the "UBTI Percentage"). The
UBTI Percentage is the gross income derived by AIMCO from an unrelated trade
or business (determined as if AIMCO were a pension trust) divided by the
gross income of AIMCO for the year in which the dividends are paid. The UBTI
rule applies to a pension trust holding more than 10% of AIMCO's stock only
if (i) the UBTI Percentage is at least 5%, (ii) AIMCO qualifies as a REIT by
reason of the modification of the 5/50 Rule that allows the beneficiaries of
the pension trust to be treated as holding shares of AIMCO in proportion to
their actuarial interest in the pension trust, and (iii) either (A) one
pension trust owns more than 25% of the value of AIMCO's stock or (B) a group
of pension trusts each individually holding more than 10% of the value of
AIMCO's stock collectively owns more than 50% of the value of AIMCO's stock.
The restrictions on ownership and transfer of AIMCO's stock should prevent an
Exempt Organization from owning more than 10% of the value of AIMCO's stock.
OTHER TAX CONSEQUENCES
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
The rules dealing with federal income taxation are constantly under
review by persons involved in the legislative process and by the IRS and the
U.S. Treasury Department. Changes to the federal laws and interpretations
thereof could adversely affect an investment in AIMCO. For example, a
proposal issued by President Clinton on February 2, 1998, if enacted into
law, may adversely affect the ability of AIMCO to expand the present
activities of its Management Subsidiaries. It cannot be predicted whether,
when, in what forms, or with what effective dates, the tax laws applicable to
AIMCO or an investment in AIMCO will be changed.
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STATE AND LOCAL TAXES. AIMCO and its stockholders may be subject to state
or local taxation in various state or local jurisdictions, including those in
which they transact business or reside. The state and local tax treatment of
AIMCO and its stockholders may not conform to the Federal income tax
consequences discussed above. Consequently, prospective investors should consult
their own tax advisors regarding the application and effect of state and local
tax laws on an investment in AIMCO.
LEGAL MATTERS
Certain legal matters will be passed upon for AIMCO by Skadden, Arps,
Slate, Meagher & Flom LLP, Los Angeles, California. The validity of the Class A
Common Stock offered hereby will be passed on for AIMCO by Piper & Marbury
L.L.P., Baltimore, Maryland. Certain matters as to Florida law will be passed
upon for AIMCO by Shumaker, Loop & Kendrick, Tampa, Florida.
EXPERTS
The consolidated financial statements of AIMCO and the combined financial
statements of the AIMCO Predecessors included in AIMCO's Annual Report on Form
10-K for the year ended December 31, 1996 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference. Such consolidated financial
statements and combined financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The Historical Summary of Gross Income and Direct Operating Expenses of
Morton Towers for the year ended December 31, 1996 appearing in AIMCO's Current
Report on Form 8-K, dated September 19, 1997, has been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. Such Historical Summary is incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The Historical Summary of Gross Income and Direct Operating Expenses of The
Bay Club at Aventura for the year ended December 31, 1996 included in Amendment
No. 1 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, has been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such Historical
Summary is incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The Historical Summary of Gross Income and Direct Operating Expenses of
Villa Ladera Apartments for the year ended December 31, 1995 included in AIMCO's
Current Report on Form 8-K, dated December 19, 1996, has been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such Historical Summary is
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of NHP for the years ended December
31, 1996, 1995 and 1994 included in Amendment No. 3 to AIMCO's Current Report on
Form 8-K, dated April 16, 1997, have been audited by Arthur Andersen LLP,
independent public accountants, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
As noted in their report, Arthur Andersen LLP did not audit the 1994
financial statements of certain real estate partnerships whose operating results
are included in "income (loss) from discontinued real estate operations, net of
income taxes" in the 1994 consolidated financial statements of NHP. The
financial statements of these real estate partnerships were audited by other
auditors, whose reports are incorporated herein by reference to Amendments No. 1
and 2 to AIMCO's Current Report on Form 8-K, dated April 16, 1997, and Arthur
Andersen LLP's opinion, insofar as it relates to the amounts included in the
consolidated financial statements for these real estate partnerships, is based
solely on the reports of those auditors included therein and incorporated herein
by reference. The auditors on whose reports Arthur Andersen LLP relied are:
Anders, Minkler & Diehl LLP; Dauby O'Connor & Zaleski, LLC; Deloitte & Touche
LLP; Edwards Leap & Sauer; George A. Hieronymous & Company, LLC; Goldenberg
Rosenthal Friedlander, LLP; Hansen, Hunter & Kibbee, P.C.; J.H. Cohn LLP; J.A.
