<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 1998
REGISTRATION NO. 333-47201
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 84-1259577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
--------------------
<TABLE>
<S> <C>
1873 SOUTH BELLAIRE STREET, TERRY CONSIDINE
17TH FLOOR CHAIRMAN OF THE BOARD OF DIRECTORS
DENVER, COLORADO 80222 APARTMENT INVESTMENT
(303) 757-8101 AND MANAGEMENT COMPANY
(Address, including zip code, and 1873 SOUTH BELLAIRE STREET,
telephone number, including area 17TH FLOOR
code, of registrant's principal DENVER, COLORADO 80222
executive offices) (303)757-8101
(Name, address, including zip code,
and telephone number, including area
code, of Agent for Service)
</TABLE>
--------------------
JONATHAN L. FRIEDMAN, 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 . . . . . . . 1,496,477(2) $39.375 $58,923,781.00 $17,382.52(3)
</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 July 6, 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.
(3) $6,017.02 of this fee was paid prior to the initial filing
of this registration statement.
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
1,496,477 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 1,496,477 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 July 6, 1998, the last
reported sale price of the Class A Common Stock on the NYSE was $39.375 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 July 7, 1998
3
<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/A for the year ended December 31, 1997;
(ii) Quarterly Report on Form 10-Q/A for the quarter ended March 31,
1998;
(iii) Current Reports on Form 8-K dated December 23, 1997 (and
Amendment No. 1 thereto filed February 6, 1998 and Amendment No. 2 thereto
filed May 22, 1998), January 31, 1998 and March 17, 1998 (and Amendment No. 1
thereto filed April 3, 1998, Amendment No. 2 thereto filed June 22, 1998 and
Amendment No. 3 thereto filed July 2, 1998);
and
(iv) the description of the Class A Common Stock which is contained in a
Registration Statement on Form 8-A (File No. 1-13232) filed July 19, 1994,
including any amendment or reports filed for the purpose of updating such
description.
All documents filed by 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
4
<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
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<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . 4
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SELLING STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CERTAIN FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . 20
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</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 184,660 apartment units
owned or under management as of March 31, 1998. As of March 31, 1998, the
Company owned or controlled a total of 41,886 units in 153 apartment
properties (the "Owned Properties"), had an equity interest in 75,109 units
in 480 apartment properties (the "Equity Properties"), and managed 67,665
units in 356 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 March 31, 1998, 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.
BankBoston, N.A. serves as transfer agent and registrar of AIMCO's Class
A Common Stock, par value $.01 per share ("AIMCO Stock" or "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.
INSIGNIA MERGER
On March 17, 1998, AIMCO and AIMCO Properties, L.P. entered into an
Agreement and Plan of Merger (as amended and restated as of May 26, 1998, the
"Insignia Merger Agreement") with Insignia Financial Group, Inc., a Delaware
corporation ("Insignia"), and its subsidiary, Insignia/ESG, Inc. pursuant to
which, upon the approval of stockholders holding a majority of the
outstanding common stock of Insignia, Insignia will be merged with and into
AIMCO with AIMCO as the survivor (the "Insignia Merger"). The Insignia Merger
Agreement provides that prior to the Insignia Merger, Insignia will spin off
to its stockholders all assets related to its U.S. and international
commercial real estate business, its New York-based cooperative and
condominium management company, its single-family home brokerage operations
and other related holdings.
Assuming the stockholders of AIMCO and Insignia approve the Insignia
Merger, in the Insignia Merger the Class A common stock, par value $0.01 per
share, of Insignia ("Insignia Common Stock") will be converted into the right
to receive an aggregate of approximately $303 million in Series E Preferred
Stock, par value of $0.01 per share, of AIMCO ("Series E Preferred Stock").
In addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Series E Preferred Stock are entitled to a preferred cash dividend
of $50 million in the aggregate, and when such dividend is paid, the Series E
Preferred Stock automatically will convert into AIMCO Common Stock on a
one-for-one basis, subject to antidilution adjustments, if any. In addition,
AIMCO will assume approximately $307 million in outstanding indebtedness and
other liabilities and will assume approximately $150 million aggregate
liquidation amount of 6 1/2% Trust Convertible Preferred Securities (the
"TOPRs") issued by Insignia Financing I, a subsidiary of Insignia, for a
total transaction value of approximately $810 million. Also, the Insignia
Merger Agreement provides that AIMCO is required to propose to acquire (by
merger) the outstanding shares of beneficial interest in Insignia Properties
Trust, a Maryland real estate investment trust ("IPT"), for consideration of at
least $13.25 per IPT share and use its reasonable best efforts to consummate
the transaction after the closing of the Insignia Merger but not earlier than
August 15, 1998. IPT is a 61% owned subsidiary of Insignia; the 39% of IPT
not owned by Insignia is valued at an aggregate of approximately $100
million, or approximately $13.25 per share.
If the stockholders of AIMCO do not approve the Insignia Merger, but the
stockholders of Insignia do approve it, the Insignia Merger may nonetheless
be consummated. However, instead of receiving $303 million in Series E
Preferred Stock, holders of Insignia Common Stock would receive approximately
$203 million in Series E Preferred Stock and $100 million aggregate
liquidation value of Series F Preferred Stock, par value $0.01 per share, of
AIMCO ("Series F Preferred Stock"). In either case, holders of Series E
Preferred Stock would be entitled to a preferred cash dividend of $50
million. Holders of Series F Preferred Stock are entitled to receive the
greater of (i) the dividends received by holders of AIMCO Stock and (ii)
preferred distributions of 10% of the liquidation value of the Series F
Preferred Stock, with the preferred return rate escalating by 1% each year
until a 15% annual return is achieved. Upon the approval by stockholders of
AIMCO, the Series F Preferred Stock will convert into AIMCO Stock on a
one-to-one basis, subject to antidilution adjustments, if any.
Insignia Financial Group, Inc. is a leading fully integrated real estate
services company. Insignia is the largest manager of multifamily residential
properties in the United States and is among the largest managers of
commercial properties. Insignia commenced operations in December 1990 and
since then has grown to provide property and/or asset management and other
real estate services for over 2,700 properties which include approximately
280,000 residential units (including cooperative and condominium units), and
approximately 160 million square feet and commercial space located in over
500 cities and 48 states and overseas.
