<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 2, 1998
--------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
---------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 1-13232 84-1259577
- -------------------------------- ------------- -------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1873 SOUTH BELLAIRE STREET, SUITE 1700, DENVER, CO 80222-4348
- ----------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 757-8101
-------------------
NOT APPLICABLE
------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 5. OTHER EVENTS
On March 31, 1998, AIMCO Properties, L.P., a Delaware limited partnership
("AIMCO Properties"), a subsidiary limited partnership of Apartment Investment
and Management Company, a Maryland corporation ("AIMCO" and, together with its
majority-owned subsidiaries and controlled entities, the "Company"), acquired a
portfolio of five multifamily residential properties (collectively, the "Cirque
Apartment Communities") from Cirque Property, L.C. The purchase price was
approximately $62.0 million, consisting of 666,009 limited partnership units
("OP Units") in AIMCO Properties valued at $21.8 million, the assumption of
$40.8 million in mortgage indebtedness, and the receipt of $0.6 million in cash.
The five garden-style apartment communities are located in Arizona, have an
average age of 14 years and contain 1,633 apartment units. Three of the
apartment communities are located in Tuscon with 1,010 units and two apartment
communities with 623 units are located in Phoenix.
In July 1998, the Company, entered into a Purchase and Sale Agreement with
Realty Investment Co. to acquire partnership interests in limited partnerships
owning a total of nine multifamily residential properties. On October 16, 1998,
the Company acquired seven of these nine multifamily residential properties
(collectively "Realty Investment Apartment Communities I") from Realty
Investment Co. The purchase price was approximately $41.8 million, consisting
of $16.8 million in cash and the assumption of $25.0 million in mortgage
indebtedness. The seven garden-style apartment communities are located in three
states, have an average age of 14 years and contain 1,353 apartment units. Five
of the apartment communities are located in Florida, with 448 units in
Jacksonville, 208 units in Daytona Beach, 120 units in Melbourne, and 216 units
in Palm Bay. One apartment community with 137 units is located in Hemet,
California and one apartment community with 224 units is located in Stone
Mountain, Georgia.
2
<PAGE> 3
The remaining two multifamily residential properties (collectively "Realty
Investment Apartment Communities II") to be acquired from Realty Investment Co.
are scheduled to be acquired in early December 1998. The purchase price is
estimated to be approximately $60.5 million, consisting of the issuance of OP
Units with a value of $26.4 million and the assumption of approximately $34.1
million in mortgage indebtedness. The two garden-style apartment communities
are located in two states, have an average age of 22 years and contain 1,164
apartment units. One of the apartment communities with 983 units is located in
College Park, Maryland, and the other with 181 units is located in Lafayette,
Indiana.
3
<PAGE> 4
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Combined Historical Summary of Gross Income and Direct Operating
Expenses of the Cirque Apartment Communities for the year ended December 31,
1997 and the three months ended March 31, 1998 (unaudited) together with the
Report of Independent Auditors (included as Exhibit 99.1 to this Report and
incorporated herein by reference).
Combined Historical Summary of Gross Income and Direct Operating
Expenses of the Realty Apartment Investment Communities I for the year ended
December 31, 1997 and the six months ended June 30, 1998 (unaudited), together
with the Independent Auditors' Report (included as Exhibit 99.2 to this Report
and incorporated herein by this reference).
Combined Historical Summary of Gross Income and Direct Operating
Expenses of the Realty Apartment Investment Communities II for the year ended
December 31, 1997 and the six months ended June 30, 1998 (unaudited), together
with the Independent Auditors' Report (included as Exhibit 99.3 to this Report
and incorporated herein by this reference).
(b) Pro Forma Financial Information
The required pro forma financial information is included as Exhibit
99.4 to this Report and incorporated herein by this reference.
4
<PAGE> 5
(c) Exhibits
The following exhibits are filed with this report:
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
23.1 Consent of Ernst & Young LLP
23.2 Consent of Beers & Cutler PLLC
23.3 Consent of Beers & Cutler PLLC
99.1 Combined Historical Summary of Gross Income and Direct Operating
Expenses of Cirque Apartment Communities for the year ended
December 31, 1997 and the three months ended March 31, 1998
(unaudited), together with the Report of Independent Auditors.
99.2 Combined Historical Summary of Gross Income and Direct Operating
Expenses of Realty Investment Apartment Communities I for the year
ended December 31, 1997 and the six months ended June 30, 1998
(unaudited), together with the Independent Auditors' Report.
99.3 Combined Historical Summary of Gross Income and Direct Operating
Expenses of Realty Investment Apartment Communities II for the year
ended December 31, 1997 and the six months ended June 30, 1998
(unaudited), together with the Independent Auditors' Report.
99.4 Pro Forma Financial Information of Apartment Investment and Management
Company.
</TABLE>
5
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Date: November 3, 1998 By: /s/ Troy Butts
---------------------------------
Troy Butts
Senior Vice President,
Chief Financial Officer
6
<PAGE> 7
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
<TABLE>
<CAPTION>
Sequentially
Exhibit
Number Description
- ------- -----------
<S> <C>
23.1 Consent of Ernst & Young LLP
23.2 Consent of Beers & Cutler PLLC
23.3 Consent of Beers & Cutler PLLC
99.1 Combined Historical Summary of Gross Income and Direct Operating
Expenses of Cirque Apartment Communities for the year ended
December 31, 1997 and the three months ended March 31, 1998
(unaudited), together with the Report of Independent Auditors.
99.2 Combined Historical Summary of Gross Income and Direct Operating
Expenses of Realty Investment Apartment Communities I for the year
ended December 31, 1997 and the six months ended June 30, 1998
(unaudited), together with the Independent Auditors' Report.
99.3 Combined Historical Summary of Gross Income and Direct Operating
Expenses of Realty Investment Apartment Communities II for the
year ended December 31, 1997 and the six months ended June 30, 1998
(unaudited), together with the Independent Auditors' Report.
99.4 Pro Forma Financial Information of Apartment Investment and Management
Company.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Current Report on Form 8-K (dated November
2, 1998) filed with the Securities and Exchange Commission by Apartment
Investment and Management Company of our report dated June 26, 1998, with
respect to the audit of the Combined Historical Summary of Gross Income and
Direct Operating Expenses of Cirque Apartment Communities included as Exhibit
99.1 to the Form 8-K.
We also consent to the incorporation by reference of such report in Apartment
Investment and Management Company's Registration Statement on Form S-3 (No.
333-828), Registration Statement on Form S-3 (No. 333-8997), Registration
Statement on Form S-3 (No. 333-17431), Registration Statement on Form S-3 (No.
333-20755), Registration Statement on Form S-3 (No. 333-26415), Registration
Statement on Form S-3 (No. 333-36531), Registration Statement on Form S-3 (No.
333-36537), Registration Statement on Form S-3 (No. 333-4542), Registration
Statement on Form S-8 (No. 333- 4550), Registration Statement on Form S-8 (No.
333-4548), Registration Statement on Form S-8 (No. 333-14481), Registration
Statement on Form S-8 (No. 333-36803), Registration Statement on Form S-4 (No.
333-39357), Registration Statement on Form S-8 (No. 333-41719), Registration
Statement on Form S-4 (No. 333-49075), Registration Statement on Form S-3 (No.
333-47201), Registration Statement on Form S-8 (No. 333-57617), Registration
Statement on Form S-4 (No. 333-60663), Registration Statement on Form S-4 (No.
333-60355), and Registration Statement on Form S-3 (No. 333-61409) all filed
with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
October 30, 1998
Denver, Colorado
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Current Report on Form 8-K (dated November
2, 1998) filed with the Securities and Exchange Commission by Apartment
Investment and Management Company of our report dated February 11, 1998, except
for Note 1 as to which the date is October 16, 1998, with respect to the audit
of the Combined Historical Summary of Gross Income and Direct Operating Expenses
of Realty Investment Apartment Communities I included as Exhibit 99.2 to the
Form 8-K.
We also consent to the incorporation by reference of such report in Apartment
Investment and Management Company's Registration Statement on Form S-3 (No.
333-828), Registration Statement on Form S-3 (No. 333-8997), Registration
Statement on Form S-3 (No. 333-17431), Registration Statement on Form S-3 (No.
333-20755), Registration Statement on Form S-3 (No. 333-26415), Registration
Statement on Form S-3 (No. 333-36531), Registration Statement on Form S-3 (No.
333-36537), Registration Statement on Form S-3 (No. 333-4542), Registration
Statement on Form S-8 (No. 333-4550), Registration Statement on Form S-8 (No.
333-4548), Registration Statement on Form S-8 (No. 333-14481), Registration
Statement on Form S-8 (No. 333-36803), Registration Statement on Form S-4 (No.
333-39357), Registration Statement on Form S-8 (No. 333-41719), Registration
Statement on Form S-4 (No. 333-49075), Registration Statement on Form S-3 (No.
333-47201), Registration Statement on Form S-8 (No. 333-57617), Registration
Statement on Form S-4 (No. 333-60663), Registration Statement on Form S-4 (No.
333-60355), and Registration Statement on Form S-3 (No. 333-61409) all filed
with the Securities and Exchange Commission.
/s/ BEERS & CUTLER PLLC
October 30, 1998
Washington, D.C.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Current Report on Form 8-K (dated November
2, 1998) filed with the Securities and Exchange Commission by Apartment
Investment and Management Company of our report dated January 28, 1998, except
for Note 1 as to which the date is July 24, 1998, with respect to the audit
of the Combined Historical Summary of Gross Income and Direct Operating Expenses
of Realty Investment Apartment Communities II included as Exhibit 99.3 to the
Form 8-K.
We also consent to the incorporation by reference of such report in Apartment
Investment and Management Company's Registration Statement on Form S-3 (No.
333-828), Registration Statement on Form S-3 (No. 333-8997), Registration
Statement on Form S-3 (No. 333-17431), Registration Statement on Form S-3 (No.
333-20755), Registration Statement on Form S-3 (No. 333-26415), Registration
Statement on Form S-3 (No. 333-36531), Registration Statement on Form S-3 (No.
333-36537), Registration Statement on Form S-3 (No. 333-4542), Registration
Statement on Form S-8 (No. 333-4550), Registration Statement on Form S-8 (No.
333-4548), Registration Statement on Form S-8 (No. 333-14481), Registration
Statement on Form S-8 (No. 333-36803), Registration Statement on Form S-4 (No.
333-39357), Registration Statement on Form S-8 (No. 333-41719), Registration
Statement on Form S-4 (No. 333-49075), Registration Statement on Form S-3 (No.