Plumer & Co., P.A.; Marks Shron & Company, LLP; Reznick Fedder & Silverman; and
Russell Thompson Butler &
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Houston.
The combined financial statements of NHP Real Estate Companies (as defined
in Note 1 of such financial statements) for the years ended December 31, 1996,
1995 and 1994 included in Amendment No. 5 to AIMCO's Current Report on Form 8-K
dated June 3, 1997, have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such combined financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
As noted in their report, Arthur Andersen LLP did not audit the 1996, 1995
and 1994 financial statements of certain real estate partnerships accounted for
under the equity method by the NHP Real Estate Companies. The financial
statements of these real estate partnerships were audited by other auditors,
whose reports are filed as exhibits to Amendments No. 1 and 3 to AIMCO's Current
Report on Form 8-K, dated June 3, 1997, and Arthur Andersen LLP's opinion,
insofar as it relates to the amounts included in the combined financial
statements for these real estate partnerships, is based solely on the reports of
those auditors included therein and incorporated herein by reference. The
auditors on whose reports Arthur Andersen LLP relied are: Anders, Minkler &
Diehl LLP; Dauby O'Connor & Zaleski, LLC; Deloitte & Touche LLP; Edwards Leap &
Sauer; Fishbein & Company, P.C.; Freeman and Vessillo; Friduss, Lukee, Schiff &
Co., PC; George A. Heironymous & Company, LLC; Goldenberg Rosenthal Friedlander,
LLP; Hansen, Hunter & Kibbee, P.C.; J.H. Cohn LLP; J.A. Plumer & Co., P.A.;
Prague & Company, P.C.; Robert Ercolini & Company; Marks Shron & Company, LLP;
Reznick Fedder & Silverman; Russell Thompson Butler & Houston; Sciarabba Walker
& Co., LLP; Wallace Sanders & Company; Warady and Davis; Ziner and Company, PC;
and Zinner & Co.
The financial statements of NHP Southwest Partners, LP for the year ended
December 31, 1996 and for the period from January 20, 1995 through December 31,
1995 included in Amendment No. 5 to AIMCO's Current Report on Form 8-K, dated
June 3, 1997, have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
The combined financial statements of NHP New LP Entities (as defined in
Note 1 of such financial statements) for the year ended December 31, 1996 and
for the period from January 20, 1995 through December 31, 1995 included in
Amendment No. 1 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, have
been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report thereon included therein and incorporated herein by
reference. Such combined financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The combined financial statements of NHP Borrower Entities (as defined in
Note 1 of such financial statements) for the year ended December 31, 1996 and
for the period from January 20, 1995 through December 31, 1995 included in
Amendment No. 1 to AIMCO's Current Report on Form 8-K, dated June 3, 1997, have
been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report thereon included therein and incorporated herein by
reference. Such combined financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The Combined Statement of Revenues and Certain Expenses of the Thirty-Five
Acquisition Properties (as defined in Note 1 of such financial statements (which
represent the Winthrop Portfolio)) for the year ended December 31, 1996,
included in AIMCO's Current Report on Form 8-K, dated October 15, 1997, have
been audited by Deloitte & Touche LLP, independent public accountants, as set
forth in their report thereon included therein and incorporated herein by
reference. Such combined financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The statements of revenues and certain expenses of First Alexandria
Associates, A Limited Partnership, for the years ended December 31, 1996, 1995
and 1994 included in AIMCO's Current Report on Form 8-K, dated December 1, 1997,
have been audited by Reznick Fedder & Silverman, a Professional Corporation, as
set forth in
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their report thereon included therein and incorporated herein by reference. Such
statements of revenues and certain expenses are incorporated herein by reference
in reliance upon such report given upon the authority of the firm as experts in
accounting and auditing.