AMBASSADOR MERGER
On May 8, 1998, AIMCO completed the acquisition by merger (the
"Ambassador Merger") of Ambassador Apartments, Inc., a Maryland corporation
that had elected to be taxed as a REIT ("Ambassador"). AIMCO issued
6,578,833 shares of Class A Common Stock in connection with the Ambassador
Merger, assumed approximately $406.1 million in indebtedness, paid $19.6
million in cash to acquire interests in partnerships, and incurred
approximately $43.0 million in transaction costs associated with the
Ambassador Merger (including severance costs, transfer fees, and prepayment
fees). In the Ambassador Merger, each share of Common Stock, par value $0.01
per share, of Ambassador ("Ambassador Common Stock") was designated a value
of $21.00 per share and was converted into 0.553 shares of Class A Common
Stock as a result of the AIMCO Index Price equaling approximately $38.00. The
"AIMCO Index Price" was the aggregate of the average of the high and low
sales prices for the Class A Common Stock on each of the twenty consecutive
New York Stock Exchange trading days prior to the fifth trading day prior to
the closing of the Ambassador Merger.
In the Ambassador Merger, each outstanding option exercisable for
Ambassador Common Stock was converted into an option exercisable of 0.553
shares of Class A Common Stock, or at the option holder's option, cash equal
to the excess of $21.00 over the strike price.
Also in connection with the Ambassador Merger, AIMCO MergerSub, L.P., a
99.9% owned subsidiary partnership of AIMCO Properties, L.P. ("MergerSub"),
was merged with and into Ambassador's operating partnership, Ambassador
Apartments, L.P. (the "Ambassador OP"), with the Ambassador OP surviving (the
"OP Merger"). In the OP Merger, each unit of limited partnership interest in
the Ambassador OP was converted into 0.553 units of limited partnership
interest in AIMCO Properties, L.P. Thus, the Ambassador OP became a 99.9%
owned subsidiary partnership of AIMCO Properties, L.P.
Ambassador was a self-administered, self-managed real estate investment
trust engaged in the ownership and management of garden-style apartment
properties primarily to middle income tenants. As of the consummation of the
Ambassador Merger, Ambassador and its subsidiaries owned 52 apartment
communities with a total of 15,728 units located in Arizona, Colorado,
Florida, Georgia, Illinois, Tennessee and Texas.
6
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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, INSIGNIA AND OTHER ACQUIRED
BUSINESSES.
In connection with the Ambassador Merger, the Company acquired 15,728
apartment units and related assets with an aggregate book value in excess of
$500 million. The Insignia Merger will constitute the largest acquisition
ever undertaken by the Company, involving aggregate consideration in excess
of $910 million. In addition to the risks typically associated with
acquisitions generally, the integration of NHP's, Ambassador's and Insignia'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, Ambassador or Insignia, the difficulty
associated with assimilating the personnel and operations of NHP, Ambassador
and Insignia, 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
Insignia Merger, 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 certain 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
for interests therein. 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
8
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voting control over PAMS Inc., the Unconsolidated Partnership, the
Unconsolidated Subsidiaries, or certain other Management Subsidiaries, AIMCO
is not able to cause such entities to take actions that would be in the
interest of AIMCO and its stockholders or to 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. Although any transfer of assets or
services to CK will be at prices approved by the independent members of the
Board of Directors, the value of such assets or services may be difficult to
ascertain, there can be no assurance that 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 March 31, 1998, 94% of the Company's Owned
Properties and 56% of its total assets, were encumbered by debt, and the
Company had total outstanding indebtedness of $811.5 million, all of which
was secured by Owned Properties and other assets. In January 1998, the
Company entered into a new unsecured $50 million revolving credit facility
(the "New Credit Facility") with Bank of America National Trust and Saving
Association. On May 8, 1998, the Company increased its borrowing capacity
under the New Credit Facility to $125 million until November 1, 1998. On May
21, 1998, the Company further increased its borrowing capacity under the New
Credit Facility to $155 million until November 1, 1998. After November 1,
1998, the maximum borrowing capacity returns to its original $50 million. In
February 1998, the Company entered into a five-year secured credit facility
agreement (the "WMF Credit Facility") with Washington Mortgage Financial
Group, Ltd. ("Washington Mortgage"), 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 WMF
Credit Facility provides that all the rights of Washington Mortgage are
assigned to the Federal National Mortgage Association ("FNMA"), but FNMA does
not assume Washington Mortgage's obligations under the WMF 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. AIMCO has outstanding borrowings under
the WMF Credit Facility of $36.9 million as of March 31, 1998. As of March
31, 1998, General Motors Acceptance Corporation ("GMAC") has made 89 loans
(the "GMAC Loans"), with an aggregate outstanding principal balance of $386.9
million as of such date, to property owning partnerships of the Company, each
of which is secured by the underlying Owned Property of such partnership.
Twenty-Four GMAC Loans, having an aggregate balance of $146.4 million
outstanding as of March 31, 1998, are cross-collateralized and
cross-defaulted with certain other GMAC Loans, and seven loans currently held
by FNMA, having an aggregate balance of $66.9 million outstanding as of March
31, 1998, are cross-collateralized and cross-defaulted with certain other
FNMA loans. Other than certain GMAC Loans and certain loans currently held by
FNMA, 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 the Credit Facility, bear
interest at a variable rate. As of March 31, 1998, approximately 7% of the
Company's indebtedness bears interest at 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
From time to time, the Company enters into interest rate lock agreements
with major investment banking firms, in anticipation of refinancing debt.