333-47201), Registration Statement on Form S-8 (No. 333-57617), Registration
Statement on Form S-4 (No. 333-60663), Registration Statement on Form S-4 (No.
333-60355), and Registration Statement on Form S-3 (No. 333-61409) all filed
with the Securities and Exchange Commission.
/s/ BEERS & CUTLER PLLC
October 30, 1998
Washington, D.C.
<PAGE> 1
EXHIBIT 99.1
Report of Independent Auditors
Board of Directors
Apartment Investment and Management Company
We have audited the accompanying Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities (the
"Communities"), as described in Note 1 for the year ended December 31, 1997.
This Combined Historical Summary is the responsibility of the Communities'
management. Our responsibility is to express an opinion on this Combined
Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Combined Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Combined Historical Summary. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Combined
Historical Summary. We believe that our audit provides a reasonable basis for
our opinion.
The Combined Historical Summary has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the Current Report on Form 8-K of Apartment Investment and
Management Company, as described in Note 1 and is not intended to be a complete
presentation of the income and expenses of the Communities.
In our opinion, the Combined Historical Summary referred to above presents
fairly, in all material respects, the gross income and direct operating expenses
of the Cirque Apartment Communities, as described in Note 1, for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
June 26, 1998
Denver, Colorado
1
<PAGE> 2
Cirque Apartment Communities
Combined Historical Summary of
Gross Income and Direct Operating Expenses
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(unaudited)
<S> <C> <C>
GROSS INCOME
Rental income $ 8,563,239 $ 2,227,559
Other income 522,630 102,411
------------ ------------
Total gross income 9,085,869 2,329,970
DIRECT OPERATING EXPENSES
Repairs and maintenance 1,755,522 368,838
Utilities and other property operating 733,615 181,238
General and administrative 964,474 265,860
Real estate taxes 667,417 165,321
Management fees 421,697 107,970
------------ ------------
Total direct operating expenses 4,542,725 1,089,227
------------ ------------
Excess of gross income over direct operating expenses $ 4,543,144 $ 1,240,743
============ ============
</TABLE>
See accompanying notes.
2
<PAGE> 3
Cirque Apartment Communities
Notes to Combined Historical Summary of Gross Income
and Direct Operating Expenses
Year Ended December 31, 1997 and
Three Months Ended March 31, 1998 (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
The Cirque Apartment Communities (the "Communities") include five separate
residential apartment communities located in Phoenix and Tucson, Arizona. The
Communities, which are under common management and control, have been summarized
as follows:
<TABLE>
<CAPTION>
COMMUNITY LOCATION NUMBER OF UNITS
--------- -------- ---------------
<S> <C> <C> <C>
San Marina Phoenix 399
Sundown Tucson 330
Rio Cancion Tucson 379
Casa Anita Phoenix 224
Cobble Creek Tucson 301
----
Total 1,633
=====
</TABLE>
On March 31, 1998, the Communities were sold to Apartment Investment Management
Company, a publicly traded real estate investment trust.
The accompanying Combined Historical Summary has been prepared for the purpose
of complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K of Apartment
Investment and Management Company. The Combined Historical Summary is not
intended to be a complete presentation of income and expenses of the Communities
for the year ended December 31, 1997, and the three months ended March 31, 1998,
as certain costs such as depreciation, amortization, interest, and other debt
service costs have been excluded. These costs are not considered to be direct
operating expenses.
3
<PAGE> 4
CIRQUE APARTMENT COMMUNITIES
Notes to Combined Historical Summary of Gross Income
and Direct Operating Expenses (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the Combined Historical Summary in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts included in the Combined Historical
Summary and accompanying notes thereto. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Rental income attributable to residential leases is recorded when due from
residents. Leases are for periods of up to one year, with rental payments due
monthly.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited Combined Historical Summary has been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and was prepared on the same basis as the Combined Historical Summary for the
year ended December 31, 1997. In the opinion of management of the Communities,
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the information for this interim period have been made.
The excess of combined gross income over direct operating expenses for such
interim period is not necessarily indicative of the excess of gross income over
direct operating expenses for the full year.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES
Cirque Property Management ("Cirque"), an affiliate, receives management fees
relating to the Communities. The management fee ranges from 3.5% to 4.0% of
gross annual cash receipts. In addition, Cirque receives an asset management fee
of 1% of gross annual cash receipts.
4
<PAGE> 1
EXHIBIT 99.2
Independent Auditors' Report
Board of Directors
Apartment Investment and Management Company
We have audited the accompanying Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Realty Investment Apartment Communities I (the
"Communities"), as described in Note 1 for the year ended December 31, 1997.
This Combined Historical Summary is the responsibility of the Communities'
management. Our responsibility is to express an opinion on this Combined
Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Combined Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Combined Historical Summary. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Combined
Historical Summary. We believe that our audit provides a reasonable basis for
our opinion.
The Combined Historical Summary has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the Current Report on Form 8-K of Apartment Investment and
Management Company, as described in Note 1 and is not intended to be a complete
presentation of the income and expenses of the Communities.
In our opinion, the Combined Historical Summary referred to above presents
fairly, in all material respects, the gross income and direct operating expenses
of the Realty Investment Apartment Communities I, as described in Note 1, for
the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ BEERS & CUTLER PLLC
February 11, 1998, except for Note 1, as to
which the date is October 16, 1998
Washington, D.C.
1
<PAGE> 2
Realty Investment Apartment Communities I
Combined Historical Summary of
Gross Income and Direct Operating Expenses
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
-------------------------------------
(unaudited)
<S> <C> <C>
GROSS INCOME
Net rental income $ 7,772,039 $ 4,004,982
Service and other income 448,694 239,970
-------------------------------------
Total gross income 8,220,733 4,244,952
DIRECT OPERATING EXPENSES
Furnished apartment expense 108,336 64,813
Marketing 182,522 85,784
Management fees 378,372 195,552
Administrative expenses 315,850 160,158
Utilities 563,775 279,402
Maintenance and repairs 1,175,061 490,155
Taxes and insurance 777,725 418,732
Personnel costs 1,236,847 630,949
-------------------------------------
Total direct operating expenses 4,738,488 2,325,545
-------------------------------------
Excess of gross income over direct operating expenses $ 3,482,245 $ 1,919,407
=====================================
</TABLE>
See accompanying notes.
2
<PAGE> 3
Realty Investment Apartment Communities I
Notes to Combined Historical Summary of Gross Income
and Direct Operating Expenses
Year Ended December 31, 1997 and
Six Months Ended June 30, 1998 (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
The Realty Investment Apartment Communities I (the "Communities") include seven
separate residential apartment communities located in Florida, California and
Georgia. The Communities, which are under common management and control, have
been summarized as follows:
<TABLE>
<CAPTION>
COMMUNITY LOCATION NUMBER OF UNITS
--------- -------- ---------------
<S> <C> <C>
The Pines Apartments Palm Bay, FL 216
Pinebrook Apartments Jacksonville, FL 208
Fieldcrest Apartments Jacksonville, FL 240
The Breakers Apartments Daytona Beach, FL 208
Park Apartments Melbourne, FL 120
Royal Gardens Apartments Hemet, CA 137
Weatherly Apartments Stone Mountain, GA 224
---
Total 1,353
=====
</TABLE>
On October 16, 1998, the Communities were sold to Apartment Investment and
Management Company, a publicly traded real estate investment trust.
The accompanying Combined Historical Summary has been prepared for the purpose
of complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K of Apartment
Investment and Management Company.
The Combined Historical Summary is not intended to be a complete presentation of
income and expenses of the Communities, as certain costs such as depreciation,
amortization, interest, and other debt service costs have been excluded. These
costs are not considered to be direct operating expenses.
3
<PAGE> 4
Realty Investment Apartment Communities I
Notes to Combined Historical Summary of Gross Income
and Direct Operating Expenses (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the Combined Historical Summary in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts included in the Combined Historical
Summary and accompanying notes thereto. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Rental income for occupied units is recorded as earned based on the amount
reflected in the lease.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited Combined Historical Summary has been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and was prepared on the same basis as the Combined Historical Summary for the
year ended December 31, 1997. In the opinion of management of the Communities,
all material adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information for this interim period
have been made. The excess of gross income over direct operating expenses for
such interim period is not necessarily indicative of the excess of gross income
over direct operating expenses for the full year.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES
Realty Investment Company, Inc., an affiliate of the Communities, receives
management fees relating to the Communities. The management fee ranges from 4.0%
to 5.0% of gross receipts, as defined in the management agreement.
4
<PAGE> 1
EXHIBIT 99.3
Independent Auditors' Report
Board of Directors
Apartment Investment and Management Company
We have audited the accompanying Combined Historical Summary of Gross Income
and Direct Operating Expenses of the Realty Investment Apartment Communities II
(the "Communities"), as described in Note 1 for the year ended December 31,
1997. This Combined Historical Summary is the responsibility of the
Communities' management. Our responsibility is to express an opinion on this
Combined Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Combined Historical Summary is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Combined Historical Summary. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Combined Historical Summary. We believe that our audit provides a
reasonable basis for our opinion.
The Combined Historical Summary has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the Current Report on Form 8-K of Apartment Investment and
Management Company, as described in Note 1 and is not intended to be a complete
presentation of the income and expenses of the Communities.
In our opinion, the Combined Historical Summary referred to above presents
fairly, in all material respects, the gross income and direct operating
expenses of the Realty Investment Apartment Communities II, as described in
Note 1, for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ BEERS & CULTER PLLC
January 28, 1998, except for Note 1, as to
which the date is July 24, 1998
Washington, D.C.
1
<PAGE> 2
Realty Investment Apartment Communities II
Combined Historical Summary of
Gross Income and Direct Operating Expenses
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
--------------- ---------------
(unaudited)
<S> <C> <C>
GROSS INCOME
Net rental income $ 10,585,834 $ 5,231,427
Service and other income 425,795 208,172
--------------- ---------------
Total gross income 11,011,629 5,439,599
DIRECT OPERATING EXPENSES
Furnished apartment expense 74,899 37,905
Marketing 140,666 90,229
Management fees 602,208 297,632
Administrative expenses 195,260 86,172
Utilities 1,340,891 549,221
Maintenance and repairs 857,966 431,926
Taxes and insurance 869,742 419,836
Personnel costs 1,443,381 697,779
--------------- ---------------
Total direct operating expenses 5,525,013 2,610,700
--------------- ---------------
Excess of gross income over direct operating expenses $ 5,486,616 $ 2,828,899
=============== ===============
</TABLE>
See accompanying notes.