The statements of revenues and certain expenses of Country Lakes Associates
Two, A Limited Partnership, for the years ended December 31, 1996, 1995, and
1994 included in AIMCO's Current Report on Form 8-K, dated December 1, 1997,
have been audited by Reznick Fedder & Silverman, a Professional Corporation, as
set forth in their report thereon included therein and incorporated herein by
reference. Such statements of revenues and certain expenses are incorporated
herein by reference in reliance upon such report given upon the authority of the
firm as experts in accounting and auditing.
The statements of revenues and certain expenses of Point West Limited
Partnership, A Limited Partnership, for the years ended December 31, 1996, 1995
and 1994 included in AIMCO's Current Report on Form 8-K, dated December 1, 1997,
have been audited by Deloitte & Touche LLP, independent public accountants, as
set forth in their report thereon included therein and incorporated herein by
reference. Such statements of revenues and certain expenses are incorporated
herein by reference in reliance upon such report given upon the authority of the
firm as experts in accounting and auditing.
The statements of revenues and certain expenses of The Oak Park
Partnership, A Limited Partnership, for the years ended December 31, 1996, 1995
and 1994 included in AIMCO's Current Report on Form 8-K, dated December 1, 1997,
have been audited by Warady & Davis LLP, as set forth in their report thereon
included therein and incorporated herein by reference. Such statements of
revenues and certain expenses are incorporated herein by reference in reliance
upon such report given upon the authority of the firm as experts in accounting
and auditing.
The consolidated balance sheets of Ambassador Apartments, Inc. as of
December 31, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for the years then ended and the period
from August 31, 1994 through December 31, 1994, and the combined statements
of operations, partners' deficit and cash flows of Prime Properties (the
Predecessor to Ambassador Apartments, Inc.) for the period from January 1,
1994 through August 30, 1994, included in Amendment No. 1 to AIMCO's Current
Report on Form 8-K, dated December 23, 1997, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
31
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONS.
The estimated expenses, other than underwriting discounts and commissions,
in connection with the offering of the Securities, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee - Securities and Exchange Commission ........... $ 6,017
Printing and Engraving Expenses ................................. 5,000
Legal Fees and Expenses ......................................... 25,000
Accounting Fees and Expenses .................................... 35,000
Miscellaneous ................................................... 5,000
-------
Total ...................................................... $76,017
-------
-------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AIMCO's Charter limits the liability of AIMCO's directors and officers to
AIMCO and its stockholders to the fullest extent permitted from time to time by
Maryland law. Maryland law presently permits the liability of directors and
officers to a corporation or its stockholders for money damages to be limited,
except (i) to the extent that it is proved that the director or officer actually
received an improper benefit or profit in money, property or services for the
amount of the benefit or profit in money, property or services actually
received, or (ii) if a judgment or other final adjudication is entered in a
proceeding based on a finding that the director's or officer's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. This provision
does not limit the ability of the Company or its stockholders to obtain other
relief, such as an injunction or rescission.
AIMCO's Charter and Bylaws require AIMCO to indemnify its directors,
officers and certain other parties to the fullest extent permitted from time to
time by Maryland law. The Maryland General Corporation Law permits a corporation
to indemnify its directors, officers and certain other parties against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service to or at the request of the corporation, unless
it is established that (i) the act or omission of the indemnified party was
material to the matter giving rise to the proceeding and (x) was committed in
bad faith or (y) was the result of active and deliberate dishonesty, (ii) the
indemnified party actually received an improper personal benefit in money,
property or services or (iii) in the case of any criminal proceeding, the
indemnified party had reasonable cause to believe that the act or omission was
unlawful. Indemnification may be made against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by the director or officer
in connection with the proceeding; PROVIDED, HOWEVER, that if the proceeding is
one by or in the right of the corporation, indemnification may not be made with
respect to any proceeding in which the director or officer has been adjudged to
be liable to the corporation. In addition, a director or officer may not be
indemnified with respect to any proceeding charging improper personal benefit to
the director or officer in which the director or officer was adjudged to be
liable on the basis that personal benefit was improperly received. The
termination of any proceeding by conviction, or upon a plea of nolo contendere
or its equivalent, or an entry of any order of probation prior to judgment,
creates a rebuttable presumption that the director or officer did not meet the
requisite standard of conduct required for indemnification to be permitted. It
is the position of the Securities and Exchange Commission that indemnification
of directors and officers for liabilities arising under the Securities Act is
against public policy and is unenforceable pursuant to Section 14 of the
Securities Act.