Interest rate lock agreements related to planned refinancings of identified
variable rate indebtedness are accounted for as anticipatory hedges. Upon the
refinancing of such indebtedness, any gain or loss associated with the
termination of the interest rate lock agreement is deferred and recognized
over the life of the refinanced indebtedness. In order for the interest rate
lock to qualify as an anticipatory hedge, the following criteria must be met:
(a) the refinance being hedged exposes the Company to interest rate risk; (b)
the interest rate lock is designated as a hedge; (c) the significant
characteristics and expected terms of the refinance are identified; and (d)
it is probable that the refinance will occur. The Company believes that all
four of the above qualifications have been met. In the event that any of the
above qualifications are not met, the interest rate lock will not qualify as
an anticipatory hedge, and the gain or loss on the interest rate lock will be
recognized in the current period's earnings. In September 1997, AIMCO entered
into an interest rate lock agreement having a notional principal amount of
$75.0 million, in anticipation of refinancing certain floating rate
indebtedness. The interest rate lock agreement fixed the ten-year treasury
rate at 6.294%. An unrealized loss of approximately $3.5 million relating to
the hedge has been deferred as of March 31, 1998. Subsequent to March 31,
1998, AIMCO refinanced certain mortgage indebtedness relating to 10 real
estate partnerships, and realized losses of approximately $3.9 million, which
have been deferred and will be amortized over the life of the refinanced
debt. These losses, when amortized, will result in effective interest rates
of approximately 7.0% over the life of the refinanced debt.
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.
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 principle 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 1998.
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.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING. As of March 31, 1998,
the Managed Properties included 68,264 affordable units in 460 properties. In
addition, the NHP Real Estate Companies own interests in 55,546 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 the U.S. Department of Housing and Urban Development ("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 March 31, 1998, and in addition to the 441
HUD-assisted properties, the Company managed 19 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 suspended the Company's ability to manage or acquire additional
HUD-assisted properties in eastern Missouri through June 24, 1998. The
Company has proposed a settlement agreement with HUD which includes aggregate
payments to HUD of approximately $485,000 and withdrawal of the LDP as of its
date of issuance. 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. Effective February 13, 1998, counsel for the Company
and the U.S. Attorney for the Northern District of California entered into a
Tolling Agreement related to certain civil claims the government may have
against the Company. 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 apartment 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
June 12, 1998, the Company had under contract or letter of intent an
aggregate of 55 multi-family apartment properties with a maximum aggregate
purchase price of $667 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, Insignia 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 31 limited partnerships (the "English
Partnerships") that own 22 multifamily apartment properties and other assets and
interests related to the J.W. English Companies, and assumed management of the
properties owned by the English Partnerships. The Company made separate tender
offers (the "English Tender Offers") to the limited partners of 25 of the
English Partnerships (the "Tender Offer English Partnerships").
In November 1996, purported limited partners of certain of the Tender
Offer English Partnerships filed a 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 filed a
consolidated amended complaint on February 25, 1998. The Consolidated Amended
Complaint has added the general partners of the English Partnerships as
defendants, and has added the English Partnerships themselves as nominal
defendants.
The Consolidated Amended Complaint seeks compensatory and punitive
damages and alleges six causes of action for breach of fiduciary duty (two
separate causes of action), for an accounting, for breach of contract, for
breach of the implied covenant of good faith and fair dealing, and for
inducing breach of contract. Plaintiffs have also added allegations of
alleged wrongful conduct in connection with the Company's second group of
tender offers commenced in late 1997. On March 27, 1998, the Company filed
demurrers on behalf of the AIMCO defendants. On May 22, 1998, the Court
overruled the demurrers. Defendants intend to defend the action vigorously.
Trial is scheduled to begin on October 5, 1998. The defendants intend to
defend the action vigorously.
RISKS RELATING TO INSIGNIA LITIGATION
On March 24, 1998, certain persons claiming to own limited partner
interests in certain limited partnerships whose general partners (the
"General Partners") are affiliates of Insignia (the "Partnerships") filed a
purported class and derivative complaint (the "Complaint") in California
Superior Court in the County of San Mateo against Insignia, the General
Partners, AIMCO, certain persons and entities who purportedly formerly
controlled the General Partners, and additional entities affiliated with and
individuals who are officers, directors and/or principals of several of the
defendants. With respect to AIMCO, plaintiffs allege that (i) AIMCO aided and
abetted Insignia's alleged breach of fiduciary duty in connection with
Insignia's agreement to merge with AIMCO and (ii) AIMCO aided and abetted
other alleged acts of mismanagement purportedly committed by the Insignia
defendants. With respect to Insignia and the other defendants, plaintiffs
allege purported violations of various California securities, corporate and
partnership statutes, as well as conversion and common law fraud. The
Complaint seeks unspecified compensatory and punitive damages, an injunction
blocking the sale of control of the General Partners to AIMCO and a court
order directing the defendants to discharge their fiduciary duties to the
plaintiffs. On June 25, 1998, AIMCO filed a demurrer to the Complaint.
Hearing on the matter is currently scheduled for August 6, 1998. The
defendants intend to defend the action vigorously.
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 July 1998, AIMCO received an opinion of Skadden, Arps, Slate, Meagher
& Flom LLP, tax counsel to AIMCO, concerning the qualification of AIMCO as a
REIT. The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is based on,
and conditioned upon, certain representations and covenants made by AIMCO
as to factual matters including representations and covenants regarding the
nature of AIMCO's properties and the future conduct of its business. 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").
Following the Insignia Merger, AIMCO's qualification as a REIT also
depends upon the qualification of IPT as a REIT.
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. In addition, following the
Insignia Merger, if Insignia is subsequently determined to have earnings and
profits in excess of that distributed by AIMCO effective on or before
December 31, 1998, AIMCO would fail to qualify as a REIT. 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."
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 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.
RISKS RELATING TO CONSUMMATION OF INSIGNIA MERGER
Consummation of the Insignia Merger does not require the approval of the
stockholders of AIMCO. However, approval of the AIMCO stockholders is
necessary for the issuance of the $100 million in Series E Preferred Stock in
excess of $203 million. Therefore, in order to avoid the necessity of issuing
Series F Preferred Stock, which AIMCO management believes has terms less
favorable to AIMCO than Series E Preferred Stock, approval of the AIMCO
stockholders will be sought. As a result, it is possible that the AIMCO
stockholders will vote to disapprove the Insignia Merger (or fail to vote in
favor of the Insignia Merger) and the Insignia Merger will nonetheless be
consummated, notwithstanding the vote of the AIMCO stockholders.