2
<PAGE> 3
Realty Investment Apartment Communities II
Notes to Combined Historical Summary of Gross Income
and Direct Operating Expenses
Year Ended December 31, 1997 and
Six Months Ended June 30, 1998 (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
The Realty Investment Apartment Communities II (the "Communities") include two
separate residential apartment communities located in Maryland and Indiana. The
Communities, which are under common management and control, have been summarized
as follows:
<TABLE>
<CAPTION>
COMMUNITY LOCATION NUMBER OF UNITS
--------- -------- ---------------
<S> <C> <C>
Seven Springs Village College Park, MD 983
The Bluffs Lafayette, IN 181
-----
Total 1,164
=====
</TABLE>
On July 24, 1998, Apartment Investment and Management Company, a publicly
traded real estate investment trust, entered into acquisition and contribution
agreements to acquire the partnership interests of the partnerships owning the
Communities. The transaction is expected to close in December 1998.
The accompanying Combined Historical Summary has been prepared for the purpose
of complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K of Apartment
Investment and Management Company.
The Combined Historical Summary is not intended to be a complete presentation
of income and expenses of the Communities, as certain costs such as
depreciation, amortization, interest, and other debt service costs have been
excluded. These costs are not considered to be direct operating expenses.
3
<PAGE> 4
Realty Investment Apartment Communities II
Notes to Combined Historical Summary of Gross Income
and Direct Operating Expenses (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the Combined Historical Summary in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts included in the Combined
Historical Summary and accompanying notes thereto. Actual results could differ
from those estimates.
REVENUE RECOGNITION
Rental income for occupied units is recorded as earned based on the amount
reflected in the lease.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited Combined Historical Summary has been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission and was prepared on the same basis as the Combined Historical
Summary for the year ended December 31, 1997. In the opinion of management of
the Communities, all material adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information for this
interim period have been made. The excess of gross income over direct operating
expenses for such interim period is not necessarily indicative of the excess of
gross income over direct operating expenses for the full year.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES
Realty Investment Company, Inc., an affiliate of the Communities, receives
management fees relating to the Communities. The management fee ranges from
5.25% to 7.40% of gross receipts, as defined in the management agreement.
4
<PAGE> 1
EXHIBIT 99.4
PRO FORMA FINANCIAL INFORMATION OF AIMCO
AS OF JUNE 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
SIX MONTHS ENDED JUNE 30, 1998
INTRODUCTION
On October 1, 1998, AIMCO completed its merger with Insignia Financial Group
("IFG") ("the IFG Merger"). In the IFG Merger, IFG's common stock was converted
into 8,945,921 shares of Class E Cumulative Convertible Preferred Stock of AIMCO
("Class E Preferred Stock") whose issue date market value approximately equaled
$310 million. In addition to receiving the same dividends as holders of AIMCO
Common Stock, holders of Class E Preferred Stock will be entitled to a special
dividend of approximately $50 million in the aggregate. When that special
dividend is paid in full, the Class E Preferred Stock will automatically convert
into AIMCO Common Stock on a one-for-one basis, subject to antidilution
adjustments, if any. In addition, AIMCO assumed approximately $325 million in
indebtedness and other liabilities of IFG and its subsidiaries and subsidiaries
of AIMCO, assumed approximately $149.5 million of convertible securities for a
total transaction value of approximately $835 million. In connection with the
IFG Merger, AIMCO assumed property management of approximately 192,000
multifamily units which consist of general and limited partnership investments
in 115,000 units and third party management of 77,000 units. Insignia Properties
Trust ("IPT"), which prior to the IFG Merger was a subsidiary of IFG, owns a 32%
weighted average general and limited partnership interest in approximately
51,000 units.
In May and September of 1997, AIMCO directly or indirectly through a subsidiary,
acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares of common
stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired the
remaining shares of NHP Common Stock in a merger transaction accounted for as a
purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
In June 1997, AIMCO purchased a group of companies (the "NHP Real Estate
Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP Partnerships") that own 534 conventional and
affordable multifamily apartment properties (the "NHP Properties") containing
87,659 units, a captive insurance subsidiary and certain related assets (the
"NHP Real Estate Acquisition"). AIMCO paid aggregate consideration of $54.8
million in cash and warrants that entitle the holders to purchase 399,999 shares
of AIMCO Common Stock at an exercise price of $36.00 per share. AIMCO engaged in
a reorganization (the "NHP Real Estate Reorganization") of its interests in the
NHP Real Estate Companies, which resulted in certain of the assets of the NHP
Real Estate Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the AIMCO Operating Partnership holds 99% limited partner
interest and certain directors and officers of AIMCO directly or indirectly,
hold a 1% general partner interest.
Immediately following the NHP Merger, in order to satisfy certain requirements
of the Code applicable to AIMCO's status as a REIT, AIMCO engaged in a
reorganization (the "NHP Reorganization") of the assets and operations of NHP
that resulted in the Master Property Management Agreement being terminated and
NHP's operations being conducted through corporations (the "Unconsolidated
Subsidiaries") in which the AIMCO Operating Partnership holds non-voting
preferred stock that represents a 95% economic interest, and
1
<PAGE> 2
certain officers and/or directors of AIMCO hold, directly or indirectly, all of
the voting common stock, representing a 5% economic interest. As a result of the
controlling ownership interest in the Unconsolidated Subsidiaries held by
others, AIMCO accounts for its interest in the Unconsolidated Subsidiaries on
the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
AIMCO Operating Partnership was merged with and into the Ambassador Operating
Partnership (the "Ambassador OP Merger"). Each outstanding unit of limited
partnership interest in the Ambassador Operating Partnership was converted into
the right to receive 0.553 OP Units, and as a result, the Ambassador Operating
Partnership became a 99.9% owned subsidiary partnership of the AIMCO Operating
Partnership.
Also during 1997, AIMCO (i) (a) acquired 44 properties for aggregate purchase
consideration of $467.4 million, of which $56 million was paid in the form of
1.9 million OP Units (b) paid $34.2 million in cash and issued OP Units valued
at $7.3 million in connection with the acquisition of partnership interests
through tender offers in certain partnerships ((a) and (b) together are the
"1997 Property Acquisitions") and (c) paid $19.9 million to acquire 886,600
shares of Ambassador Common Stock (together with the 1997 Property Acquisitions,
the "1997 Acquisitions"); (ii) sold (a) approximately 16,367,000 shares of AIMCO
Common Stock for aggregate net proceeds of $513.4 million; (b) 750,000 shares of
AIMCO Class B Cumulative Convertible Preferred Stock for net proceeds of $75
million; and (c) 2,400,000 shares of AIMCO Class C 9% Cumulative Preferred Stock
for net proceeds of $58.1 million (collectively, the "1997 Stock Offerings");
and (iii) sold five real estate properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D Cumulative
Preferred Stock for net proceeds of $101.5 million (the "1998 Stock Offering");
(b) sold 4,050,000 shares of its Class G Cumulative Preferred Stock for net
proceeds of $98.0 million (the "Class G Preferred Stock Offering"); and (c) sold
2,000,000 shares of its Class H Cumulative Preferred Stock for net proceeds of
$48.1 million (the "Class H Preferred Stock Offering" and, together with the
1998 Stock Offering and the Class G Preferred Stock Offering, the "1998 Stock
Offerings"); (ii) purchased 22 properties, including the Realty Investment
Apartment Communities I and the Cirque Apartment Communities for aggregate
purchase consideration of $179.8 million, of which $27.3 million was paid in the
form of OP Units (the "1998 Acquisitions"); (iii) sold one real estate property
(the "1998 Disposition"); (iv) completed the Ambassador Merger; (v) completed
the IFG Merger; and (vi) contracted to purchase Realty Investment Apartment
Communities II (the "Probable Purchases").
2
<PAGE> 3
PRO FORMA FINANCIAL INFORMATION OF AIMCO
The following Pro Forma Consolidated Balance Sheet of AIMCO as of June 30, 1998
has been prepared as if each of the following transactions had occurred as of
June 30, 1998: (i) the purchase of three properties for an aggregate purchase
price of $32.6 million; (ii) the Class G Preferred Stock Offering; (iii) the
Class H Preferred Stock Offering; (iv) the Purchase of the Realty Investment
Apartment Communities I; (v) the Probable Purchases; (vi) the IFG Merger; (vii)
the merger between IPT and Angeles Mortgage Investment Trust ("AMIT") ("the AMIT
Merger"); and (viii) the transfer of certain assets and liabilities of IFG to be
unconsolidated subsidiaries following the IFG Merger (the "IFG Reorganization").
The following Pro Forma Consolidated Statement of Operations of AIMCO for the
year ended December 31, 1997 has been prepared as if each of the following
transactions had occurred as of January 1, 1997: (i) the 1997 Acquisitions;
(ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions; (iv) the NHP Real
Estate Acquisition; (v) the NHP Real Estate Reorganization; (vi) the NHP Stock
Purchase; (vii) the NHP Merger; (viii) the NHP Reorganization; (ix) the 1998
Stock Offerings; (x) the 1998 Acquisitions; (xi) the Probable Purchases; (xii)
the 1998 Disposition; (xiii) the Ambassador Merger; (xv) the IFG Merger; (xv)
the AMIT Merger; and (xvi) the IFG Reorganization.
The following Pro Forma Consolidated Statement of Operations of AIMCO for the
six months ended June 30, 1998 has been prepared as if each of the following
transactions had occurred as of January 1, 1997: (i) the 1998 Stock Offerings;
(ii) the 1998 Acquisitions; (iii) the Probable Purchases; (iv) the 1998
Disposition; (v) the Ambassador Merger; (vi) the IFG Merger; (vii) the AMIT
Merger; and (viii) the IFG Reorganization.