The Company has entered into agreements with certain of its officers,
pursuant to which the Company has agreed to indemnify such officers to the
fullest extent permitted by applicable law.
II-1
<PAGE>
The Agreement of Limited Partnership (the "Operating Partnership
Agreement") of the Operating Partnership also provides for indemnification of
AIMCO, or any director or officer of AIMCO, in its capacity as the previous
general partner of the Operating Partnership, from and against all losses,
claims, damages, liabilities, joint or several, expenses (including legal fees),
fines, settlements and other amounts incurred in connection with any actions
relating to the operations of the Operating Partnership, as set forth in the
Operating Partnership Agreement.
Section 11.6 of the Apartment Investment and Management Company 1997 Stock
Award and Incentive Plan (the "1997 Plan"), Section 2.8 of the Amended and
Restated Apartment Investment and Management Company Non-Qualified Employee
Stock Option Plan (the "Non-Qualified Plan"), Section 2.8 of the Apartment
Investment and Management Company 1996 Stock Award and Incentive Plan (the "1996
Plan"), and Section 6.7 of the 1994 Stock Option Plan of Apartment Investment
and Management Company (the "1994 Plan") specifically provide that, to the
fullest extent permitted by law, each of the members of the Board of Directors
of AIMCO (the "Board"), the Compensation Committee of the Board and each of the
directors, officers and employees of AIMCO, any AIMCO subsidiary, the Operating
Partnership and any subsidiary of the Operating Partnership shall be held
harmless and indemnified by AIMCO for any liability, loss (including amounts
paid in settlement), damages or expenses (including reasonable attorneys' fees)
suffered by virtue of any determinations, acts or failures to act, or alleged
acts or failures to act, in connection with the administration of the 1997 Plan,
the Non-Qualified Plan, the 1996 Plan or the 1994 Plan, as the case may be, so
long as such person is not determined by a final adjudication to be guilty of
willful misconduct with respect to such determination, action or failure to act.
ITEM 16. EXHIBITS.
4.6 Specimen certificate for Class A Common Stock (incorporated by reference
from AIMCO's Registration Statement on Form 8-A filed on July 19, 1994).