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 March 31, 1998, 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 7.7
million shares of Class A Common Stock. In addition, as of March 31, 1998,
there were outstanding approximately 5.7 million OP Units which, upon tender
for redemption by the holders, may be acquired by AIMCO in exchange for an
equal number of shares of Class A Common Stock. Consummation of the
Ambassador Merger increased the amount of outstanding shares of Class A
Common Stock by approximately 6.8 million shares (using a conversion ratio
of .553). In addition, in the Insignia merger, AIMCO will issue approximately
$303 million in Series E Preferred Stock or $203 million in Series E
Preferred Stock and $100 million aggregate liquidation value of Series F
Preferred Stock. If $303 million in Series E Preferred Stock is issued, $303
million will automatically convert into Class A Common Stock on a one-for-one
basis, subject to antidilution adjustments, if any, upon payment of a $50
million dividend. If $100 million aggregate liquidation value of Series F
Preferred Stock is issued, the Series F Preferred Stock will convert into
Class A Common Stock, upon approval by stockholders of AIMCO, on a one-to-one
basis, subject to antidilution adjustments, if any. All of the shares of
Class A Common Stock issued to Ambassador stockholders as consideration in
the Ambassador Merger is immediately available for sale in the public markets
and the other shares of Class A Common Stock described above is available for
sale in the public markets from time to time pursuant to exemptions from
registration or upon registration. 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 1,496,477
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, shares that may be issued upon exercise of
warrants and shares that may be issued upon conversion of AIMCO Class B
Common Stock.
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 SHARES OFFERED
SELLING STOCKHOLDER TO OFFERING(1) HEREBY(1)
------------------- ------------------ --------------
<S> <C> <C>
Terry Considine 822,311(2) 186,857(3)
Public Employees Retirement System of Ohio 747,297(4) 747,297(4)
Leo E. Zickler 125,000(5) 125,000(5)
Francis P. Lavin 125,000(5) 125,000(5)
Robert B. Downing 73,865(5) 73,865(5)
Mark E. Schifrin 73,865(5) 73,865(5)
Marc B. Abrams 55,400(5) 55,400(5)
Richard R. Singleton 46,870(5) 46,870(5)
Saul Skoler 27,569 27,569
Edward T. Tokar 5,865 5,865
Joseph A. Goldblum 3,910 3,910
Goldblum Trust FBO Libby DelGuidice 3,910 3,910
Goldblum Trust FBO Georgeanne T. Goldblum 3,910 3,910
Teresa L. Barnes 76 76
Francis S. Godbold 1,495 1,495
John Davenport Mosby III 1,327 1,327
Todd W. Sheets and Joyce C. Sheets 5,608 5,608
David E. Thomas, Jr. 229 229
Steven D. Ira 399,891(6) 1,431
Charles H. Ballou 378 378
Jack C. Harmon 693 693
Sally E. Law Revocable Trust 693 693
Christopher A. Morson 630 630
Margaret C. Starner 378 378
Patrick L. Sullivan 756 756
Frederick G. Tripp Trust 3,465 3,465
</TABLE>
(1) Unless otherwise indicated, the number of shares shown reflects the
number of shares of Class A Common Stock (subject to adjustment pursuant to
antidilution adjustment provisions) that may be issued to the Selling
Stockholder from time to time by AIMCO in exchange for OP Units tendered for
redemption by such Selling Stockholder pursuant to the Limited Partnership
Agreement.
(2) Mr. Considine is the Chairman of the Board of Directors and Chief
Executive Officer of AIMCO. The number of shares shown as owned by Terry
Considine prior to this offering includes 264,594 shares of Class A Common
Stock that are currently outstanding; 93,428 shares of Class A Common Stock
issuable upon conversion of an equal number of shares of Class B Common Stock
(the "Considine Class B Shares"); 464,289 shares of Class A Common Stock
issuable by the Company in exchange for an equal number of OP Units, which
are held by Mr. Considine.
(3) The number of shares shown as offered hereby includes the Considine
Class B Shares and 93,429 shares of Class A Common Stock, all of which Mr.
Considine has pledged to U.S. Bank ("USB") as collateral security for certain
loans. Such Pledged Shares may be sold hereunder by USB in the event of a
default on such loans.
(4) Represents shares of Class A Common Stock.
(5) 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.
(6) Mr. Ira is an Executive Vice President of AIMCO. The number of
shares shown as owned by Mr. Ira prior to this offering includes 240,897
shares of Class A Common Stock; 13,821 shares of Class A Common Stock
issuable upon conversion of an equal number of shares of Class B Common
Stock; 48,800 shares of Class A Common Stock issuable upon the exercise of
options; and 96,373 shares of Class A Common Stock issuable by the Company in
exchange for an equal number of OP Units.
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,
none of the Selling Stockholders will own any shares of Class A Common Stock,
except that (i) Mr. Considine will own 171,165 shares of Class A Common
Stock; and 464,289 shares of Class A Common Stock issuable by the Company in
exchange for an equal number of OP Units (collectively representing
approximately 1% of the total number of shares of Class A Common Stock
outstanding as of the date hereof); and (ii) Mr. Ira will own 240,897 shares
of Class A Common Stock; 13,821 shares of Class A Common Stock issuable upon
conversion of an equal number of shares of Class B Common Stock; 48,800
shares of Class A Common Stock issuable upon exercise of options; and 94,942
shares of Class A Common Stock issuable by the Company in exchange for an
equal number of OP Units.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the
Selling Stockholders of up to 1,496,477 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.
CERTAIN 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 its 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 SHOULD CONSULT ITS TAX ADVISOR REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, HOLDING,
EXCHANGING, OR OTHERWISE DISPOSING OF CLASS A COMMON STOCK AND OF AIMCO'S
ELECTION TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX PURPOSES, AS A REAL
ESTATE INVESTMENT TRUST.