The following Pro Forma Financial Information is based, in part, on the
following historical financial statements, which have been previously filed by
AIMCO: (i) the audited Consolidated Financial Statements of AIMCO for the year
ended December 31, 1997; (ii) the unaudited Consolidated Financial Statements
of AIMCO for the six months ended June 30, 1998; (iii) the audited Consolidated
Financial Statements of Ambassador for the year ended December 31, 1997; (iv)
the unaudited Consolidated Financial Statements of Ambassador for the four
months ended April 30, 1998; (v) the audited Consolidated Financial Statements
of IFG for the year ended December 31, 1997; (vi) the audited Consolidated
Financial Statements of AMIT for the year ended December 31, 1997; (vii) the
unaudited Consolidated Financial Statements of IFG for the six months ended
June 30, 1998; (viii) the unaudited Consolidated Financial Statements of AMIT
for the six months ended June 30, 1998; (ix) the unaudited Consolidated
Financial Statements of NHP for the nine months ended September 30, 1997; (x)
the unaudited Combined Financial Statements of the NHP Real Estate Companies
for the three months ended March 31, 1997; (xi) the unaudited Financial
Statements of NHP Southwest Partners, L.P. for the three months ended March 31,
1997; (xii) the unaudited Combined Financial Statements of the NHP New LP
Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and
Direct Operating Expenses of Morton Towers for the six months ended June 30,
1997; (xvi) the unaudited Combined Statement of Revenues and Certain Expenses
of the Thirty-Five Acquisition Properties for the six months ended June 30,
1997; (xvii) the unaudited Statement of Revenues and Certain Expenses of First
3
<PAGE> 4
Alexandria Associates, a Limited Partnership for the nine months ended September
30, 1997; (xviii) the unaudited Statement of Revenues and Certain Expenses of
Country Lakes Associates Two, a Limited Partnership for the nine months ended
September 30, 1997; (xix) the unaudited Statement of Revenues and Certain
Expenses of Point West Limited Partnership, A Limited Partnership for the nine
months ended September 30, 1997; (xx) the unaudited Statement of Revenues and
Certain Expenses for The Oak Park Partnership for the nine months ended
September 30, 1997; (xxi) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities I for the year ended December 31, 1997, (xxii) the audited Combined
Historical Summary or Gross Income and Direct Operating Expenses of the Cirque
Apartment Communities for the year ended December 31, 1997; (xxiii) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities II for the year ended December 31, 1997;
(xxiv) the unaudited Combined Historical Summary of Gross Income and Direct
Operating Expenses of the Realty Investment Apartment Communities I for the six
months ended June 30, 1998; (xxv) the unaudited Combined Historical Summary of
Gross Income and Direct Operating Expenses of the Cirque Apartment Communities
for the three months ended March 31, 1998; and (xxvi) the unaudited Combined
Historical Summary of Gross Income and Direct Operating Expenses of the Realty
Investment Apartment Communities II for the six months ended June 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information has been prepared using the
purchase method of accounting whereby the assets and liabilities of NHP, the NHP
Real Estate Companies, Ambassador, IFG, the 1997 Acquisitions, the 1998
Acquisitions, and the Probable Purchases are adjusted to estimated fair market
value, based upon preliminary estimates, which are subject to change as
additional information is obtained. The allocations of purchase costs are
subject to final determination based upon estimates and other evaluations of
fair market value. Therefore, the allocations reflected in the following
unaudited Pro Forma Financial Information may differ from the amounts ultimately
determined.
The following unaudited Pro Forma Financial Information is presented for
informational purposes only and is not necessarily indicative of the financial
position or results of operations of AIMCO that would have occurred if such
transactions had been completed on the dates indicated, nor does it purport to
be indicative of future financial positions or results of operations. In the
opinion of AIMCO's management, all material adjustments necessary to reflect the
effects of these transactions have been made.
4
<PAGE> 5
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG IFG AIMCO BEFORE
AND PROBABLE AS MERGER IFG
HISTORICAL(A) PURCHASES(B) ADJUSTED(C) ADJUSTMENTS(D) REORGANIZATION(E)
------------- --------------- ----------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Real estate......................... $2,287,309 $ 74,716
61,120 $ 30,600 $ 21,348(G) $2,475,093
Property held for sale.............. 35,695 -- -- -- 35,695
Investments in securities........... 5,767 -- -- 310,048(G)
(310,048)(H) 5,767
Investments in and notes receivable
from unconsolidated
subsidiaries...................... 108,105 -- -- -- 108,105
Investments in and notes receivable
from unconsolidated real estate
partnerships...................... 243,799 -- 242,457 424,756(G) 911,012
Mortgage notes receivable........... -- -- 35,316 -- 35,316
Cash and cash equivalents........... 49,320 -- 42,585 -- 91,905
Restricted cash..................... 75,123 -- -- -- 75,123
Accounts receivable................. 26,201 -- 24,385 -- 50,586
Deferred financing costs............ 22,629 -- 7,158 -- 29,787
Goodwill............................ 122,068 -- 19,836 36,704 (G) 178,608
Property management contracts....... -- -- 89,838 22,211(G) 112,049
Other assets........................ 78,725 -- 22,780 (632)(G) 100,873
---------- --------- -------- --------- ----------
Total Assets................ $3,054,741 $ 135,836 $514,955 $ 504,387 $4,209,919
========== ========= ======== ========= ==========
Secured notes payable............... $ 751,337 $ 48,025
34,074 $ 26,476 $ -- $ 859,912
Secured tax-exempt bond financing... 394,662 -- -- 394,662
Secured short-term financing........ 50,000 (21,434)
620 233,310 (297,000)(G)
50,000(G)
325,381(G) 340,877
Unsecured short-term financing...... 118,476 (97,987) 1,647 -- 22,136
Accounts payable, accrued and other
liabilities....................... 155,129 -- 32,669 20,000(G) 207,798
Deferred tax liability.............. -- -- 18,802 (18,802)(G)
12,849(G) 12,849
Security deposits and prepaid
rents............................. 12,882 -- 2,898 -- 15,780
---------- --------- -------- --------- ----------
1,482,486 (36,702) 315,802 92,428 1,854,014
Minority interest in other
partnerships...................... 43,167 -- 66,216 (66,216)(G) 43,167
Minority interest in Operating
Partnership....................... 134,694 26,426 -- -- 161,120
Company-obligated mandatorily
redeemable convertible securities
of a subsidiary trust............. -- -- 144,210 5,290(G) 149,500
Class A common stock, $.01 par
value............................. 481 -- 358 (358)(G)
137(H) 618
Class B common stock, $.01 par
value............................. 2 -- -- -- 2
Non-voting preferred stock, $.01 par
value............................. -- -- -- -- --
Class B Cumulative Convertible
Preferred Stock, $.01 par value... 75,000 -- -- -- 75,000
Class C Cumulative Preferred Stock
$.01 par value.................... 60,000 -- -- -- 60,000
Class D Cumulative Preferred Stock
$.01 par value.................... 105,000 -- -- -- 105,000
Class G Cumulative Preferred Stock
$.01 par value.................... -- 101,250 -- -- 101,250
Class H Cumulative Preferred Stock
$.01 par value.................... 50,000 -- -- 50,000
Additional paid in capital.......... 1,247,839 (5,138) (37,595) 37,595(G)
461,475(H) 1,704,176
Notes receivable on common stock
purchases......................... (45,508) -- -- -- (45,508)
Distributions in excess of
earnings.......................... (48,203) -- 25,964 (25,964)(G) (48,203)
Unrealized gain on investments...... (217) -- -- -- (217)
---------- --------- -------- --------- ----------
1,394,394 146,112 (11,273) 472,885 2,002,118
---------- --------- -------- --------- ----------
Total Liabilities and
Equity.................... $3,054,741 $ 135,836 $514,955 $ 504,387 $4,209,919
========== ========= ======== ========= ==========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(F) FORMA
-------------- ----------
<S> <C> <C>
Real estate......................... $ -- $2,475,093
Property held for sale.............. -- 35,695
Investments in securities...........
-- 5,767
Investments in and notes receivable
from unconsolidated
subsidiaries...................... 64,561(I) 172,666(K)
Investments in and notes receivable
from unconsolidated real estate
partnerships...................... -- 911,012
Mortgage notes receivable........... 35,316
Cash and cash equivalents........... (15,102)(J) 76,803
Restricted cash..................... -- 75,123
Accounts receivable................. (23,773)(J) 26,813
Deferred financing costs............ -- 29,787
Goodwill............................ -- 178,608
Property management contracts....... (77,410)(I) 34,639
Other assets........................ (8,954)(J) 91,919
--------- ----------
Total Assets................ $ (60,678) $4,149,241
========= ==========
Secured notes payable............... $ -- $ 859,912
Secured tax-exempt bond financing... -- 394,662
Secured short-term financing........
(I) 340,877
Unsecured short-term financing...... -- 22,136
Accounts payable, accrued and other
liabilities....................... (44,931)(J) 162,867
Deferred tax liability..............
(12,849)(I) --
Security deposits and prepaid
rents............................. (2,898)(J) 12,882
--------- ----------
(60,678) 1,793,336
Minority interest in other
partnerships...................... -- 43,167
Minority interest in Operating
Partnership....................... -- 161,120
Company-obligated mandatorily
redeemable convertible securities
of a subsidiary trust............. -- 149,500
Class A common stock, $.01 par
value.............................
-- 618
Class B common stock, $.01 par
value............................. -- 2
Non-voting preferred stock, $.01 par
value............................. -- --
Class B Cumulative Convertible
Preferred Stock, $.01 par value... -- 75,000
Class C Cumulative Preferred Stock
$.01 par value.................... -- 60,000
Class D Cumulative Preferred Stock
$.01 par value.................... -- 105,000
Class G Cumulative Preferred Stock
$.01 par value.................... -- 101,250
Class H Cumulative Preferred Stock
$.01 par value.................... -- 50,000
Additional paid in capital..........
-- 1,704,176
Notes receivable on common stock
purchases......................... -- (45,508)
Distributions in excess of
earnings.......................... -- (48,203)
Unrealized gain on investments...... -- (217)
--------- ----------
-- 2,002,118
--------- ----------
Total Liabilities and
Equity.................... $ (60,678) $4,149,241
========= ==========
</TABLE>
5
<PAGE> 6
- -------------------------
(A) Represents the unaudited historical consolidated financial position of
AIMCO as of June 30, 1998, as reported in AIMCO's Quarterly Report on Form
10-Q.
(B) Represents adjustments to reflect the purchase of three properties for an
aggregate purchase price of $32.6 million; the sale of 4,050,000 shares of
AIMCO Class G Preferred Stock for net proceeds of $98.0 million; the sale
of 2,000,000 shares of AIMCO Class H Preferred Stock for net proceeds of
$48.1 million; the purchase of the Realty Investment Apartment Communities
I; and the Probable Purchases.
(C) Represents adjustments to reflect the IFG Merger, including the AMIT
Merger, and the spin-off of the common stock of Insignia/ESG Holdings, Inc.