5.1 Opinion of Piper & Marbury L.L.P. regarding the validity of the
Securities offered hereby.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax
matters.*
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in their
opinion filed as Exhibit 8.1).*
23.3 Consent of Piper & Marbury L.L.P. (included in their opinion filed as
Exhibit 5.1).*
23.4 Consent of Shumaker, Loop & Kendrick.*
23.5 Consent of Arthur Andersen LLP.*
23.6 Consent of Deloitte & Touche LLP.*
23.7 Consent of Anders, Minkler & Diehl LLP.*
23.8 Consent of Dauby O'Connor & Zaleski, LLC.*
23.9 Consent of Edwards Leap & Sauer.*
23.10 Consent of Fishbein & Company, P.C..*
23.11 Consent of Freeman & Vessillo.*
23.12 Consent of Friduss, Lukee, Schiff & Co., PC.*
23.13 Consent of George A. Hieronymous & Company, LLC.*
23.14 Consent of Goldenberg Rosenthal Friedlander, LLP.*
23.15 Consent of Hansen, Hunter & Kibbee, P.C..*
23.16 Consent of J.H. Cohn LLP.*
23.17 Consent of J.A. Plumer & Co., P.A..*
23.18 Consent of Marks Shron & Company, LLP.*
23.19 Consent of Prague & Company, P.C..*
23.20 Consent of Reznick Fedder & Silverman.*
23.21 Consent of Robert Ercolini & Company.*
23.22 Consent of Russell Thompson Butler & Houston.*
23.23 Consent of Sciarabba Walker & Co., LLP.*
23.24 Consent of Wallace Sanders & Company.*
23.25 Consent of Warady and Davis.*
23.26 Consent of Ziner and Company, PC.*
23.27 Consent of Zinner & Co..*
24 Power of Attorney (included on page II-4).*
* To be filed by Amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on this Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Denver, State of Colorado, on the 2nd day of
March, 1998.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ TERRY CONSIDINE
----------------------------
Terry Considine,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Terry
Considine and Peter K. Kompaniez his or her true and lawful attorney-in-fact and
agents, each acting alone, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone, or
his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ TERRY CONSIDINE
- ---------------------- Chairman of the Board and Chief
Terry Considine Executive Officer (Principal
Executive Officer) March 2, 1998
/s/ TROY D. BUTTS
- ---------------------- Senior Vice President and Chief
Troy D. Butts Financial Officer (Principal
Financial Officer) March 2, 1998
/s/ PATRICIA K. HEATH
- ---------------------- Vice President and Chief
Patricia K. Heath Accounting Officer (Principal March 2, 1998
Accounting Officer)
/s/ PETER K. KOMPANIEZ
- ---------------------- Vice Chairman, President and
Peter K. Kompaniez Director March 2, 1998
/s/ RICHARD S. ELLWOOD
- ---------------------- Director March 2, 1998
Richard S. Ellwood
/s/ J. LANDIS MARTIN
- ---------------------- Director March 2, 1998
J. Landis Martin
/s/ THOMAS L. RHODES
- ---------------------- Director March 2, 1998
Thomas L. Rhodes
/s/ JOHN D. SMITH
- ---------------------- Director March 2, 1998
John D. Smith
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
4.6 Specimen certificate for Class A Common Stock (incorporated by reference
from AIMCO's Registration Statement on Form 8-A filed on July 19, 1994).
5.1 Opinion of Piper & Marbury L.L.P. regarding the validity of the
Securities offered hereby.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax
matters.*
23. Consent of Ernst & Young LLP.*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in their
opinion filed as Exhibit 8.1).*
23.3 Consent of Piper & Marbury L.L.P. (included in their opinion filed as
Exhibit 5.1).*
23.4 Consent of Shumaker, Loop & Kendrick.*
23.5 Consent of Arthur Andersen LLP.*
23.6 Consent of Deloitte & Touche LLP.*
23.7 Consent of Anders, Minkler & Diehl LLP.*
23.8 Consent of Dauby O'Connor & Zaleski, LLC.*
23.9 Consent of Edwards Leap & Sauer.*
23.10 Consent of Fishbein & Company, P.C..*
23.11 Consent of Freeman & Vessillo.*
23.12 Consent of Friduss, Lukee, Schiff & Co., PC.*
23.13 Consent of George A. Hieronymous & Company, LLC.*
23.14 Consent of Goldenberg Rosenthal Friedlander, LLP.*
23.15 Consent of Hansen, Hunter & Kibbee, P.C..*
23.16 Consent of J.H. Cohn LLP.*
23.17 Consent of J.A. Plumer & Co., P.A..*
23.18 Consent of Marks Shron & Company, LLP.*
23.19 Consent of Prague & Company, P.C..*
23.20 Consent of Reznick Fedder & Silverman.*
23.21 Consent of Robert Ercolini & Company.*
23.22 Consent of Russell Thompson Butler & Houston.*
23.23 Consent of Sciarabba Walker & Co., LLP.*
23.24 Consent of Wallace Sanders & Company.*
23.25 Consent of Warady and Davis.*
23.26 Consent of Ziner and Company, PC.*
23.27 Consent of Zinner & Co..*
24 Power of Attorney (included on II-4).*
* To be filed by Amendment.
II-5