TAXATION OF AIMCO
GENERAL. The REIT provisions of the Code are highly technical and
complex. The following sets forth the material aspects of the provisions of
the Code that govern the federal income tax treatment of a REIT and its
stockholders. This summary is qualified in its entirety by the applicable
Code provisions, rules and regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all of which are subject
to change, 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 such
election. 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, notwithstanding AIMCO's
qualification as a REIT, 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
(such as the assets acquired from Insignia in the Insignia Merger), 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. It should be noted that AIMCO has acquired (and will acquire
in the Insignia Merger) a significant amount of assets with Built-in Gain and
a taxable disposition by AIMCO of these assets within ten years of their
acquisitions would subject AIMCO to tax under the foregoing rule. In
addition, AIMCO could be subject to tax in certain situations and on certain
transactions not presently contemplated.
REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association (1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation, but for the special Code provisions applicable to REITs;
(4) that is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (5) the beneficial ownership of which is held by
100 or more persons; (6) in which, during the last half of each taxable year,
not more than 50% in
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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. AIMCO's 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.
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 dividends paid by AIMCO). 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 partnerships and limited liability companies in
which the Company has ownership interests (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 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) may directly perform
services that are "usually or customarily rendered" in connection with the
rental of space for occupancy only and are not otherwise considered rendered
to the occupant of the property. In addition, AIMCO (or its affiliates) may
provide non-customary services to tenants 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 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 indirectly receives distributions from the Management
Subsidiaries that will be classified
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as dividend income to the extent of the earnings and profits of the
Management Subsidiaries. Such distributions will generally 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 are 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. As set
forth above, the ownership of more than 10% of the voting securities of any
one issuer or the ownership of more than 5% of AIMCO's total assets in any
one issuer's securities by a REIT is prohibited by the asset tests. AIMCO
believes that its indirect ownership interests in the Management Subsidiaries
qualify 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 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 disqualifies AIMCO from treatment as a REIT.
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 distributes at least 95%, but less than 100%, of its "REIT taxable
income," as adjusted, it will be subject to tax thereon at ordinary corporate
tax rates.
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AIMCO may elect to retain, rather than distribute its net long-term capital
gains and pay the tax on such gains. In such a 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. AIMCO's stockholders would then increase the adjusted basis of
their AIMCO shares by the difference between the designated amounts included
in their long-term capital gains and the tax deemed paid with respect to
their shares. 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 and (ii)
95% of its REIT capital gain income for such year (excluding retained
long-term capital gains), and (iii) any undistributed taxable income from
prior periods, AIMCO would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed. AIMCO
believes that it has made, and intends to make, timely distributions
sufficient to satisfy this annual distribution requirement.
It is possible that AIMCO, from time to time, may not have sufficient
cash to meet the 95% distribution requirement due to timing differences
between (i) the actual receipt of cash (including receipt of distributions
from the Operating Partnership) and (ii) the inclusion of such income
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.
ABSENCE OF EARNINGS AND PROFITS. The Code provides that when a REIT
acquired a corporation that is currently a C corporation (such as Insignia),
the REIT may qualify as a REIT only if, as of the close of the year of
acquisition, the REIT has no "earnings and profits" acquired from such C
corporation. In the Insignia Merger, AIMCO will succeed to the earnings and
profits of Insignia and, therefore, AIMCO must distribute such earnings and
profits by December 31, 1998. Insignia has retained independent certified
public accountants to determine Insignia's earnings and profits through the
Effective Time for purposes of this requirement. The determination of the
independent certified public accountants will be based upon Insignia's tax
returns as filed with the IRS and other assumptions and qualifications set
forth in the reports issued by such accountants.
Any adjustments to Insignia's income for taxable years ending on or
before the closing of the Insignia Merger including as a result of an
examination of its returns by the IRS and the receipt of certain indemnity or
other payments could affect the calculation of Insignia's earnings and
profits. Furthermore, the determination of earnings and profits requires the
resolution of certain technical tax issues with respect to which there is no
authority directly on point and, consequently, the proper treatment of these
issues for earnings and profits purposes is not free from doubt. There can be
no assurance that the IRS will not examine the tax returns of Insignia and
propose adjustments to increase its taxable income and therefore its earnings
and profits. In this regard, the IRS can consider all taxable years of
Insignia as open for review for purposes of determining the amount of such
earnings and profits. Additionally, if the Insignia Merger does not qualify
as a tax-free reorganization, Insignia would recognize a taxable gain in an
amount equal to the excess of the fair market value of its assets over the
tax basis in its assets. Such gain would result in AIMCO succeeding to a
substantial amount of corporate earnings and profits of Insignia (in addition
to a substantial corporate income tax). AIMCO's failure to distribute an
amount equal to such earnings and profits effective on or before December 31,
1998 would result in AIMCO's failure to qualify as a REIT.
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 OP Units will be allocated lower amounts
of depreciation deductions for tax purposes and increased taxable income and
gain on sale by the Operating Partnership or 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
A portion of the amounts to be used to fund distributions to
stockholders is expected to come from distributions made by the Management
Subsidiaries to the Operating Partnership, distributions paid to the
Operating Partnership as the general partner of PAMS LP, and interest paid by
the Management Subsidiaries on certain notes held by the Operating
Partnership. In general the Management Subsidiaries pay federal, state and
local income taxes on their taxable income at normal corporate rates. Any
federal, state or local income taxes that the Management 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 (and retained long-term capital gains) 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.
In general, any loss upon a sale or exchange of shares by a stockholder
who has held such shares for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss to the
extent of distributions from AIMCO required to be treated by such stockholder
as long-term capital gain.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain U.S. federal income and estate
tax consequences of the ownership and disposition of AIMCO 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. The discussion addresses only certain and not all
aspects of U.S. federal income and estate taxation.
ORDINARY DIVIDENDS. The portion of dividends received by Non-U.S.
Holders payable out of AIMCO's earnings and profits which are not
attributable to capital gains of AIMCO and which are not effectively
connected with a U.S. trade or business of the Non-U.S. Holder will be
subject to U.S. withholding tax at the rate of 30% (unless reduced by
treaty). In general, Non-U.S. Holders will not be considered engaged in a
U.S. trade or business solely as a result of their ownership of AIMCO Stock.