("Holdings") to holders of IFG common stock, as if these transactions had
occurred on June 30, 1998. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG AS
HISTORICAL(i) MERGER(ii) SPIN-OFF (iii) ADJUSTED
------------- ---------- ----------------- --------
<S> <C> <C> <C> <C>
ASSETS
Real estate...................................... $ 25,808 $ 4,792 $ -- $ 30,600
Investments in and notes receivable from
unconsolidated partnerships.................... 282,599 -- (40,142) 242,457
Mortgage notes receivable........................ -- 35,316 -- 35,316
Cash and cash equivalents........................ 57,807 6,248 (21,470) 42,585
Accounts receivable.............................. 147,569 604 (123,788) 24,385
Deferred financing costs......................... 7,158 -- -- 7,158
Goodwill......................................... 245,391 -- (225,555) 19,836
Property management contracts.................... 134,344 -- (44,506) 89,838
Other assets..................................... 53,513 (258) (30,475) 22,780
-------- ------- --------- --------
$954,189 $46,702 $(485,936) $514,955
======== ======= ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Secured notes payable............................ $ 21,951 $ 4,525 $ -- $ 26,476
Secured short-term financing..................... 265,737 -- (32,427) 233,310
Unsecured short-term financing................... 1,647 -- -- 1,647
Accounts payable, accrued and other
liabilities.................................... 147,116 1,629 (116,076) 32,669
Deferred tax liability........................... 24,865 -- (6,063) 18,802
Security deposits and deferred income............ 4,349 -- (1,451) 2,898
-------- ------- --------- --------
465,665 6,154 (156,017) 315,802
Minority interest in other partnerships.......... 66,484 -- (268) 66,216
Company-obligated mandatorily redeemable
convertible securities of a subsidiary trust... 144,210 -- -- 144,210
Class A common stock, $.01 par value............. 318 40 -- 358
Additional paid in capital....................... 234,819 40,508 (312,922) (37,595)
Distributions in excess of earnings.............. 42,693 -- (16,729) 25,964
-------- ------- --------- --------
277,830 40,548 (329,651) (11,273)
-------- ------- --------- --------
$954,189 $46,702 $(485,936) $514,955
======== ======= ========= ========
</TABLE>
------------------------------
(i) Represents the unaudited consolidated financial position of IFG as of
June 30, 1998, as reported in IFG's Quarterly Report on Form 10-Q.
Certain reclassifications have been made to IFG's historical balance
sheet to conform to AIMCO's balance sheet presentation.
(ii) Represents the historical balance sheet of AMIT, as well as pro forma
adjustments related to the AMIT Merger. The AMIT Merger closed prior
to the IFG Merger.
(iii) Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
6
<PAGE> 7
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,945,921 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the payment of a special dividend of $50,000; (iii)
the assumption of $149,500 of the convertible debentures of IFG; and (iv)
the allocation of the combined purchase price of IFG based on the
preliminary estimates of relative fair market value of the assets and
liabilities of IFG.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, AIMCO contributed or sold to the combined
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at AIMCO's new basis
resulting from the allocation of the purchase price of IFG. AIMCO received
non-voting preferred stock as consideration in exchange for the net assets
contributed. The net deferred tax liability is assumed by the
Unconsolidated Subsidiaries as it resulted from the assets and liabilities
transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger, AIMCO became obligated to issue
8,945,921 shares of AIMCO Common Stock
The total purchase price of IFG is $1,019,342, as follows:
<TABLE>
<S> <C>
Issuance of 8,945,921 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 310,048
Issuance of 4,811,568 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of IFG liabilities as indicated in the IFG
Merger Agreement.......................................... 325,381
Transaction costs........................................... 20,000
Generation of deferred tax liability........................ 12,849
Special dividend............................................ 50,000
----------
Total............................................. $1,019,342
==========
</TABLE>
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,019,342
Historical basis of IFG's assets acquired, adjusted for the
AMIT Merger and the spin-off of Holdings.................. (514,955)
----------
Step-up to record the fair value of IFG's assets acquired... $ 504,387
==========
</TABLE>
7
<PAGE> 8
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 21,348
Investment in real estate partnerships...................... 424,756
Management contracts........................................ 22,211
Reduction in goodwill....................................... 36,704
Reduction in value of other assets.......................... (632)
--------
Total............................................. $504,387
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of June 30, 1998, IFG's stockholder's deficit, as adjusted for the AMIT
Merger and the spin-off of Holdings, was $(11,273), which is detailed as
follows:
<TABLE>
<S> <C>
Common stock................................................ $ 358
Additional paid-in capital.................................. (37,595)
Retained earnings........................................... 25,964
--------
Total............................................. $(11,273)
========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
deficit was eliminated.
The increase of $5,290 in convertible debentures of IFG relates to the
elimination of unamortized issuance discount.
In addition, the minority interest in other partnerships of IFG of $66,216
will be eliminated upon the IPT Merger.
(H) Represents the issuance of 8,945,921 shares of AIMCO Common Stock to IFG
stockholders, in exchange for all the shares of IFG common stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,945,921 shares of Class E Preferred Stock, approximately equal to
$310 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.7% of the AIMCO Common Stock. The special dividend on the Class E
Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
(I) Represents the increase in AIMCO's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and liabilities are valued at AIMCO's new basis resulting from
the allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by AIMCO to the
Unconsolidated Subsidiaries,
8
<PAGE> 9
valued at AIMCO's new basis resulting from the allocation of the purchase price
of IFG.
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $18,933, and equity
in the Unconsolidated Subsidiaries of $58,733. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of June 30, 1998 is
presented below, which reflects the effects of the IFG Merger and the IFG
Reorganization as if such transactions had occurred as of June 30, 1998.
9
<PAGE> 10
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ----------
<S> <C> <C> <C>
ASSETS
Real estate............................... $ 21,727 $ -- $ 21,727
Cash and cash equivalents................. 5,627 15,102(ii) 20,729
Restricted cash........................... 5,010 -- 5,010
Management contracts...................... 50,320 77,410(iii) 127,730
Accounts receivable....................... -- 23,773(ii) 23,773
Deferred financing costs.................. 3,217 -- 3,217
Goodwill.................................. 44,252 -- 44,252
Other assets.............................. 21,020 8,954(ii) 29,974
-------- -------- --------
$151,173 $125,239 $276,412
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable..................... $ 72,037 $ 45,000(iii) $117,037
Accounts payable, accrued and other
liabilities............................. 41,761 44,931(ii) 86,692
Security deposits and deferred income..... 316 2,898(ii) 3,214
Deferred tax liability.................... -- 12,849(iii) 12,849
-------- -------- --------
114,114 105,678 219,792
Common stock.............................. 2,319 1,030(iv) 3,349
Preferred stock........................... 39,172 19,561(iii) 58,733
Retained earnings......................... (4,174) -- (4,174)
Notes receivable on common stock
purchases............................... (258) (1,030)(iv) (1,288)
-------- -------- --------
37,059 19,561 56,620
-------- -------- --------
$151,173 $125,239 $276,412
======== ======== ========
</TABLE>
- -------------------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, AIMCO contributed or sold to the combined
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at AIMCO's new basis
resulting from the allocation of the purchase price of IFG. AIMCO received
non-voting preferred stock as consideration in exchange for the net assets
contributed. The net deferred tax liability is assumed by the
Unconsolidated Subsidiaries as it resulted from the assets and liabilities
transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by AIMCO to the
Unconsolidated Subsidiaries, valued at AIMCO's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note,and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
10
<PAGE> 11
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED AMBASSADOR
TRANSACTIONS AND NHP AMBASSADOR PURCHASE PRICE
HISTORICAL(A) PROBABLE PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E)
------------- ---------------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues........................... $193,006 $110,516 (I)
11,012 (J) $ 6,660 $ 93,329 $ --
Property operating expenses......... (76,168) (55,054)(I)
(4,923)(J) (2,941) (36,088) --
Owned property management expense... (6,620) (3,857)(I)
(602)(J) (282) -- --
Depreciation........................ (37,741) (22,301)(I)
(2,139)(J) (1,414) (18,979) (5,997)(O)
-------- -------- ------- -------- -------
Income from property operations..... 72,477 32,652 2,023 38,262 (5,997)
-------- -------- ------- -------- -------
Management fees and other income.... 13,937 -- 7,813 -- --
Management and other expenses....... (9,910) -- (5,394) -- --
Corporate overhead allocation....... (588) -- -- -- --
Amortization........................ (1,401) -- (5,800) -- --
-------- -------- ------- -------- -------
Income from service company
business........................... 2,038 -- (3,381) -- --
Minority interest in service company
business........................... (10) -- -- -- --
-------- -------- ------- -------- -------
AIMCO's share of income from service
company business................... 2,028 -- (3,381) -- --
-------- -------- ------- -------- -------
General and administrative
expenses........................... (5,396) -- (1,025) (7,392) 7,392(P)
Interest expense.................... (51,385) (4,598)(K)
(2,430)(L) (5,462) (26,987) (221)(Q)
Interest income..................... 8,676 -- 1,900 -- --
Minority interest in other
partnerships....................... 1,008 779(M) 16 (851) 705(R)
Equity in losses of unconsolidated
partnerships....................... (1,798) (122)(N) (8,542) 405 --
Equity in earnings of unconsolidated
subsidiaries....................... 4,636 -- 5,790 -- --
-------- -------- ------- -------- -------
Income (loss) from operations....... 30,246 26,281 (8,681) 3,437 1,879
Income tax provision................ -- -- -- -- --
Gain on dispositions of property.... 2,720 (2,720) -- -- --
-------- -------- ------- -------- -------
Income (loss) before extraordinary
item and minority interest in AIMCO
Operating Partnership.............. 32,966 23,561 (8,681) 3,437 1,879
Extraordinary item -- early
extinguishment of debt............. (269) 269 -- -- --
-------- -------- ------- -------- -------
Income before minority interest in
AIMCO Operating Partnership........ 32,697 23,830 (8,681) 3,437 1,879
Minority interest in AIMCO Operating
Partnership........................ (4,064) 197(DD) 1,863(DD) (386)(DD) (79)(DD)
-------- -------- ------- -------- -------
Net income.......................... 28,633 24,027 (6,818) 3,051 1,800
Income attributable to preferred
stockholders....................... 2,315 31,859 -- 2,296 (2,296)(S)
-------- -------- ------- -------- -------
Income attributable to common
stockholders....................... $ 26,318 $ (7,832) $(6,818) $ 755 $ 4,096
======== ======== ======= ======== =======
Basic earnings per share............ $ 1.09
========
Diluted earnings per share.......... $ 1.08
========
Weighted average shares
outstanding........................ 24,055
========
Weighted average shares and
equivalents outstanding............ 24,436
========
<CAPTION>
IFG IFG
IFG AS MERGER REORGANIZATION
ADJUSTED(F) ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
----------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Rental and other property
revenues........................... $ 6,912 $ -- $ -- $ 421,435
Property operating expenses......... (3,307) -- -- (178,481)
Owned property management expense... -- -- -- (11,361)
Depreciation........................ (966) (1,321)(T) -- (90,858)
-------- -------- -------- ---------
Income from property operations..... 2,639 (1,321) -- 140,735
-------- -------- -------- ---------
Management fees and other income.... 94,330 -- (74,404)(Z) 41,676
Management and other expenses....... (57,615) -- 49,236(Z) (23,683)
Corporate overhead allocation....... -- -- -- (588)
Amortization........................ (16,768) (26,794)(U) 28,922(AA) (21,841)
-------- -------- -------- ---------
Income from service company
business........................... 19,947 (26,794) 3,754 (4,436)
Minority interest in service company
business........................... -- -- -- (10)
-------- -------- -------- ---------
AIMCO's share of income from service
company business................... 19,947 (26,794) 3,754 (4,446)
-------- -------- -------- ---------
General and administrative
expenses........................... (21,199) -- 6,392(Z) (21,228)
Interest expense.................... (9,035) (5,839)(V) -- (105,957)(EE)
Interest income..................... 10,967 -- 191(BB) 21,734
Minority interest in other
partnerships....................... (12,871) 1,552 (W) -- (9,662)
Equity in losses of unconsolidated
partnerships....................... 12,515 (25,357)(X) -- (22,899)
Equity in earnings of unconsolidated
subsidiaries....................... -- -- (4,505)(BB) 5,921(GG)
-------- -------- -------- ---------
Income (loss) from operations....... 2,963 (57,759) 5,832 4,198
Income tax provision................ 1,701 (1,701)(Y) -- --
Gain on dispositions of property.... 80 (80) -- --
-------- -------- -------- ---------
Income (loss) before extraordinary
item and minority interest in AIMCO
Operating Partnership.............. 4,744 (59,540) 5,832 4,198
Extraordinary item -- early
extinguishment of debt............. -- -- -- --
-------- -------- -------- ---------
Income before minority interest in
AIMCO Operating Partnership........ 4,744 (59,540) 5,832 4,198
Minority interest in AIMCO Operating
Partnership........................ -- 5,571(DD) -- 3,102(DD)
-------- -------- -------- ---------
Net income.......................... 4,744 (53,969) 5,832 7,300
Income attributable to preferred
stockholders....................... -- -- -- 34,174(FF)
-------- -------- -------- ---------
Income attributable to common
stockholders....................... $ 4,744 $(53,969) $ 5,832 $ (26,874)(EE)
======== ======== ======== =========
Basic earnings per share............ $ (0.44)(EE)
=========
Diluted earnings per share.......... $ (0.44)(EE)
=========
Weighted average shares
outstanding........................ 60,443
=========
Weighted average shares and
equivalents outstanding............ 61,287
=========
</TABLE>
11
<PAGE> 12
- -------------------------
(A) Represents AIMCO's audited consolidated results of operations for the
year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; and (vii) the
1998 Disposition.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other
property revenues..... $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses.............. (2,941)(v) (8,411) -- 8,411 (xvii) (2,941)
Owned property
management expense.... (282)(v) (862) -- 862 (xvii) (282)
Depreciation........... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii) (1,414)
------- -------- ------- -------- -------
Income from property
operations............ 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and
other income.......... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses.............. (2,263)(viii) (35,267) -- 32,136 (xviii) (5,394)
Amortization........... -- (9,111) (4,432)(xii) 7,743 (xix) (5,800)
------- -------- ------- -------- -------
Income from service
company business...... (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and
administrative
expenses.............. -- (16,266) 8,668 (xiii 6,573 (xviii) (1,025)
Interest expense....... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income........ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest in
other partnerships.... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships.......... (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries.......... -- -- (4,636)(xv) 10,426 (xxii) 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............ (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision... -- (3,502) 3,502 (xvi -- --
------- -------- ------- -------- -------
Income (loss) before
minority interest in
Operating
Partnership........... (7,266) 4,350 (2,222) (3,543) (8,681)
Minority interest in
Operating
Partnership........... 1,419 -- -- 444 1,863
------- -------- ------- -------- -------
Net income (loss)...... (5,847) 4,350 (2,222) (3,099) (6,818)
======= ======== ======= ======== =======
</TABLE>
12
<PAGE> 13
- -------------------------
(i) Represents the adjustment to record activity from January 1, 1997
to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest
that will be presented on the equity method by AIMCO as a result
of the NHP Real Estate Reorganization. In addition, represents
adjustments to record additional depreciation and amortization
related to the increased basis in the assets of the NHP Real
Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by AIMCO
to consummate the NHP Real Estate Acquisition.
(ii) Represents the unaudited consolidated results of operations of
NHP for the period from January 1, 1997 through December 8, 1997
(date of the NHP Merger).
(iii) Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related
to real estate; (iii) the incremental amortization of the
purchase price adjustment related to the management contracts,
furniture, fixtures and equipment, and goodwill; (iv) the
reversal of equity in earnings of NHP during the pre-merger
period when AIMCO held a 47.62% interest in NHP; and (v) the
amortization of the increased basis in investments in real estate
partnerships based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv) Represents adjustments related to the NHP Reorganization, whereby
AIMCO contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership: (i) certain assets and liabilities
of NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties
containing 2,905 apartment units. The adjustments represent (i)
the related revenues and expenses primarily related to the
management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to AIMCO's new basis resulting from
the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi) Represents incremental depreciation related to the consolidated
real estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
13
<PAGE> 14
(vii) Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii) Represents $4,878 related to the adjustment to record the
expenses from ancillary businesses purchased from the NHP Real
Estate Companies as if the acquisition had occurred on January 1,
1997, less $2,615 related to a reduction in personnel costs
pursuant to a restructuring plan, approved by AIMCO senior
management, assuming that the acquisition of the NHP Real Estate
Companies had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The
restructuring plan specifically identifies all significant
actions to be taken to complete the restructuring plan, including
the reduction of personnel, job functions, location and the date
of completion.
(ix) Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on
January 1, 1997, as well as the increase in interest expense in
the amount of $1,691 related to borrowings on AIMCO's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on
January 1, 1997, as well as amortization of $1,473 related to the
increased basis in investment in real estate partnerships, as a
result of the allocation of the purchase price of the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xi) Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii) Represents incremental depreciation and amortization of the
tangible and intangible assets related to the property management
and other business operated by the Unconsolidated Subsidiaries,
based on AIMCO's new basis as adjusted by the allocation of the
combined purchase price of NHP including amortization of
management contracts of $3,782, depreciation of furniture,
fixtures and equipment of $2,018 and amortization of goodwill of
$7,743, less NHP's historical depreciation and amortization of
$9,111. Management contracts are amortized using the straight-line
method over the weighted average life of the contracts estimated
to be approximately 15 years. Furniture, fixtures and equipment
are depreciated using the straight-line method over the estimated
life of 3 years. Goodwill is amortized using the straight-line
method over 20 years.
(xiii) Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by AIMCO senior
management, specifically identifying all significant actions to
be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on
14
<PAGE> 15
January 1, 1997 and that the restructuring plan was completed on
January 1, 1997.
(xiv) Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv) Represents the reversal of equity in earnings in NHP during the
pre-merger period when AIMCO held a 47.62% interest in NHP, as a
result of AIMCO's acquisition of 100% of the NHP Common Stock.
(xvi) Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii) Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated
Partnership pursuant to the NHP Reorganization.
(xviii) Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix) Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on AIMCO's new basis
resulting from the allocation of the purchase price of NHP, that
will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other
businesses owned by NHP.
(xx) Represents interest expense of $6,020 related to the contribution
of NHP's 12 real estate properties containing 2,905 apartment
units to the Unconsolidated Partnership and interest expense of
$4,285 related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi) Represents the interest income of $5,000 earned on notes payable
of $50,000 to AIMCO issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by AIMCO, net
of the elimination of AIMCO's share of the related interest
expense of $4,750 reflected in the equity in earnings of the
Unconsolidated Subsidiaries operating results, offset by $853 in
interest income primarily related to the management operations and
other businesses owned by NHP contributed or sold to the
Unconsolidated Subsidiaries pursuant to the NHP Reorganization.
(xxii) Represents AIMCO's equity in earnings of the Unconsolidated
Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to
AIMCO's Statement of Operations presentation. The Ambassador historical
statement of operations excludes extraordinary loss of $1,384 and a loss
on sale of an interest rate cap of $509.
15
<PAGE> 16
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger and the
spin-off of Holdings as if these transactions had occurred on January 1,
1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues.................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses... (3,251) (56) -- (3,307)
Depreciation.................. (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations.................. 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income...................... 389,626 -- (295,296) 94,330
Management and other
expenses.................... (315,653) -- 258,038 (57,615)
Amortization.................. (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business.................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses.................... (20,435) (1,351) 587 (21,199)
Interest expense.............. (9,353) -- 318 (9,035)
Interest income............... 4,571 6,853 (457) 10,967
Minority interest in other
partnerships................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated
partnership................. 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from
operations.................. 17,055 7,666 (21,758) 2,963
Income tax provision.......... (6,822) (180) 8,703 1,701
Gain on sale of property...... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)............. 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- -------------------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to AIMCO's statement
of operations presentation.
(ii) Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT
Merger closed prior to the IFG Merger.
16
<PAGE> 17
(iii) Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts resulting from the IFG Merger; (iii) the increase in interest
expense resulting from the net increase in debt; and (iv) the elimination
of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, AIMCO contributed or sold to the Unconsolidated
Subsidiaries certain assets and liabilities of IFG, primarily management
contracts and related working capital assets and liabilities related to
IFG's third party management operations. The adjustments reflect the
related revenues and expenses primarily related to the management
operations owned by IFG, with additional amortization recorded related to
AIMCO's new basis resulting from the allocation of the purchase price of
IFG.
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Disposition as
if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on AIMCO's investment in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITION TOTAL
------------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues............... $ 88,589 $(4,081) $28,113 $(2,105) $110,516
Property operating
expense................ (44,109) 1,944 (13,672) 783 (55,054)
Owned property management
expense................ (3,233) 133 (832) 75 (3,857)
Depreciation............. (16,839) 452 (6,268) 354 (22,301)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on AIMCO's investment in the properties.