In cases where the dividend income from a Non-U.S. Holder's investment in
AIMCO 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 AIMCO 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 AIMCO 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 AIMCO 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 Non-U.S. Holder that is a corporation.
DISPOSITION OF STOCK OF AIMCO. Unless AIMCO 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 AIMCO Stock should not be
subject to taxation under FIRPTA. Because AIMCO 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 New York Stock Exchange, on which AIMCO 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 AIMCO 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. AIMCO 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, 1999. Prospective investors 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"),
are generally 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
should generally 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 will generally 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, LOCAL AND FOREIGN TAXES. The Operating Partnership and its
partners and AIMCO and its stockholders may be subject to state, local or
foreign taxation in various state or local jurisdictions and foreign
countries, including those in which they transact business or reside. The
state, local and foreign tax treatment of the Operating Partnership and its
partners and 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,
local and foreign tax laws on an investment in the Operating Partnership or
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.
EXPERTS
The consolidated financial statements of AIMCO included in AIMCO's
Annual Report on Form 10-K/A for the year ended December 31, 1997, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. The
consolidated financial statements of Ambassador Apartments, Inc. as of
December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997, included in AIMCO's Current Report on Form 8-K dated
March 17, 1998 (and Amendment No. 1 thereto filed April 3, 1998), and the
consolidated financial statements of Ambassador Apartments, Inc. as of
December 31, 1996 and 1995, and for each of the two years in the period ended
December 31, 1996 and the period from August 31, 1994 through December 31,
1994, and the combined financial statements of Prime Properties (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 filed February 6, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports
thereon included therein and incorporated herein by reference. The
consolidated financial statements of Insignia Financial Group, Inc. as of
December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997 included in AIMCO's Current Report on Form 8-K dated
March 17, 1998 (and Amendment No. 1 thereto filed April 3, 1998), have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated 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.
29
<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 ........... $17,382.52
Printing and Engraving Expenses ................................. 5,000
Legal Fees and Expenses ......................................... 25,000
Accounting Fees and Expenses .................................... 35,000
Miscellaneous ................................................... 5,000
----------
Total ...................................................... $87,382.52
----------
-------
</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. dated July 7, 1998 regarding the
validity of the Securities offered hereby.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated July 7,
1998 regarding tax matters.
23.1 Consent of Piper & Marbury L.L.P. dated July 7, 1998 (included in
their opinion filed as Exhibit 5.1).
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP dated July 7,
1998 (included in their opinion filed as Exhibit 8.1).
23.3 Consent of Ernst & Young LLP, Dallas, Texas, dated July 2, 1998.
23.4 Consent of Ernst & Young, LLP, Chicago, Illinois, dated July 2, 1998.
23.5 Consent of Ernst & Young, LLP, Greenville, South Carolina, dated
July 6, 1998.
24. Power of Attorney.*
* Previously filed.
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 7th day of
July, 1998.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ TERRY CONSIDINE
----------------------------
Terry Considine,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
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) July 7, 1998
/s/ TROY D. BUTTS*
- ---------------------- Senior Vice President and Chief
Troy D. Butts Financial Officer (Principal
Financial Officer) July 7, 1998
/s/ PATRICIA K. HEATH*
- ---------------------- Vice President and Chief
Patricia K. Heath Accounting Officer (Principal July 7, 1998
Accounting Officer)
/s/ PETER K. KOMPANIEZ*
- ---------------------- Vice Chairman, President and
Peter K. Kompaniez Director July 7, 1998
/s/ RICHARD S. ELLWOOD*
- ---------------------- Director July 7, 1998
Richard S. Ellwood
/s/ J. LANDIS MARTIN*
- ---------------------- Director July 7, 1998
J. Landis Martin
/s/ THOMAS L. RHODES*
- ---------------------- Director July 7, 1998
Thomas L. Rhodes
/s/ JOHN D. SMITH*
- ---------------------- Director July 7, 1998
John D. Smith
* By: /s/ TERRY CONSIDINE
--------------------------
Terry Considine
ATTORNEY-IN-FACT
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. dated July 7, 1998 regarding the
validity of the Securities offered hereby.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated July 7,
1998 regarding tax matters.
23.1 Consent of Piper & Marbury L.L.P. dated July 7, 1998 (included in
their opinion filed as Exhibit 5.1).
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP dated July 7,
1998 (included in their opinion filed as Exhibit 8.1).
23.3 Consent of Ernst & Young LLP, Dallas, Texas, dated July 2, 1998.
23.4 Consent of Ernst & Young, LLP, Chicago, Illinois, dated July 2, 1998.
23.5 Consent of Ernst & Young, LLP, Greenville, South Carolina, dated
July 6, 1998.
24. Power of Attorney.*
* Previously filed.
II-5
<PAGE>
EXHIBIT 5.1
LETTERHEAD OF PIPER & MARBURY L.L.P.
July 7, 1998
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222
Ladies and Gentlemen:
We have acted as special Maryland counsel to Apartment Investment and
Management Company, a Maryland corporation (the "Company"), in connection
with the registration under the Securities Act of 1933, as amended (the
"Act"), of 1,496,477 shares (the "Shares") of Class A Common Stock, par value
$.01 per share, of the Company (the "Class A Common Stock") pursuant to a
Registration Statement of the Company on Form S-3 (Registration No.
333-47201) (the "Registration Statement") filed with the Securities and
Exchange Commission (the "Commission"). This opinion is being provided at
your request in connection with the filing of the Registration Statement.