17
<PAGE> 18
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on AIMCO's credit facilities and other loans and
mortgages assumed in connection with the 1997 Property
Acquisitions.............................................. $(29,427)
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,505
Repayments on AIMCO's credit facilities with proceeds from a
dividend received from one of the Unconsolidated
Subsidiaries.............................................. 1,889
Borrowings on AIMCO's credit facilities and other loans and
mortgages assumed in connection with the 1998
Acquisitions.............................................. (11,242)
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the 1998 Disposition and
the 1998 Stock Offerings.................................. 14,677
--------
$ (4,598)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(M) Represents income related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions.
(N) Represents the reduction in AIMCO's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by AIMCO senior management, assuming that the Ambassador
Merger had occurred on January 1, 1997 and that the restructuring plan
was completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job functions,
location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under AIMCO's credit facilities.
18
<PAGE> 19
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents the elimination of the preferred stock dividends of Ambassador
upon the conversion of the Ambassador Preferred Stock to AIMCO Common
Stock.
(T) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger, based on
AIMCO's new basis resulting from the allocation of the purchase price of
IFG. Buildings and improvements are depreciated on the straight-line
method over a period of 20 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(U) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on AIMCO's new basis resulting from the allocation of the purchase
price of IFG, including amortization of property management contracts of
$37,350, amortization of goodwill of $2,790, and depreciation of
furniture, fixtures, and equipment of $3,119, less IFG's historical
depreciation and amortization of $16,465. Property management contracts
are amortized using the straight-line method over a period of three
years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years.
(V) Represents the increase in interest expense of $3,725 related to
borrowings to pay a special dividend of approximately $50 million to
holders of the Class E Preferred Stock; and $2,114 related to borrowings
of $28,381 for the additional liabilities of IFG assumed by AIMCO. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(W) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(X) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG, based on an estimated average life of 20 years, and based
on AIMCO's new basis resulting from the allocation of the purchase price
of IFG.
(Y) Represents the reversal of IFG's income tax provision.
(Z) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(AA) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed
or sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on AIMCO's new basis resulting from
the allocation of the purchase price of IFG.
(BB) Represents interest income of $3,825 earned on notes payable of $45,000
to AIMCO issued as consideration for certain assets and liabilities sold
to the Unconsolidated Subsidiaries by AIMCO, net of the elimination of
AIMCO's share of the related interest expense of $3,634 reflected on the
equity in earnings of the Unconsolidated Subsidiaries.
(CC) Represents AIMCO's equity in earnings of the Unconsolidated Subsidiaries.
(DD) Represents adjustments to Minority Interest in AIMCO Operating
Partnership assuming the Completed Transactions, the NHP Transactions,
the Ambassador Merger, and the IFG Merger had occurred as of January 1,
1997. On a pro forma
19
<PAGE> 20
basis, without giving effect to the NHP Transactions, the Ambassador Merger and
the IFG Merger as of December 31, 1997, the minority interest percentage is
approximately 17.3%. On a pro forma basis, without giving effect to the
Ambassador Merger and the IFG Merger, as of December 31, 1997, the minority
interest percentage is approximately 14.6%. On a pro forma basis, without giving
effect to the IFG Merger, as of December 31, 1997, the minority interest
percentage is approximately 13.0%. On a pro forma basis, giving effect to the
Completed Transactions, the NHP Transactions, the Ambassador Merger and the IFG
Merger, as of December 31, 1997, the minority interest percentage is
approximately 10.3%.
(EE) The following table presents the net impact to pro forma net loss
applicable to holders of shares of AIMCO Common Stock and net loss per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 939
========
Income before minority interest in AIMCO Operating
Partnership............................................... $ 3,259
Minority interest in AIMCO Operating Partnership............ 3,199
--------
Net income.................................................. $ 6,458
========
Net loss attributable to common stockholders................ $(27,716)
========
Basic loss per share........................................ $ (0.46)
========
Diluted loss per share...................................... $ (0.46)
========
</TABLE>
(FF) Represents the net income attributable to holders of the AIMCO Class B
Preferred Stock, the AIMCO Class C Preferred Stock, the AIMCO Class D
Preferred Stock the AIMCO Class G Preferred Stock and the AIMCO Class H
Preferred Stock as if these stock offerings had occurred as of January 1,
1997.
(GG) Represents AIMCO's equity in earnings in the Unconsolidated Subsidiaries
of $(2,463), plus the elimination of intercompany interest expense of
$8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
20
<PAGE> 21
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ----------
<S> <C> <C> <C> <C>
Rental and other property
revenues............... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating
expenses............... (3,355) (3,531)(iv) -- (6,886)
Owned property management
expense................ (147) (478)(iv) -- (625)
Depreciation expense..... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property
operations............. 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other
income................. 23,776 41,992(v) 74,404(x) 140,172
Management and other
expenses............... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............. (3,726) (4,017)(v) (28,922)(xi) (36,665)
-------- -------- -------- --------
Income from service
company................ 8,317 17,572 (3,754) 22,135
General and
administrative
expense................ -- (6,573)(v) (6,392)(x) (12,965)
Interest expense......... (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income.......... 1,001 (148)(v) -- 853
Minority interest in
other partnerships..... (2,819) 2,198 (viii -- (621)
Equity in losses of
unconsolidated
partnerships........... (1,028) 1,028(iv) -- --
Equity in earnings of
Unconsolidated
Subsidiaries........... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from
operations............. 4,010 6,880 (13,971) (3,081)
Income tax provision..... (1,902) (3,013)(ix) 5,404 (xiii) 489
-------- -------- -------- --------
Net income (loss)........ $ 2,108 $ 3,867 $ (8,567) $ (2,592)
======== ======== ======== ========
Income attributable to
preferred
stockholders........... $ 2,003 $ 3,673 $ (8,139) $ (2,463)
======== ======== ======== ========
Income (loss)
attributable to common
stockholders........... $ 105 $ 194 $ (428) $ (129)
======== ======== ======== ========
</TABLE>
21
<PAGE> 22
- -------------------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment
units from the unconsolidated partnerships to the Unconsolidated
Subsidiaries, as well as the sale or contribution of 12 properties
containing 2,905 apartment units from the Unconsolidated Subsidiaries to
the Unconsolidated Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, AIMCO contributed or sold to the Unconsolidated
Subsidiaries certain assets and liabilities of IFG, primarily related to
the management operations owned by IFG. The adjustments reflect the
related revenues and expenses primarily related to the management
operations owned by IFG, with additional amortization recorded related to
AIMCO's new basis resulting from the allocation of the purchase price of
IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to AIMCO's new
basis resulting from the allocation of purchase price of NHP and the NHP
Real Estate Companies.
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from AIMCO to the Unconsolidated
Subsidiaries and $5,000 related to a note payable to AIMCO.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii) Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed
or sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on AIMCO's new basis resulting from
the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
AIMCO.
(xiii) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
22
<PAGE> 23
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS MERGER
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- --------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues................ $161,264 $10,444(H)
5,440(I) $35,480 $ -- $ 3,988 $ --
Property operating
expenses................ (59,643) (4,663)(H)
(2,313)(I) (14,912) -- (1,736) --
Owned property management
expense................. (4,713) (363)(H)
(298)(I) -- -- -- --
Depreciation.............. (34,289) (2,226)(H)
(1,070)(I) (7,270) (1,420)(L) (600) (660)(P)
-------- ------- -------- ------- -------- --------
Income from property
operations.............. 62,619 4,951 13,298 (1,420) 1,652 (660)
-------- ------- -------- ------- -------- --------
Management fees and other
income.................. 9,562 -- -- -- 47,635 --
Management and other
expenses................ (5,470) -- -- -- (27,585) --
Corporate overhead
allocation.............. (196) -- -- -- -- --
Amortization.............. (3) -- -- -- (8,928) (12,753)(Q)
-------- ------- -------- ------- -------- --------
Income from service
company business........ 3,893 -- -- -- 11,122 (12,753)
Minority interest in
service company
business................ (1) -- -- -- -- --
-------- ------- -------- ------- -------- --------
Company's share of income
from service company
business................ 3,892 -- -- -- 11,122 (12,753)
-------- ------- -------- ------- -------- --------
General and administrative
expenses................ (4,103) -- (5,278) 5,278(M) (10,272) 4,937(R)
Interest expense.......... (34,778) 1,508(J)
(1,205)(K) (10,079) 145(N) (9,614) (2,896)(S)
Interest income........... 11,350 -- -- -- 4,431 --
Minority interest in other
partnerships............ (516) -- (252) 252(O) (8,643) 3,056 (T)
Equity in losses of
unconsolidated
partnerships............ (4,681) -- (71) -- 14,482 (9,295)(U)
Equity in earnings of
unconsolidated
subsidiaries............ 5,609 -- -- -- -- --
Amortization of
goodwill................ (3,394) -- -- -- -- --
-------- ------- -------- ------- -------- --------
Income (loss) from
operations.............. 35,998 5,254 (2,382) 4,255 3,158 (17,611)
Income tax provision...... -- -- -- -- (231) 231(V)
Gain on dispositions of
property................ 2,526 (2,526) -- -- -- --
-------- ------- -------- ------- -------- --------
Income before minority
interest in AIMCO
Operating Partnership... 38,524 2,728 (2,382) 4,255 2,927 (17,380)
Minority interest in AIMCO
Operating Partnership... (3,262) (170)(AA) -- 180(AA) -- 1,773(AA)
e -------- ------- -------- ------- -------- --------
Net income (loss)......... 35,262 2,558 (2,382) 4,435 2,927 (15,607)
Income attributable to
preferred
stockholders............ 8,650 8,354 -- -- -- --
-------- ------- -------- ------- -------- --------
Income (loss) attributable
to common
stockholders............ $ 26,612 $(5,796) $ (2,382) $ 4,435 $ 2,927 $(15,607)
======== ======= ======== ======= ======== ========
Basic earnings per
share................... $ 0.62
========
Diluted earnings per
share................... $ 0.61
========
Weighted average shares
outstanding............. 43,206
========
Weighted average shares
and equivalents
outstanding............. 43,409
========
<CAPTION>
IFG
REORGANIZATION
ADJUSTMENTS(G) PRO FORMA
-------------- ---------
<S> <C> <C>
Rental and other property
revenues................ $ -- $216,616
Property operating
expenses................ -- (83,267)
Owned property management
expense................. -- (5,374)
Depreciation.............. -- (47,535)
-------- --------
Income from property
operations.............. -- 80,440
-------- --------
Management fees and other
income.................. (37,672)(W) 19,525
Management and other
expenses................ 23,395(W) (9,660)
Corporate overhead
allocation.............. -- (196)
Amortization.............. 14,461(X) (7,223)
-------- --------
Income from service
company business........ 184 2,446
Minority interest in