The Shares include 840,726 shares of Class A Common Stock that have
previously been issued by the Company (the "Outstanding Shares"), and up to
655,751 shares of Class A Common Stock that may be issued by the Company
from time to time as follows: (i) up to 500,000 shares (plus such additional
shares as may be issued pursuant to certain antidilution provisions) of Class
A Common Stock (the "Warrant Shares") that may be issued by the Company upon
exercise of certain Common Stock Purchase Warrants (the "Warrants") issued by
the Company to purchase such shares at $41.00 per share, (ii) up to 93,428
shares of Class A Common Stock (the "Conversion Shares") that may be issued
by the Company to upon conversion of up to 93,428 outstanding shares of
Class B Common Stock, par value $.01 per share, of the Company (the "Class B
Common Stock"), and (iii) up to 62,323 shares (plus such additional shares as
may be issued pursuant to certain antidilution provisions) of Class A Common
Stock (the "Exchange Shares") that may be issued by the Company in exchange
for up to 62,323 Partnership Common Units (the "OP Units") of AIMCO
Properties, L.P., a Delaware limited partnership (the "Operating
Partnership") tendered redemption.
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
July 7, 1998
Page 2
In rendering the opinion expressed herein, we have examined the
Registration Statement, the Charter and By-Laws of the Company, the Warrants,
the Second Amended and Restated Agreement of Limited Partnership of the
Operating Partnership, as amended to date (the "Partnership Agreement"),
the proceedings of the Board of Directors of the Company relating to the
reservation and issuance of the Shares, a Certificate of the Secretary
of the Company (the "Certificate"), and such other statutes, certificates,
instruments, and documents relating to the Company and matters of law as
we have deemed necessary to the issuance of this opinion.
In our examination of the aforesaid documents, we have assumed, without
independent investigation, the genuineness of all signatures, the legal
capacity of all individuals who have executed any of the aforesaid documents,
the authenticity of all documents submitted to us as originals, the
conformity with originals of all documents submitted to us as copies (and the
authenticity of the originals of such copies), and the accuracy and
completeness of all public records reviewed by us. In making our examination
of documents executed by parties other than the Company, we have assumed that
such parties had the power, corporate or other, to enter into and perform all
obligations thereunder, and we have also assumed the due authorization by all
requisite action, corporate or other, and the valid execution and delivery by
such parties of such documents and the validity, binding effect and
enforceability thereof with respect to such parties. As to any facts material
to this opinion which we did not independently establish or verify, we have
relied solely upon the Certificate. We have also assumed, without independent
investigation, that the Outstanding Shares were issued in accordance with the
terms of the resolutions authorizing their issuance.
Based upon the foregoing, having regard for such legal considerations as
we deem relevant, and limited in all respects to applicable Maryland law, we
are of the opinion and advise you that:
(1) The Outstanding Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(2) The Warrant Shares to be issued upon the exercise of the
Warrants have been duly authorized and, upon exercise of the Warrants in
accordance with their terms and issuance and delivery of stock
certificates representing the Warrant Shares, will be validly issued,
fully paid, and non-assessable.
<PAGE>
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
July 7, 1998
Page 3
(3) The Conversion Shares to be issued upon conversion of shares
of Class B Common Stock have been duly authorized and, upon satisfaction
of the conditions for conversion of such shares of Class B Common Stock
as set forth in the Charter of the Company and delivery of stock
certificates representing the Conversion Shares, will be validly issued,
fully paid, and non-assessable.
(4) The Exchange Shares to be issued in exchange for OP Units
tendered for redemption have been duly authorized and, upon exchange of
such OP Units in accordance with the terms of the Partnership Agreement
and issuance and delivery of stock certificates representing the
Exchange Shares, will be validly issued, fully paid, and non-assessable.
In addition to the qualifications set forth above, this opinion is
subject to the qualification that we express no opinion as to the laws of any
jurisdiction other than the State of Maryland. This opinion concerns only the
effect of the laws (exclusive of the securities or "blue sky" laws and the
principles of conflict of laws) of the State of Maryland as currently in
effect. We assume no obligation to supplement this opinion if any applicable
laws change after the date hereof or in any facts or circumstances come to
our attention after the date hereof that might change this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters" in the Prospectus included in the Registration Statement. In
giving our consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<PAGE>
Exhibit 8.1
July 7, 1998
Apartment Investment and
Management Company
1873 South Bellaire Street
Suite 1700
Denver, Colorado 80222
Re: CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
-----------------------------------------
Ladies and Gentlemen:
You have requested our opinion concerning certain Federal income tax
considerations in connection with the offering (the "Offering") for sale,
from time to time, of shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock"), of Apartment Investment and Management Company, a
Maryland corporation ("AIMCO"), by certain stockholders pursuant to a
Registration Statement on Form S-3 (No. 333-47201), as amended (the
"Registration Statement"). Unless otherwise specifically defined herein, all
capitalized terms have the meanings assigned to them in the Registration
Statement.
In connection with the Offering and with certain previous offerings
of Class A Common Stock by AIMCO we have acted as counsel to AIMCO, and we
have assisted in the preparation of the Registration Statement and certain
other documents. In formulating our opinion, we have reviewed the
Registration Statement and such other documentation and information provided
by you as is relevant to the Offering and necessary to prepare the
Registration Statement. In addition, you have provided us with certain
representations and covenants of officers of AIMCO relating to, among other
things, the actual and proposed operation of AIMCO. For purposes of our
opinion, we have not made an independent investigation of the facts
<PAGE>
Apartment Investment and
Management Company
July 7, 1998
Page 2
set forth in such representations, the partnership agreements and
organizational documents for each of the partnerships and limited liability
companies in which AIMCO holds a direct or indirect interest (the
"Subsidiaries"), the Registration Statement or any other document. We have,
consequently, relied on your representations that the information presented
in such documents or otherwise furnished to us accurately and completely
describes all material facts relevant to our opinion. No facts have come to
our attention, however, that would cause us to question the accuracy and
completeness of such facts or documents in a material way. We have also
relied upon the opinion of Piper & Marbury L.L.P. dated July 7, 1998 with
respect to certain matters of Maryland law, as well as the opinion of
Shumaker, Loop & Kendrick dated October 18, 1995 with respect to certain
matters of Florida law and the opinion of Altheimer & Gray dated May 8, 1998
with respect to the qualification as a REIT of Ambassador Apartments, Inc.,
a Maryland corporation for its taxable year ended December 31, 1994 and all
subsequent taxable years ending on or before May 8, 1998 (including the
short taxable year ending immediately prior to May 8, 1998).