service company
business................ -- (1)
-------- --------
Company's share of income
from service company
business................ 184 2,445
-------- --------
General and administrative
expenses................ 4,760(W) (4,678)
Interest expense.......... -- (56,919)(BB)
Interest income........... 95(Y) 15,876
Minority interest in other
partnerships............ -- (6,103)
Equity in losses of
unconsolidated
partnerships............ -- 435
Equity in earnings of
unconsolidated
subsidiaries............ (1,839)(Z) 3,770(DD)
Amortization of
goodwill................ -- (3,394)
-------- --------
Income (loss) from
operations.............. 3,200 31,872
Income tax provision...... -- --
Gain on dispositions of
property................ -- --
-------- --------
Income before minority
interest in AIMCO
Operating Partnership... 3,200 31,872
Minority interest in AIMCO
Operating Partnership... -- (1,479)(AA)
-------- --------
Net income (loss)......... 3,200 30,393(BB)
Income attributable to
preferred
stockholders............ -- 17,004(CC)
-------- --------
Income (loss) attributable
to common
stockholders............ $ 3,200 $ 13,389(BB)
======== ========
Basic earnings per
share................... $ 0.22(BB)
========
Diluted earnings per
share................... $ 0.22(BB)
========
Weighted average shares
outstanding............. 61,589
========
Weighted average shares
and equivalents
outstanding............. 62,253
========
</TABLE>
23
<PAGE> 24
- -------------------------
(A) Represents AIMCO's unaudited consolidated results of operations for the
six months ended June 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; and (iv) the 1998
Disposition.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to AIMCO's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, and
the spin-off of the common stock of Holdings as if these transactions had
occurred on January 1, 1998. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 3,627 $ 361 $ -- $ 3,988
Property operating expenses...... (1,736) -- -- (1,736)
Depreciation..................... (600) -- -- (600)
--------- ------ --------- --------
Income from property
operations..................... 1,291 361 -- 1,652
--------- ------ --------- --------
Management fees and other
income......................... 274,749 (227,114) 47,635
Management and other expenses.... (228,454) 200,869 (27,585)
Amortization..................... (20,021) (33) 11,126 (8,928)
--------- ------ --------- --------
Income from service company
business....................... 26,274 (33) (15,119) 11,122
--------- ------ --------- --------
General and administrative
expenses....................... (13,116) (302) 3,146 (10,272)
Interest expense................. (10,320) -- 706 (9,614)
Interest income.................. 2,878 2,618 (1,065) 4,431
Minority interest in other
partnerships................... (8,497) -- (146) (8,643)
Equity in losses of
unconsolidated partnerships.... 13,624 858 14,482
--------- ------ --------- --------
Income (loss) from operations.... 12,134 2,644 (11,620) 3,158
Income tax provision............. (5,460) -- 5,229 (231)
--------- ------ --------- --------
Net income (loss)................ $ 6,674 $2,644 $ (6,391) $ 2,927
========= ====== ========= ========
</TABLE>
- ---------------
(i) Represents the unaudited consolidated results of operations of IFG
for the six months ended June 30, 1998, as reported in IFG's
Quarterly Report on
24
<PAGE> 25
Form 10-Q. Certain reclassifications have been made to IFG's
historical statement of operations to conform to AIMCO's statement
of operations presentation.
(ii) Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT
Merger closed prior to the IFG Merger.
(iii) Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts resulting from the IFG Merger; (iii) the increase in interest
expense resulting from the net increase in debt; and (iv) the elimination
of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, AIMCO contributed or sold to the combined
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to AIMCO's new basis resulting from the allocation of
the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Disposition as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on AIMCO's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITION TOTAL
------------ ----------- -------
<S> <C> <C> <C>
Rental and other property revenues...... $10,542 $(98) $10,444
Property operating expense.............. (4,754) 91 (4,663)
Owned property management expense....... (369) 6 (363)
Depreciation............................ (2,244) 18 (2,226)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if
they had occurred on January 1, 1998. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on AIMCO's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on AIMCO's credit facilities and other loans and
mortgages assumed in connection with the 1998
Acquisitions.............................................. $(4,234)
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the 1998 Disposition and
the 1998 Stock Offerings.................................. 5,742
-------
$ 1,508
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption
of mortgage debt in connection with the probable purchases.
(L) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are
25
<PAGE> 26
depreciated on the straight-line method over a period of 30 years, and furniture
and fixtures are depreciated on the straight-line method over a period of 5
years.
(M) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 355
Reduction in salaries and benefits.......................... 2,482
Merger related costs........................................ 1,212
Other....................................................... 1,229
------
$5,278
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by AIMCO senior management, assuming that the Ambassador
Merger had occurred on January 1, 1998 and that the restructuring plan
was completed on January 1, 1998. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job functions,
location and date of completion.
(N) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the AIMCO line of credit.
(O) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(P) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger, based on
AIMCO's new basis resulting from the allocation of the purchase price of
IFG. Buildings and improvements are depreciated on the straight-line
method over a period of 20 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(Q) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on AIMCO's new basis resulting from the allocation of the purchase
price of IFG, including amortization of property management contracts of
$18,674, amortization of goodwill of $1,415, and depreciation of
furniture, fixtures, and equipment of $1,559, less IFG's historical
depreciation and amortization of $8,895. Property management contracts
are amortized using the straight-line method over a period of three
years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years.
(R) Represents the elimination of merger related expenses recorded by IFG
during the six months ended June 30, 1998. In connection with the IFG
Merger, certain IFG executives will receive one-time lump-sum payments in
connection with the termination of their employment and option
agreements. The total of these lump sum payments is estimated to be
approximately $50,000.
(S) Represents the increase in interest expense of $1,847 related to
borrowings to pay a special dividend to holders of the Class E Preferred
Stock and $1,049 related to
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borrowings of $28,381 for the additional liabilities of IFG assumed by AIMCO.
The interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(T) Represents elimination of minority interest in IPT resulting from the
IPT merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG, based on an estimated average life of 20 years, and based
on AIMCO's new basis resulting from the allocation of the purchase price
of IFG.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on AIMCO's new basis resulting from
the allocation of the purchase price of IFG.
(Y) Represents interest income of $1,897 earned on notes payable of $45,000
to AIMCO issued as consideration for certain assets and liabilities sold
to the Unconsolidated Subsidiaries of AIMCO, net of the elimination of
AIMCO's share of the related interest expense of $1,802 reflected in the
equity in earnings of the Unconsolidated Subsidiaries.
(Z) Represents AIMCO's equity in earnings of the Unconsolidated Subsidiaries.
(AA) Represents adjustments to Minority Interest in the AIMCO Operating
Partnership assuming the Completed Transactions, the Ambassador Merger,
and the IFG Merger had occurred as of January 1, 1997. On a pro forma
basis, without giving effect to the Ambassador Merger and the IFG Merger,
as of June 30, 1998, the minority interest percentage is approximately
14.1%. On a pro forma basis, without giving effect to the IFG Merger, as
of June 30, 1998, the minority interest percentage is approximately
12.4%. On a pro forma basis, giving effect to the Completed Transactions,
the Ambassador Merger and the IFG Merger, as of June 30, 1998, the
minority interest percentage is approximately 9.9%.
(BB) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 466
========
Income before minority interest in AIMCO Operating
Partnership............................................... $ 31,406
Minority interest in AIMCO Operating Partnership............ (1,432)
--------
Net income.................................................. $ 29,974
========
Net income attributable to common stockholders.............. $ 12,970
========
Basic income per share...................................... $ 0.21
========
Diluted income per share.................................... $ 0.21
========
</TABLE>
(CC) Represents the net income attributable to holders of the AIMCO Class B
Preferred Stock, the AIMCO Class C Preferred Stock, the AIMCO Class D
Preferred Stock
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<PAGE> 28
the AIMCO Class G Preferred Stock and the AIMCO Class H Preferred Stock as if
these stock offerings had occurred as of January 1, 1997.
(DD) Represents AIMCO's equity in earnings in the Unconsolidated Subsidiaries
of $1,968 plus the elimination of intercompany interest of $1,802. The
combined Pro Forma Statement of Operations of the Unconsolidated
Subsidiaries for the six months ended June 30, 1998 is presented below,
which represents the effects of the Ambassador Merger, the IFG Merger and
the IFG Reorganization as if these transactions had occurred as of
January 1, 1997.
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<PAGE> 29
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(i) REORGANIZATION(ii) PRO FORMA
------------- ------------------ ----------
<S> <C> <C> <C>
Rental and other property revenues.... $ 6,550 $ -- $ 6,550
Property operating expense............ (3,390) -- (3,390)
Owned property management expense..... (230) -- (230)
Depreciation expense.................. (650) -- (650)
-------- -------- --------
Income from property operations....... 2,280 -- 2,280
-------- -------- --------
Management fees and other income...... 37,585 37,672 (iii) 75,257
Management and other expenses......... (23,673) (23,395)(iii) (47,068)
Amortization.......................... (1,390) (14,461)(iv) (15,851)
-------- -------- --------
Income from service company........... 12,522 (184) 12,338
General and administrative expense.... -- (4,760)(iii) (4,760)
Interest expense...................... (3,878) (1,897)(v) (5,775)
Interest income....................... 425 -- 425
Minority interest in other
partnerships........................ (250) -- (250)
-------- -------- --------
Income (loss) from operations......... 11,099 (6,841) 4,258
Income tax provision.................. (5,195) 3,008 (vi) (2,187)
-------- -------- --------
Net income (loss)..................... $ 5,904 $ (3,833) $ 2,071
======== ======== ========
Income (loss) attributable to
preferred stockholders.............. $ 5,609 $ (3,641) $ 1,968
======== ======== ========
Income (loss) attributable to common
stockholders........................ $ 295 $ (192) $ 103
======== ======== ========
</TABLE>
- -------------------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated
results of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, AIMCO contributed or sold to the combined
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to AIMCO's new basis resulting from the allocation of
the purchase price of IFG.
(iii) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
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<PAGE> 30
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to
the Unconsolidated Subsidiaries, primarily related to the management
operations of IFG, based on AIMCO's new basis resulting from the
allocation of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to
AIMCO.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
30