In rendering our opinion, we have assumed that the transactions
contemplated by the foregoing documents have been or will be consummated in
accordance with the operative documents, and that such documents accurately
reflect the material facts of such transactions. In addition, our opinion is
based on the correctness of the following specific assumptions: (i) each of
AIMCO, Property Asset Management Services, Inc., AIMCO/NHP Holdings, Inc.,
AIMCO/NHP Properties, Inc., NHP Management Company, NHP A&R Services, Inc.,
and each "qualified REIT subsidiary" of AIMCO (within the meaning of section
856(i)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), has
been and will continue to be operated in accordance with the laws of the
jurisdiction in which it was formed and in the manner described in the
relevant organizational documents and in the Registration Statement; and (ii)
there have been no changes in the applicable laws of the State of Maryland or
any other state under the laws of which any of the Subsidiaries have been
formed. In rendering our opinion, we have also considered and relied upon the
Code, the regulations promulgated thereunder (the "Regulations"),
administrative rulings and the other interpretations of the Code and the
Regulations by the courts and the Internal Revenue Service, all as they exist
at the date of this letter. With respect to the latter assumption, it should
be noted that statutes, regulations, judicial decisions, and administrative
interpretations are subject to change at any time and, in some circumstances,
with retroactive effect. Any
<PAGE>
Apartment Investment and
Management Company
July 7, 1998
Page 3
material change which is made after the date hereof in any of the foregoing
bases for our opinion could affect our conclusions.
We express no opinion as to the laws of any jurisdiction other than the
Federal laws of the United States of America to the extent specifically
referred to herein.
Based on the foregoing, we are of the opinion that:
1. Commencing with AIMCO's initial taxable year ended December 31,
1994, AIMCO was organized in conformity with the requirements for
qualification as a real estate investment trust ("REIT") under the Code, and
AIMCO's proposed method of operation, and its actual method of operation
since its formation through the date of this letter, will enable it to meet
the requirements for qualification and taxation as a REIT. As noted in the
Registration Statement, qualification and taxation as a REIT depend upon
AIMCO's ability to meet, through actual annual operating results, certain
requirements, including requirements relating to distribution levels and
diversity of stock ownership, and the various qualification tests imposed
under the Code, the results of which will not be reviewed by us. Accordingly,
no assurance can be given that the actual results of AIMCO's operation for
any one taxable year will satisfy such requirements.
2. Although the discussion set forth in the Registration Statement
under the caption "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" does not purport
to discuss all possible United States Federal income tax consequences of the
purchase, ownership and disposition of the Class A Common Stock, such
discussion, although general in nature, constitutes, in all material
respects, a fair and accurate summary under current law of certain material
United States Federal income tax consequences of the purchase, ownership and
disposition of the Class A Common Stock by a holder who purchases such Class
A Common Stock, subject to the qualifications set forth therein. The United
States Federal income tax consequences of an investment in the Class A Common
Stock by an investor will depend upon that holder's particular situation, and
we express no opinion as to the completeness of the discussion set forth in
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" as applied to any particular holder.
Other than as expressly stated above, we express no opinion on any issue
relating to AIMCO, or to any investment therein.
This opinion is intended for the exclusive use of the person to whom it
is addressed, except as set forth herein, and it may not be used, circulated,
quoted or relied upon for any other purpose without our prior written
consent. We consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal
<PAGE>
Apartment Investment and
Management Company
July 7, 1998
Page 4
Matters" in the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules or regulations of the Securities and Exchange Commission thereunder.
This opinion is expressed as of the date hereof, and we disclaim any
undertaking to advise you of any subsequent changes of the matters stated,
represented, covenanted, or assumed herein or any subsequent changes in
applicable law.
Very truly yours,
Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 (No. 333-47201) and related Prospectus of
Apartment Investment and Management Company for the registration of 1,496,477
shares of Class A Common Stock and to the incorporation by reference therein
of our report dated March 6, 1998, except for Note 25, as to which the date
is March 17, 1998, with respect to the consolidated financial statements and
schedule of Apartment Investment and Management Company included in its
Annual Report (Form 10-K/A) for the year ended December 31, 1997, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
--------------------
ERNST & YOUNG LLP
Dallas, Texas
July 2, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-47201) and
related Prospectus of Apartment Investment and Management Company (AIMCO) for
the registration of 1,496,477 shares of AIMCO Class A Common Stock and to the
incorporation by reference therein of our report dated January 30, 1998,
(except for Note 19, as to which the date is March 5, 1998), with respect to
the consolidated financial statements and schedule of Ambassador Apartments,
Inc. (Ambassador) as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, included in Amendment No. 1
filed on April 3, 1998 to AIMCO's Current Report on Form 8-K dated March 17,
1998, and our report dated January 27, 1997, (except for Note 15, as to which
the date is March 13, 1997, and Note 2(J), as to which the date is March 31,
1997), with respect to the consolidated financial statements and schedule of
Ambassador as of December 31, 1996 and 1995, and for each of the two years
in the period ended December 31, 1996 and the period from August 31, 1994
through December 31, 1994, and the combined financial statements of Prime
Properties (Predecessor to Ambassador) for the period from January 1, 1994
through August 30, 1994, included in Amendment No. 1 filed on February 6,
1998 to AIMCO'S Current Report on Form 8-K dated December 23, 1997, filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
--------------------
ERNST & YOUNG LLP
Chicago, Illinois
July 2, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-47201) and
related Prospectus of Apartment Investment and Management Company for the
registration of shares of its Class A Common Stock and to the incorporation
by reference therein of our report dated February 13, 1998, except for Note
20, as to which the date is March 19, 1998, with respect to the consolidated
financial statements of Insignia Financial Group, Inc. as of December 31,
1997 and 1996, and for each of the three years in the period ended December
31, 1997 included as exhibit 99.2 in Apartment Investment and Management
Company's Current Report on Form 8-K dated March 17, 1998 (and Amendment No.
1 thereto filed April 3, 1998), filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
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ERNST & YOUNG LLP
Greenville, South Carolina
July 6, 1998
